How Digital Sports Trading Cards Evolved into Non-Fungible Tokens (NFTs), with the Help of the Top Athletes Around the World by Frank Rocha

 

How Digital Sports Trading Cards Evolved into Non-Fungible  Tokens (NFTs), with the Help of the Top Athletes Around the World

By Frank Rocha

Part 1: Digital trading cards made a lot of paper    

 

A 1952 Topps Mickey Mantle rookie card sold for a record-setting $5.2 million on Jan. 14, with a Professional Sports Authenticator (PSA) grade 9 or a mint grade, with only six in the world. In Aug. 2020, a signed Mike Trout rookie card sold for a hefty $3.93 million at auction. 

Faces of notable athletes have appreciated over time with the names like Trout, Mantle, or Kobe printed on paper cards since its inception in 1886 by Goodwin Tobacco, creating the first series of sports cards and the first set of baseball cards to ever be created. The physical card market, showcasing such prominent athletes as those mentioned above, will appreciate in value, regardless of competition of the newly introduced digital asset class, which is evolving a century old pastime into something that reflects the market of today.

Today, physical cards are now regarded as the thing of the past, as ex-Disney CEO Michael Eisner, now Topps’ chairman, has led the company to enter the non-fungible token (NFT) space through a special purpose acquisition company with Mudrick Capital Acquisition Corporation II, on April 20. Topps released its first series of NFTs where the public can purchase a premium or a basic pack of NFT baseball cards, with a possible digital signature from a pro-athlete included. 

 

In 2012, before its involvement in NFTs, Topps ventured into its own mobile application, to familiarize itself with a new age of trading cards. Topps Digital includes digital trading cards from the MLB, NHL, and MLS. Topps released their applications, Bunt (MLB), Huddle (NFL), and Kick (MLS) where collectors can purchase packs on the Topps marketplace and then potentially trade with other collectors through eBay. The newly introduced Topps Digital ushered in a new age of digital card collecting that has helped Topps produce record sales of $567 million in 2020, a 23% jump from its previous year. In December 2020, Topps introduced their launch of Garbage Pail Kids NFTs that were highly successful, selling out of its packs in 28 hours. It may be trying to change the new age of trading cards, but it all started with a catalyst in NFTs which caused a seismic wave of attention late last year, but let’s answer this question first. 

Part 2: What is an NFT? 

 

A NFT is a digital asset that allows you to buy and sell digital art, animated clips, songs, DLC items in video games, or even digital trading cards. An NFT is like a mini-storage drive that stores your digital content that you can buy and sell instantly using a blockchain. A blockchain protects the NFT from hackers, while adding security toward your digital asset, stopping potential use of illicit activities from trading digital assets or cryptocurrencies. A blockchain helps someone trade an NFT or digital asset directly and discreetly between seller and buyer. This process cuts out the middleman, an example being eBay or StockX where the business acts as the middleman between seller and buyer. This process eliminates additional fees per transaction that occur using normal fiat currency or fungible money on the transaction. If you live in Europe and you want to purchase an item from Etsy in the United States, just exchanging a euro to the dollar issues an additional fee. The fungible asset purchased might be large, and the shipping and handling across the Atlantic issues another fee. The benefits of the blockchain goes around the middleman to purchase an NFT and saves you money per transaction, bypassing annoying fees or geographical boundaries.

 

NFTs have become mainstream due in large part to the pandemic, where masses were locked down. The growth of NFTs correlates with the rise of cryptocurrencies, so you might say without Bitcoin’s inception in 2009, NFTs would be non-existent today. This is due to the adoption of cryptocurrencies being exchanged through blockchains, exchanges increasing their adoption across the globe with the likes of Visa and JPMorgan Chase behind it. Total value of NFT transactions from 2019-2020 went from $75 million to a whopping $250 million and a single Bitcoin went from $6,000 to over $58,000, according to Statista.

 

Part 3: Dapper Labs launch NFTs to the moon 

 

In October 2020, the $7.5 billion company, Dapper Labs, launched their beta for their groundbreaking application, NBA Top Shot. It was the match to a vat of napalm of the hype of NFTs, after a Lebron James NBA Top Shot moment sold for over $230,000. NBA Top Shot alone was responsible for a third of the $1.5 billion NFT trading volume seen in Q1 2021. The company has made over three million marketplace transactions, a jaw-dropping $500 million in total sales, and 100 times as many users since the beta’s inception. Through Top Shot marketplace, you are able to purchase a single or various booster packs using USD, Bitcoin, Ethereum, other crypto-currencies or their own token, called Flow. Flow is a decentralized, developer-friendly blockchain, designed to help power the foundation for new games, apps, and digital assets like NBA Top Shot NFTs that support the token created by non-other than Dapper Labs.  

 

NBA Top Shot NFTs are purchased at random through digital packs that contain NBA Moments or in-game clips. Each NFT can range from common to legendary, and NBA Top Shot will release an ultimate tier in the near future. There are a number of NBA Moments that have a high valuation, which comes from its scarcity. Top NBA athletes and legendary moments will have a lower serial number. The lower the serial number, the higher the value of an NBA Moment. 

After obtaining your pack, there is a NBA Top Shot market where bidders have the chance to win a highly valued NBA Top Shot Moment featuring a Lebron James or Kobe Bryant from other collectors in the marketplace. But bidders be warned, at its beta stage since its launch the platform has had major problems. Withdrawals of funds have been a nightmare on the platform, where bidders would have to wait up to 6-8 weeks before seeing their money be returned. The inability for some auctioneers to withdraw over hundreds of thousands of dollars has put its audience on edge and distances new customers to its market. Dapper Labs says that the delay in withdrawals is to benefit the transaction, as the delay helps in identity verification and in anti-money-laundering practices to protect the bidders.

 

Part 4: To the moon or bust  

 

Since its peak in February 2021, sales for NBA Top Shot have tumbled and cracked the hardwood face-first, going from $45 million to just under $10 million in April 2021. You might say the NFT craze could be deflating by evaluating that Top Shot has been down almost 75% in sales since February. If the market for NFTs continues to shrink, there should be an increased risk of losses for digital assets because of its niche market. Tracking its sales to date, you would say the craze may be slowing down because of Top Shot’s sales, but more professional athletes are continuing to enter the space that include Patrick Mahomes, Rob Gronkowski, Megan Rapinoe, Sue Bird, and Taijuan Walker. Mahomes, Gronkowski, and Taijuan collectively made over $5.45 million from their NFTs. Rapinoe and Bird will release their collection on May 10. 

The NFL is rumored to have their own NFT collection in the works. Sports Business Journal reported in March that NFL Chief Media & Business Officer Brian Rolapp, sent a memo to all the teams explaining the league was looking into blockchain technology, not only for collectables, but for ticketing as well. Even Tom Brady recently launched his own NFT company, Autograph, that will bring together the biggest names in sports, entertainment, fashion, and pop culture into the space. 

On April 27, the Golden State Warriors became the first team in U.S. professional sports to release their own NFT. Dubbing their release the “Golden State Warriors Legacy NFT Collection,” bidders can try to obtain championship ring NFTs, made by Jason of Beverly Hills, who actually designed the Warriors’ championship rings from 2015, 2017, and 2018. NFTs include a one-of-one NFT, which obtains all the rings in one, but one does not simply stop there. The team is set to release special golden ticket stubs, which have unique hand-illustrated tickets celebrating the team’s history. As of May 2, the 1-of-1 Warriors 6x World Championship ring NFT, comes with a real 120 gram, 14kt gold ring, with 475 diamonds and sapphires sold at auction for over $890,000. The 1-of-1 “The Warriors Golden Ticket” NFT sold at auction for over $85,000, and a few single ring NFTs, including the actual ring, sold for up to $135,000. 

 

According to data collected by Business Insider on April 28, sports NFTs, which include player cards, virtual racing cars and digital racing horses, brought in over 28% less cash, and sales declined by over 20%. The amount of NFT sales has decreased around 28% and the total value of sales declined by 14% between March 30 and April 28. The NFT bubble might be bursting in the near future if sales continue to dwindle and lose relevance, as new NFT collections continue to be introduced. Billion-dollar sport organizations and multi-million-dollar athletes association with NFTs could end in a blink of an eye with its continued high volatility or it could realign itself to the moon with the improved adoption of digital assets.