Since the launching of CryptoKitties in 2017, nonfungible tokens (NFTs) have surged in prominence, with the market predicted to move over $800 billion in the next two years.
Picture-for-proof projects like the Bored Ape Yacht Club and play-to-earn gaming projects are two of the most well-known use cases for NFTs.
NFTs have also piqued the interest of the sports business, with major sports leagues creating their own platforms for fans to interact with their favourite teams or players, but more on that later in this story.
NFTs are non-transferable chunks of code that are stored on the blockchain. These alpha-numerical code strings can be associated with assets such as artwork or digital and physical items.
Minting is the process through which NFTs are created, and creators can place a restriction on the number of NFTs they want to mint, generating scarcity.
Scarcity has always applied to physical assets due to their physical construction with restricted resources. However, because digital products are easily reproduced, scarcity has never existed. NFTs have changed this, and we are now seeing a developing digital collectibles market.
When it comes to sports, fans are so passionate about their favourite player or team that they engage with them in whatever manner they can. Watching or visiting live games, purchasing products, or attending signing ceremonies are all examples of engagement.
Fans want to be closer to their favourite teams and players, which creates potential for sports clubs and organisations to generate additional cash.
Sports leagues, in particular, have recognised the importance of fan involvement and have created platforms where fans can buy, possess, and trade digital mementos.
One well-known example is the NBA Top Shots NFT marketplace, where fans can buy, sell, and exchange basketball video clips.
NBA Top Shot moments are video clips on the platform that displays a different highlight from a basketball game. The NBA and Dapper Labs, the makers of CryptoKitties, collaborated to create the marketplace in 2020. Within a year of its inception, it had produced over $230 million in sales.
Some video clips are offered in packs, much like actual trading cards such as Pokèmon and Yu-Gi-Oh. There is also a gamification element, with rarity tiers ranging from “common” to “legendary,” which is a traditional structure in role-playing games.
Rarer video clips are more likely to command a greater price than more typical highlights, boosting their perceived collectible value.
When it comes to sports leagues developing their own interaction platforms, the NBA is not alone.
The National Football League and the National Hockey League are developing their own NFT platforms, respectively, while Major League Baseball has already launched its own NFT marketplace.