You might have seen the headlines and felt like you were living on a different planet.
While non-fungible tokens remain misunderstood and confusing to many, a lot of boosters in the pro basketball world welcome a future where NFTs are the norm.
In the not-so-distant future, your ticket to an NBA game could be an NFT. When the Finals-winning players hoist the coveted Larry O'Brien Championship Trophy, you could buy an NFT to have a virtual champs ring for yourself. Proceeds could benefit a charity affiliated with the team, and the token's authenticity will be verified by the blockchain.
What Is An NFT?
Wait, what? It is a lot to take in. Let's have someone explain what an NFT actually is.
"An NFT is just a file format for sending assets on blockchains," says Mason Nystrom, an analyst at the crypto research firm Messari.
Oh, OK. Let me just check which planet I'm on again...all right. Maybe breaking it down word-by-word will help?
First, we need to know what "fungible" means - it's when one of something is equal in value to something like it. A dollar is equal to a dollar, a peso is a peso and a yen is a yen. If someone walks up to you on the street and they want to trade $1 bills with you, you don't lose out — assuming that bill you receive is legit, Nystrom explained.
So when something is not fungible, it's not one for one. One NFT probably shouldn't be traded straight-up for one other NFT if you want an even trade.
What Is NBA Top Shot?
Now we can explain NBA Top Shot. In a few words: it's virtual trading cards that feature highlight videos. Much like a paper Pokémon card or Magic the Gathering card, you can buy virtual Top Shot cards in "packs" containing items of varying rarity - which can drive up its price.
Take this highlight of Brooklyn Nets star Kevin Durant, for example. There will only be 499 of them, and 41 are out there in packs as of this writing. What do you get for the retail price between $1,099 and almost $20,000? The actual item contains the highlight video of a Durant steal and alley-oop against the Cleveland Cavaliers, with stylized gold Nets logos and the final 123-109 score of the game.
What stands out about the collectible is its authenticity and being verified by the league, with a transaction history you can trace on the blockchain.
The blockchain is a complex receipt, basically. A Carfax for your digital art but with some extra details. And so if you're an artist in an NFT, or a player featured in one, you could trace the different times it was sold or resold as an asset. Players and artists could also get a cut of the profits from resales.
But let's take a hater's view for a second. There's also the simple matter that you can look up most of those highlights on YouTube for free. Anyone can. And owning an NFT is not the same thing as owning the copyright to a work.
So NFTs are probably not for everyone. But they're appealing to people who want to collect moments and show off what they get.
"In the NFT world... you have collectibles or an experience that you're going to own forever," says Orlando Magic point guard Michael Carter-Williams. "The best way I try to break it down to people is if I have a card, you buy it for me and then you sell it to somebody else, I will still get a piece of your sale. And that's the cool thing about it, is that you never lose value of what you own."
He's an investor in Top Shot and an owner of a few NFTs that were minted from key moments in basketball games, including one of Denver Nuggets player and 2021 MVP Nikola Jokic.
"I don't know how much it's worth right now because I'm just holding onto him for awhile," Carter-Williams said.
Basketball tickets as NFTs
A lot of players and fans think trading cards are pretty cool. Ted Leonsis, owner of the Washington Wizards, is thinking even more broadly about it, and sees a future where NFTs are tied to your ticket to a basketball game.
"Some people might buy it and split it, and say 'here's the way to get in to watch the game,'" Leonsis said. "Some people my want to buy the ticket just to get the NFT [of] that moment."
Leonsis thinks this will open up sales to fans outside of an NBA team’s area. Fans who may be thousands of miles away in Japan may want to buy a collectible version of a ticket with a highlight of their favorite player.
In the past, if "I bought a ticket, I bought a jersey, I bought a tchotchke...it's a one-time event," Leonsis said. But with an NFT, it's like "I bought trading cards one time and turned it into lifetime revenue generation that everyone shares in on an ongoing basis," Leonsis said.
While Leonsis is talking up the value the new tech could bring to players, the NFT craze has already been a windfall for artists.
Australian digital artist Bosslogic was able to pay off his parents' home with the proceeds from a big sale and his work continues to fetch a high price.
"Ask any artist, we strive to better ourselves, we strive to get better at our craft. And making money is important as well, so we can continue doing the stuff we do," he said in an interview. "But you would never as an artist going in, especially as a digital artist, never think that you'd be earning a million dollars. Or $500,000, or money that makes you contemplate what you're doing in life. You never think of that."
"If you've ever collected Pokemon cards, it feels like those days again. It's like, 'oh I want to get this one, this is a rare one.' ...bragging rights and all that."
It's also putting a lot of digital artists on the map.
"Now you ask anybody in the art field who Beeple is, they'll know who he is," Bosslogic said, referring to the artist who sold an NFT work called "Everydays: The First 5000 Days" for $69 million.
If this all sounds unprecedented, think about digital goods in video games.
Nystrom, the analyst likened NFTs it to a Fortnite skin - an outfit for a video game character that has no impact on performance in the game, but is widely sought after nonetheless.
"Understanding that you may not see the value in something, but the way we see value evolves over time, is I think really important for understanding how NFTs are going to proliferate into the future," Nystrom said.