Non-fungible tokens or NFTs have taken the world by storm. Sports NFT platforms like NBA Top Shot (basketball), Sorare (football), Topps MLB (baseball) and RARIO (cricket) have, however, driven a deep wedge in the sports universe. There are two camps — those who believe that sports NFT is the best thing that has happened to the industry and those who think that the ownership of images and videos is meaningless.
As an ex-first employee of one such platform, I assure you that NFTs are fine. They are the digital future of sports fandom, although, like any new technology, there is far too much marketing and too many overhyped projects, and buyers must be judicious before putting their money into any NFT.
NFTs are so hot right now; the technology holds the dubious distinction of being at the top of the latest Gartner Hype Cycle! The term NFT, which was non-existent in Google search until a year ago, is one of the hottest topics today.
What are NFTs anyway?
At the most basic level, it can be understood as an ownership certificate for digital art — whether an iconic photograph (think Sachin Tendulkar on the shoulders of the ICC CWC 2011 team) or a pivotal one (MS Dhoni twirling his bat after hitting the match-winning six in the ICC CWC 2011 final) or an emotional one (Sachin Tendulkar looking up to the sky on reaching his 100th hundred against Bangladesh) or even memes.
Sure, but why pay money for a clip available on YouTube?
Let us take a step back and understand how objects hold financial value.
People only collect what is universally desired or appreciated. Collection is an expression of one’s identity and that’s how we connect with our friends and loved ones. Unlike utilitarian materials like oil or gas, the value of collectibles or art is their shared meaning — the more unique and desired the object, the higher its price.
There are probably thousands of pixel-perfect digital photographs of the Mona Lisa but all of them hold near-zero value while the original artwork is priceless. Similarly, there are billions of cricket bats in the world but there is only ONE used by MS Dhoni to play his ICC CWC 2011 match-winning knock and personally autographed by him. That bat has limited cricketing utility but the memories associated with it is what made it fetch Rs 72 lakh in a 2011 auction.
With physical objects, you pay a fat margin to intermediary auction houses or certification agencies to ensure that you are buying an original. The NFTs, however, provide the buyer the assurance of authenticity and originality of the digital art in a single click via the blockchain. The buyer is thus assured of its legitimacy, licensing, rarity and uniqueness.
Blockchains were also designed to allow ownership of digital gold aka Bitcoin. It is impossible for a bad agent to seize anyone’s bitcoin because a million nodes will detect any fraud and reject it.
Physical art can still be forged but digital art on blockchain cannot be forged or stolen.
Okay, but why are some NFTs trading for millions?
Art is a $1.7-trillion asset class. Contemporary art outperformed the S&P 500 between 1985 and 2018!
Art, as an asset, is all about meaning and not its material cost. World’s billionaires buy art not just for aesthetic reasons but also because buying physical art from legendary auction houses like Sotheby’s assures them and their circle of its provenance, scarcity, legitimacy and thus, its image and hype.
For truly iconic art like the Mona Lisa or the moment when MS Dhoni hit the 2011 CWC match-winning six, the sky’s the limit since the price is set by the most passionate believer.
So, is it all roses? Are all NFTs worth investing in?
Given that we are in the early days of NFTs, which are also coinciding with a crypto boom and unprecedented global liquidity, we are going to see new records being set over the prices of iconic NFTs. This is likely to spawn many copycat NFT projects offering little value and way too many speculative purchases as price discovery happens.
Thankfully, there is a way to navigate these exciting and unprecedented times. The fact is that this is a brave new digital world of art but the underlying rules do not change. The monetisation is digital but the underlying emotions are as old as time itself. A new technology does not command a high price — iconic rare moments with provenance do. Here are four easy rules to navigate the world of sports NFTs:
- Is the NFT licensed? Are you buying the Dhoni sixer from the copyright holder, ICC or their authorised NFT partner?
- Is the picture card an original or is it an artist’s impression?
- Spend intentionally: Are you buying rare, limited-edition art, like one of only ten licensed copies of a match-winning moment? Or are you buying a trading card with no utility? Or are you buying an NFT from an ecosystem with a tightly knit community where the interactions and fandom come together to make your NFT purchase more fulfilling?
- NFTs are not intended to be an investment class. NFT platforms like NBA Top Shot and Sorare have operated fairly liquid marketplaces. With 600,000 users buying 11.5 million moments and performing 10 million secondary sales — NBA Top Shot has proven that sports NFTs have robust demand and stable prices. However, users should only spend what you can afford to lose.
How will sports NFTs revolutionise sport?
At this point, the observant reader would be thinking, “This is all fine but what can I do with a video of MS Dhoni’s match-winning six? The hair on my hands will still stand even if I watch it on YouTube. Why buy its NFT?” NFTs take on life when used to express one’s fandom and share this feeling with one’s tribe. This is where platforms like NBA Top Shot truly shine. These platforms are not merely digital art storefronts but a complete fandom universe that you enter by purchasing NFTs of the top moments in sports.
You are no longer restricted by your geographical location to purchase rare memorabilia. You no longer need to travel to buy global sports memorabilia. You could possibly purchase a rare NFT of the cricket World Cup trophy from anywhere!
We live a truly digital life in 2021. NFT platforms can be the digital twin of sports, providing an online universe where fans can interact and express themselves through the moments they own. NBA Top Shot members can showcase their special collections to friends, participate in contests and stay up to date with the ongoing NBA buzz, all while hanging out at online pack-opening parties. All of this makes NBA Top Shot an addictive and extremely fun place to hang out with your friends.
These are exciting times and NFTs promise to revolutionise the fandom experience. When it comes to NFTs and sports, the best is yet to come.
(Hitanshu Gandhi was the former vice president of growth at RARIO. Views expressed here are personal)