Hey guys, if you don’t want to read, please check out the podcast above. It’s a discussion I had with my friend about NBA Top Shot and blockchain technology. We cover a lot of the same subjects that I wrote about in this article. You can listen on Apple Podcasts and Spotify.
I’ve been a basketball fan since 2007, when my favorite team, the Golden State Warriors, somehow pulled off an upset against the 1st seed Dallas Mavericks in the first round of the NBA playoffs (I’m just saying this so nobody accuses me of being a bandwagoner). The saddest day of my life was probably June 19, 2016. It was Game 7 of the 2016 NBA Finals, and it was the day I saw this play.
Even though I felt absolutely depressed when I saw Lebron James come out of nowhere to help seal the NBA Finals win for the Cleveland Cavaliers, it’s been five years — so watching this highlight doesn’t make me want to lock myself in my room and listen to My Chemical Romance anymore. I can now appreciate it for being an unreal athletic play that came at a clutch moment.
While this block might have crushed my soul, there’s a whole city that celebrated when it happened. With this play, Lebron James helped to bring the first major sports championship to Cleveland in 52 years. I’m sure that there’s some sports fan from Ohio who suffered through decades of absolutely garbage teams in football, baseball, and basketball who will treasure that moment forever. Soon, that guy can have a permanent digital reminder of that blocked lay-up with NBA Top Shot.
How NFTs work
NBA Top Shot allows basketball fans to trade highlights from NBA games just like virtual sports cards. The marketplace was built by Dapper Labs in partnership with the NBA and the NBA Player’s Association. Right now, that Lebron block isn’t available because the marketplace is still in beta and only has highlights from the last two years. Of course, hasn’t stopped Top Shot from blowing up.
After endorsements from celebrities like Mark Cuban and Gary Vaynerchuk, highlights on Top Shot now have insane levels of demand from fans. According to the site’s homepage, there have been $200 million of transactions so far. Right now, the top Warriors highlight is this three-point shot by Steph Curry. The minimum price to buy it is $75,000.
Part of the reason why NBA Top Shot is so successful is that it’s built on blockchain technology. These highlights are a type of digital asset called non-fungible tokens, or NFTs for short. I’m not going to bore you all by going through all the technical details of how this works — all you need to know is that the tokens are verified via blockchain and set up so that they’re artificially scarce. That means there are just a few trading cards available for each highlight and that nobody can copy them and create more.
The limited number of cards is part of the reason why thousands of people are rushing to pick up highlights as soon as they’re dropped and why prices are going so high. It’s just the law of supply and demand in action.
Why are people paying so much for GIFs?
I’m sure some of you are wondering why people are dropping enough money to buy a new Mercedes on a highlight that you can easily find on YouTube. Well, it’s also pretty ridiculous that people pay thousands of dollars for basketball cards, which are just pictures of players printed on a piece of paper. Still, the sports collectible market has been going strong for decades.
At the end of the day, these trading cards - both physical and virtual - are valuable for emotional reasons. Fans build a sentimental attachment to certain players and certain plays. I’ll never forget Klay Thompson splashing shots from near half-court to beat the Oklahoma City Thunder in Game 6 of the Western Conference Finals. While I probably wouldn’t spend thousands of dollars to remember that moment forever, I’m sure there are plenty of Warriors fans who would.
In addition, Top Shot is an opportunity for people who might not be interested in the stock market to start investing. Buying a highlight from a promising rookie can be considered the equivalent of buying stock in that player. If they become an All-Star in the future, that highlight might be worth significantly more and can be resold for a huge profit.
All of this is incredibly exciting. Of course, it’s important to remember that Top Shot is just one potential use for NFTs. There’s another use-case that might have even more potential: helping artists monetize their work.
Why the rise of the Internet hasn’t been great for artists
We all know it’s incredibly hard for artists to make money. The digital age has made it even harder. Just think about what happened to the music industry back in the early 2000s. People didn’t need to buy CDs anymore, so they went ahead and pirated music on platforms like Limewire and Pirate’s Bay.
Even though piracy isn’t as big as it was fifteen years ago, musicians still aren’t doing nearly as well as they were in the 90s. Streaming services might have enabled them to reach larger audiences, but artists still aren’t seeing much of the revenue. Spotify only pays artists between $.003 and $.005 every time one of their songs is played. Even as late as 2015, musicians were getting more money from vinyl sales than they were from streaming.
How NFTs can help artists make money
NFTs could offer a new route to monetization for musicians in the Internet era. The technology is already giving all types of artists the opportunity to get fair compensation for their work. The artist Beeple had one of his works sold as an NFT for $6.6 million. The YouTuber Logan Paul (I know I’m stretching the definition of “artist” pretty hard) sold $5 million worth of cartoon images of himself designed to look like Pokemon cards.
In the future, musicians will most likely get in on this action as well so that they don’t need to rely on the scraps they get from streaming services. They can sell a limited number of NFTs of their songs to hardcore fans who want to own a piece of their favorite album.
Again, I’m sure some of you are wondering why anyone would buy an NFT of a song they could easily find online. Well, why would anyone buy a signed Prince vinyl when they could also easily find that same album on any streaming service? The answer is that fans value the authenticity of a signature from their favorite artist. Just like Top Shot highlights are the digital equivalent of basketball cards, NFT songs can be the digital equivalents of vinyl records. Blockchain verification can provide the digital version of a signature.
Musician NFTs can also be a way for fans to “invest” in their favorite artists. If these musicians end up blowing up, the NFTs of their songs may be worth a lot of money. What’s even cooler is that if the fan goes ahead and sells the NFT, the technology can make sure that the artist is fairly compensated. The assets can be set up so that the original creator gets a percentage of all secondary sales.
Even though the rise of the Internet hasn’t been great for artists, NFTs can change that. The technology can make sure that it’s not just the Drakes and the Travis Scotts of the world who are getting fair compensation for recorded music.
In conclusion
I asked one of my talented musician friends if he could sell me one of his songs via NFT. In response, he said, “What is an NFT lol.” While NFTs are getting a lot of traction, we’re still pretty far away from mainstream adoption. Still, NBA Top Shot shows that people are willing to spend real money to have verified ownership of virtual objects. While we’re still in the early days of blockchain technology, it’s impressive what it’s enabled already. But that’s nothing compared with what’s to come.
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