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NBA Top Shot: What you should know about the new NBA craze in digital investing in collectibles

CBS Sports |  | March 2, 2021

Something rather typical happened for an atypical reason on Feb. 25: A community within NBA Twitter was mad online. No, these weren't Denver Nuggets fans up in arms over their close loss to the lowly Washington Wizards, despite a 34-6-6 performance from Jamal Murray. Nor were they frustrated Los Angeles Clippers fans complaining about their team's stars being unable to do much against a Memphis Grizzlies squad that only just returned to a .500 record. They weren't even fans preemptively whining over their favorite superstar getting snubbed from this year's All Star Game.

No, this was a relatively new group of people, sitting on the intersection of hoops fandom, memorabilia collection and digital investing, while looking to get into what's been described as the next big thing for those who belong to any of those three crowds: NBA Top Shot. Before getting into what tilted some of that base last week, let's first get into what Top Shot is, exactly.

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NBA Top Shot is an online company launched by Vancouver-based blockchain company Dapper Labs, and backed by the NBA, that allows users to procure a collection of digital basketball highlights, and then show off that collection to others. To get these NBA highlights, which are referred to as "moments," actual money must be spent in some way, either through purchasing digital packs containing a random assortment of these moments, or through spending money in the marketplace.

These moments range in designated rarity, and are artificially scarce based on where they land in the rarity scale.

In Top Shot's own words, it is providing "next level NBA collectibles." In other words, this whole experience can be generously compared to card collecting, just in a digital format. It's what initially drew many to the process, including Alex Xu, a member of the founding team at 0x.org, a not-for-profit that helps developers build their own decentralized cryptocurrency exchange.

"Growing up I collected Pokémon cards and I'll never forget the thrill of opening a pack, hoping for a holographic Charizard," Xu told CBS Sports. "When I heard of NBA Top Shot in January, I bought a pack and the nostalgia immediately hit. As an NBA fan, owning specific moments from my favorite players was a concept that was so cool. I've been collecting moments ever since."

He went on to explain that its comparison to investing in cryptocurrency piqued his interest even more -- especially since this was something he could get into earlier in the product cycle than, say, Bitcoin -- and further research helped notice that things like Top Shot could become a huge market.

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"Then I paid some attention to Top Shot's user base grow insanely fast all while on a glitchy beta platform," he continued. "Coupling that with the clear support of the NBA, I was at least sold that the idea had a legitimate chance to scale."

The growth is something of a selling point for the company as it's still in its beta stage. When Brian Windhorst of ESPN wrote on Top Shot on Feb. 16, the numbers were as follows: "Top Shot has gained traction with more than 50,000 users having bought in and spent more than $65 million in the process, according to crypto tracker CryptoSlam."

That same tracker now lists over 88,000 buyers and over $278 million in sales, as of March 2.

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Daily Hive | Sam Chan | March 1, 2021

$2B Vancouver crypto company becomes Wall Street of digital collectibles

In partnership with the NBA and NBPA, Dapper Labs (parent company of NBA Top Shot) captures specific digital NBA moments to sell online in digital “packs” to anyone who wishes to have them.  Each moment is limited in nature and lives on Dapper’s own blockchain named Flow. As you purchase a moment either through a pack or Top Shot’s Marketplace (more on that later), it becomes yours and your (user)name is attached to that moment and etched onto the blockchain ledger forever.

I know what you’re thinking — what a waste of money, I can just YouTube that LeBron dunk.  You’re right, you can. But there’s a huge difference between Googling an image of Mona Lisa and owning the Mona Lisa, or an authentic digital version released by Leonardo da Vinci.

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One37pm does a terrific job of explaining the concept of Non Fungible Tokens (NFTs, the technology that makes Top Shot moments scarce), so I would advise you to read up there if you’re not sold.top shot alex xu - NBA Top Shot:  What you should know about the new NBA craze in digital investing in collectibles

Now, back to the marketplace which has become a phenomenon on its own. At its core, it’s no different than eBay or Facebook marketplace where someone can post an asset they own for the price that they wish to sell it for.  If another user decides that price is worth paying, the asset (in this case, the moment) gets transferred to them

and that’s also etched on the blockchain.

Here’s where it starts getting crazy.

Let’s use this no look LeBron James 3-Pointer as an example. At the time of writing, it’s going rate is about US$1,450 per moment. There are only 12,000 of these moments, period. But imagine, thousands of people picked up this “common” moment in a $9 common pack (or paid $3 for the moment)

To put this into context, let me compare it to something else that’s had the whole world talking in the last month: GameSpot shares.

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If you had purchased $GME at the lowest point in the last 52 weeks, that would have been $2.57 per share. And if you somehow had hindsight goggles and sold at its absolute peak, you would have sold at $483 per share, meaning a 188x profit, an absurdly crazy return.

However, by that same math — if you pulled a LeBron James in a common pack for $3, at a $1450 sale, that’s a 483x return, or more than 2.5x my absurd $GME example. And the value of LeBron James’s moment is still rising!

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NCFA Jan 2018 resize - NBA Top Shot:  What you should know about the new NBA craze in digital investing in collectibles The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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