Are NBA Top Shots the future of sports? It depends on what NFTs are really worth | At Large

This has been a year full of little digitised moments that few of us will want as collector’s items. 

Anniversaries pass of shocks and adaptations that were harbingers of heartache and hardship, monotony and amorphous time. 

In the past 12 months the value of sport, even if it is not as essential as other parts of life, has been underlined for many millions of people – first through its absence, then its presence. It gives substance to the intangible: shaping days, building communities, creating memories. 

Meanwhile, the industry has had ample reminder of the problems it wants to solve in the next decade. Recent restrictions are not, we hope, handicaps to be worked around that much longer but sport has been shown what it is working with. Put simply, this business has been looking for assets that can earn outside of seasonal cycles, and attractions that exist outside the live event for an age of always-on entertainment. 

All of which brings us to non-fungible tokens, or NFTs, the theme of the month in tech and media. Their rapid emergence has put most of us on a steep learning curve – one that starts with the meaning of the word ‘fungible’.

Essentially, though, NFTs are a blockchain-enabled solution for creating unique digital lots, mostly powered by the same technology as the cryptocurrency Ethereum. A file’s identity is recorded in a public ledger so that however many times an image or clip or other artefact is reproduced, any version of it can always be traced and authenticated. 

That means that for the first time, individual digital files can be valued for their specificity as well as their function. You can make something as a one-off, which opens the way to a kind of binary fine art trade, or you can make a limited run, which is of interest to the collectibles sector. The National Basketball Association (NBA) and Dapper Labs, the Vancouver-based developer behind the blockchain-powered CryptoKitties virtual pet game, have been playing with the latter on the Top Shots platform. This lets fans buy packs of Moments, which are packaged highlight clips that operate like trading cards. Top Shots is said to have moved US$400 million since launch, between over 250,000 active fans, stirring up buzz across Twitter and the messaging platform Discord.

Its model offers entry-level mystery packs for US$9, drops ‘rarer’ packs of star players and big events into the system for anything up to around US$230, and allows buyers the incentive to keep trading. According to Sports Illustrated, 100 per cent of revenue from initial sales goes to the platform while Dapper Labs takes a five per cent service fee on secondary sales, sharing all profits with the NBA, the NBPA players’ union, and other investors. Dapper Labs has already signed the Ultimate Fighting Championship (UFC) to a licensing deal that will make use of the Flow blockchain platform, and other leagues are understood to have an eye on the template. 

There are complications, from a need to monitor bot activity to the effects of unexpectedly high demand on the servers. Dapper Labs has instituted cooling-off periods after purchase to allow for this, and also begun a pre-order process on the most anticipated packs. Anti-fraud and money-laundering measures are another wrinkle with the review process for cashing out taking up to 30 days. Sports Illustrated’s report suggests that as of this week just over 17,000 Top Shot users could withdraw cash, ‘leaving millions of dollars in hypothetical earnings trapped on the platform’.

The implications of this are made harder to read at the moment because coverage of NFTs has had to follow the noise. And the noise is loud and disorienting, like a clown car skidding wild in an accordion factory. One day a GIF of a Pop Tart cat sells for US$590,000. On another, Logan Paul serves up snippets of his free-to-access YouTube videos for US$20,000 a pop. Jack Dorsey and Elon Musk are courting seven-figure bids for their early tweets. We all know the line about cynics and the value of nothing. 

Last week Christie’s processed its first fully digital NFT artwork – ‘Everyday: The First 5000 Days’ by graphic designer Beeple, AKA Mike Winklemann – for US$69,346,250. It was the third most expensive piece ever sold at auction by a living artist. Bidding started at US$100. 

“I actually do think there could be a bubble, to be quite honest,” said the 39-year-old Winkelmann, discussing the NFT market with the BBC a day before the virtual gavel came down. “And I think we could be in a bubble right now.”

A few explanations may work here. In a stunted and imbalanced pandemic economy, to coin a dystopian phrase, there is an ocean of capital sloshing around in search of a beach to wash up on. Stock markets have held high and real-world movement has been slow; bored people with loose bundles are piling in on ‘meme stonks’ and Bitcoin. From fantasy sports to limited-run footwear on StockX, all sorts of investments have been gamified. 

Then there is the added intrigue around cryptocurrencies, and the sense that all this lets their backers flaunt some future-facing vigour. Bloomberg and the Washington Post are among the outlets to discern undercurrents of market manipulation in the NFT art scene. Metakovan, who bought ‘Everyday’, spoke above a tepid critical reception to call it “the most valuable piece of art for this generation” and said it would one day be worth US$1 billion. He is the founder and financer of the cryptofund Metapurse, which the Art Newspaper reports to be both an NFT production studio and the owner of the world’s largest known NFT collection. 

So this could be an exercise in moving large sums of money round in ever-increasing circles until the real value presents itself. Or it could leave a pile of digital detritus to bury every known Dutch tulip and Beanie Baby of historic record. The sensible move, either way, is probably to wait out the investment craze and look a little closer at the practicalities. 

In a very sharp interjection on Twitter, Seven League consulting partner and sometime SportsPro collaborator Charlie Beall threw philosopher Walter Benjamin’s 1935 essay ‘The Work of Art in the Age of Mechanical Reproduction’ into the mix.

Benjamin was concerned with the value of artworks at a point where photography and machinery could make prints or copies of anything cheap and abundant. That, as it turns out, has acted more like marketing than market dilution, but tradeable digital assets are making this journey in reverse. 

At their root, NFTs are bringing scarcity to a digital environment defined so far by limitless supply. Some of this tracks a change in thinking in how digital economies can be organised. At the risk of oversimplifying things, most digital transactions are about providing consumers with access, whether to content, services or physical products. Or in other cases, they are about providing advertisers with access to consumers, to their data and their attention. Much of the value is created in the real world, with digital networks offering disintermediation and scale. 

NFTs have their technical drawbacks, not least the enormous carbon cost of crypto platforms, but could yet represent a generational shift. Solely digital goods have become more familiar in the past few years but plenty depend on context. A video game avatar or power-up has little use outside of the title it was coded for. More to the point, the company releasing it is still incentivised to sell as many as possible. NFTs, in theory, allow each unit to retain some intrinsic value. 

And while the clamour around financial speculation dominates, the sports industry might end up focused less on what these things can make than what they can mean. Over the past year, to take one limited example, several teams have issued virtual tickets for matches taking place behind closed doors. These have sometimes involved physical memorabilia as a sweetener but have, in real terms, effectively been donations that fans were happy to give to support their communities. Rewarding that type of purchase with something to hang on to and pass on has its merits and, eventually, those activities could build into something more substantial. 

It is appealing, just now, to add weight to an ephemeral thing. But it still helps for people to know what it is worth when they pay for it.