Disrupting the century-old trading card market? What makes NBA Top Shot capable?

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"Watching games, not playing with star cards, you say this thing can be collected? Quite interesting… "

After receiving similar answers from several friends around me, it seems I figured out the reason why NBA Top Shot suddenly became popular, because this thing is indeed interesting.

The NFT card-collecting game called NBA Top Shot suddenly surged in popularity after entering 2021, with several instances of daily transaction volumes exceeding one million dollars in the past week. In the last 24 hours, it achieved an impressive transaction volume of over 2.1 million dollars, quickly rising to second place in the total transaction volume leaderboard for on-chain games, showing momentum to surpass the legendary on-chain game CryptoKitties.

Image source: CryptoSlam

What magic does this game, which has only been in public beta for a short six months, possess? How did it rise in the on-chain gaming field, which was once not favored by the market? Perhaps we need to look for answers in the century-old history of sports card collecting.

1. The Past and Present of Sports Cards

In 1880, tobacco manufacturer Goodwin & Co., maker of Old Judge and Gypsy Queen, attempted to produce cards featuring sports stars as promotional items for cigarette purchases, thus opening the Pandora's box of a market that has now exceeded 10 billion dollars.

Since player cards originated in the United States, where the love for football, basketball, baseball, and hockey is significantly higher than for soccer, the earliest famous cards were mostly baseball and basketball star cards, rather than soccer, which has the broadest fan base. The company Topps, which focused on producing player cards, once monopolized the entire market.

However, with the introduction of antitrust laws, companies like PANINI, UpperDeck, FLEER, and Skybox seized the opportunity to enter the market, and after several rounds of reshuffling, the current situation emerged where PANINI holds exclusive distribution rights for the NBA (National Basketball Association), Futera operates star cards for the top five European football leagues and several national football teams, while Upper Deck and Topps retain the rights to issue personal cards for basketball legends like Jordan, James, and Bird.

For basketball star cards, which have a high user base and ideal liquidity, the development process over the past century has gradually freed them from the constraints of the "standard template" that features player images on the front and basic information on the back, giving rise to many cards that are harder to obtain and thus more collectible.

Special cards, including limited edition cards, rookie cards, jersey cards, and physical cards, have emerged. With the maturation of card protection solutions, some cards signed by stars and physical cards that can be directly linked to great moments can be preserved for longer periods, giving these unique and irreplaceable cards incredible value.

According to data from the domestic card-collecting website 卡淘 (KaTao), there are as many as 173 categories of basketball player cards. As of the time of writing, the highest-priced single card (excluding items with a direct price cap) is priced at 3,325,635 yuan, which is a physical card of Stockton's shoes.

Image source: 卡淘 (KaTao)

There are not a few cards priced over a million, including rare cards of legendary stars like James and Kobe, as well as special cards of potential new stars like Trae Young and Devin Booker, all priced over 1 million yuan. With the development of the alternative collectibles market, the prices of sports cards have risen accordingly. In mid-last year, a common card of James from the 2019-2020 season was auctioned for 200 dollars, nearly ten times its original price.

Image source: Amazon

2. The Sports Card Collecting Market Exceeds 10 Billion and Grows Rapidly

Searching for keywords like Sports Cards Buy-Sell on Facebook reveals many groups, many of which have over 20,000 members, and these groups see thousands of posts daily. The subreddit r/basketballcards has 17,000 followers, and other subreddits like r/PaniniStickerSwap also have thousands of followers. Most users in these discussion or interest groups trade cards on eBay.

Due to the lack of officially authorized purchasing channels in China, players mostly gather in related forums or discussion boards. The Baidu basketball card forum has over 50,000 followers, and the activity level of posting and interacting with card showcases and trading posts is very high. However, after platforms like 卡淘 (KaTao) closed registration, the main trading method for domestic players has become contacting and communicating through forums and trading on second-hand platforms like Xianyu.

According to a report published by Forbes in 2018 titled "Tech Entrepreneur Determines First Estimate Of U.S. Sports Memorabilia Market," as of September 2018, the eBay sports card market in the United States alone had reached 4.7 billion dollars. Considering the rapid growth of this market over the past two years and the swift global popularity of sports card collecting, the market size has likely exceeded 10 billion dollars.

3. Pain Points for Sports Card Players: Risks of Counterfeit Cards, Difficulty in Rating for Non-U.S. Players, and Challenges in Long-Term Storage of Cards

As mentioned above, the circulation and trading of sports cards are generally independent actions between users, meaning that once the cards are sold by the official source, there is no one to "regulate" the market. With the expansion of the market, some counterfeit cards have appeared, and if players are careless during the purchasing process, they may end up buying imitation cards that cost only a few cents at a high price.

Additionally, during the circulation and trading of sports cards, cards that receive high ratings from professional institutions can see their value increase significantly, sometimes even doubling. Therefore, sending collectible cards to professional institutions for grading is a major necessity for players in this circle. For example, the same Giannis MVP card rated PSA10 sells for much higher than the original card.

Image source: 卡淘 (KaTao)

However, since professional institutions like BECKETT are concentrated in the U.S., the high communication and shipping costs cannot be ignored. This demand has even given rise to specialized "grading intermediaries" to help players contact institutions and complete grading. The uncertainties during transportation and the lengthy process turn what should be a simple action into a grand "test of luck."

Moreover, aside from potential oxidation and discoloration issues that may arise from long-term storage of the cards themselves, some rare signed cards with ink from oil pens, as well as some physical cards with materials that are more prone to moisture and oxidation, require players to invest significant effort in protecting their valuable collections. Cards that are "closely guarded" are often not taken out for appreciation, creating a distance between the collection and the player.

4. Digital Collectibles? If the code can be easily copied or destroyed, how can we talk about "collecting"?

Digital collectibles? At least a few months ago, almost everyone would associate this idea with scams. After all, as a visual representation of code, digital collectibles sound no different from the MT cards in the annual NBA 2K game, where collectibles can be used to build one's team and participate in online competitions. However, due to the discontinuity of game servers, the prices of cards collected in the MT mode plummet after the next generation of the game is released, and the setting of discontinuing service for older generations ensures that these so-called digital collectibles will ultimately become worthless.

Image source: NBA 2K MT

However, with the rapid maturation of the NFT concept, things have quietly changed.

NFT, or Non-Fungible Token, is a unique and irreplaceable digital asset. Its most important feature is that each NFT is used for a unique and singular identification, non-interchangeable, non-divisible, and the smallest unit is 1. Unlike the characteristic of many crypto assets that can be infinitely divided, NFTs inherently possess the characteristics of "collectibles," and since their inception, they have been associated with art and collectibles.

Since this is a unique string of code, and once the asset is on-chain, it cannot be erased by humans, and it will not suffer from fading, oxidation, or damage over time, then logically speaking, NFT collectibles are fundamentally different from the "digital star cards" actively issued by the aforementioned platforms.

The team behind perhaps the most successful on-chain game ever, CryptoKitties, Dapper Labs, keenly recognized this potential and launched NBA Top Shot.

5. What is NBA Top Shot?

NBA Top Shot is developed on the Flow blockchain, which was created by Dapper Labs in collaboration with the blockchain team of Warner Music Group in 2019. Unlike Ethereum and most public chains, Flow employs a cryptographic technique called "Secret Knowledge Proof of Knowledge (SPoCK)" and uses a pipeline architecture design, allowing for decentralized high performance without sharding or relying on Layer 2. It achieves high throughput while ensuring a high degree of developer usability, making it more suitable for decentralized gaming applications. NBA Top Shot was a project that the team developed "in sync" during the early development of Flow.

Image source: NBA Top Shot Official Website

NBA Top Shot officially began its internal testing at the end of May last year. During the approximately two-month internal testing period, the project accumulated over 900 active users and completed transactions worth 1.2 million dollars in "digital star cards." In early August of the same year, the project officially opened public testing to invited users. Although the project’s official website is still marked as a BETA version, it has officially opened registration, allowing everyone to start a new "card-collecting" journey after a simple registration.

Unlike traditional printed star cards, the NFT format allows NBA Top Shot's "digital star cards" to have a more flexible presentation. In addition to images and text, NBA Top Shot's "star cards" also include a specific "highlight moment," which can be understood as a short video or a GIF image. However, this "highlight moment," along with the corresponding star cover and descriptive text, constitutes a complete NFT asset, which is the "digital star card" launched by NBA Top Shot.

Similar to traditional printed star cards, these "digital star cards" can also be traded in the market, and the issuance of star cards will be fully recorded on-chain, so these NFT assets also possess scarcity. Furthermore, at the early stage of the project’s development, NBA Top Shot had already reached a partnership with the NBA and obtained official authorization.

It can be said that apart from the absence of physical cards, NBA Top Shot's "digital star cards" are identical to everything about traditional star cards.

6. How to Play NBA Top Shot?

After completing registration, the website will automatically pop up a two-minute tutorial video that fully showcases what the star cards on NBA Top Shot contain and how to trade them.

For users accustomed to online shopping, there are no barriers to NBA Top Shot. Clicking on the Packs option at the top of the official website allows users to purchase card packs sold by the official source. The contents of the card packs cannot be known in advance, and the official source provides some limited descriptions for different types of card packs. If users want to open some rare cards, they need to carefully read the descriptions of the card packs. Due to the recent high market demand, as of the time of writing, all official card packs are temporarily sold out, and users need to wait for the official "restock."

Clicking on MarketPlace allows users to enter the trading market for star cards, where they can buy and sell specific cards directly. In addition to the dynamic presentation of highlight moments, each highlight moment star card will have detailed introductory information, including the game in which the highlight moment occurred, the statistics of the star card's "protagonist" in that game, the scores and results of the four quarters of that game, and the average statistics of the star card's "protagonist" for the entire season.

Image source: NBA Top Shot Official Website

The product list also supports search and category filtering functions, allowing users to filter their favorite stars or find interesting highlight moments based on their supported teams. Since these highlight moment star cards are sold in limited quantities, cards from teams with a larger fan base, such as the Lakers, and highlight moment cards of popular stars like LeBron James and Luka Dončić generally have higher prices.

Currently, NBA Top Shot supports credit card payments or payments through cryptocurrencies. Using a credit card incurs an additional fee, while purchasing cards with cryptocurrencies does not require additional fees. The supported cryptocurrencies currently include BTC, BCH, DAI, ETH, and USDC.

Image source: NBA Top Shot Official Website

After completing the payment, users will receive the purchased star card, which can also be priced and resold by the user. The rarity, serial number, and market popularity of the corresponding star will all affect the market price of the card. Selling a card incurs a 5% fee, and the proceeds will automatically be credited to the game balance, which can be used to purchase other card packs or cards. In the future, the balance will also open a withdrawal function.

7. How Popular is NBA Top Shot?

According to data released by CryptoSlam, NBA Top Shot's popularity currently stands out in the on-chain gaming space. In the past 24 hours, the game’s transaction volume exceeded 2.1 million dollars, which is nearly 46 times that of the second-ranked Sorare, and far exceeds the combined daily transaction volumes of games ranked 2-30.

Additionally, in the past 24 hours, NBA Top Shot's active user count reached 3,699, which is ten times that of the second-ranked Sorare. Based on the total number of transactions in the past 24 hours, it is estimated that more than 33 star cards are sold on NBA Top Shot every minute.

Image source: CryptoSlam

Although the project has only been in public testing for six months, NBA Top Shot has already climbed to second place in the total transaction volume leaderboard for on-chain games, second only to CryptoKitties. Currently, 6,160 users have purchased "digital star cards," a number six times that of CryptoPunks users.

Although NBA Top Shot's transaction volume still has a significant gap of about 20 million dollars compared to the former leader CryptoKitties, if NBA Top Shot can maintain its recent popularity, this seemingly large gap may be closed in the coming weeks. Perhaps in a month, the "sales champion" of on-chain games will officially change hands, and it is worth mentioning that CryptoKitties was launched back in 2017.

So far, the highest price for a single star card sold on NBA Top Shot has reached 47,500 dollars. This card features a highlight moment of Lakers forward LeBron James performing a folding dunk during a fast break against the Rockets on February 7, 2020. This transaction record also broke the previous record of 35,000 dollars set by the highlight moment of Grizzlies guard Ja Morant dunking on Baynes.

Moreover, data statistics websites focused on NBA Top Shot have completely crashed due to the recent surge in popularity, and the website operators have stated they are still considering how to resolve the traffic issue.

Image source: intangible.market

8. How Much Potential Does NBA Top Shot Have?

The reason why physical star cards have remained fresh over a century and have gradually gained recognition from more and more people, attracting more participants, is not only because star cards can be regarded as collectibles associated with a passion for competitive sports. The satisfaction derived from the significant appreciation of these cards in certain specific situations, along with the evident speculative value from a market perspective, has endowed these products with an identity as alternative assets.

The considerable user base of basketball as a sport provides an ideal liquidity foundation for this seemingly niche hobby and has spawned a market worth billions. The "digital star cards" launched by NBA Top Shot possess the same potential.

Taking Lakers star LeBron James as an example, as of the time of writing, James's Twitter account has over 48 million followers, which is even more than Tesla founder Elon Musk, who is very active on Twitter, by over 6 million.

This shows that sports superstars are also "top influencers" on social media. Just as the late Kobe Bryant was humorously referred to by Chinese fans as having 60e (6 billion global population) fans, the basketball culture represented by the NBA has considerable influence worldwide.

Even if only one percent or even one-thousandth of James's fans are willing to try purchasing star cards, that would still amount to over 48,000 users, while the current user base of NBA Top Shot is only one-tenth of that number.

As a new generation of NBA players becomes increasingly enthusiastic about using social media and speaking out online, the distance between fans and players has significantly narrowed. Players like Heat's rising star Tyler Herro, who have shone early in their careers, frequently interact with NBA Top Shot on Twitter, which has greatly contributed to the rapid rise in NBA Top Shot's popularity.

Unlike the high requirements for storage and grading of physical star cards, the almost zero storage cost of NFT star cards significantly lowers the barriers to this type of collecting, while the stronger liquidity of on-chain assets also endows sports card collecting with more ideal investment attributes. Once people begin to gradually understand and accept the collectible value of NFT assets, NBA Top Shot may open up a market that goes beyond the billion-dollar scale already created by physical star cards.