What Are Sports NFTs?
Blockchain technology is transforming sports collectibles. Here’s how you can get on board.
There’s no shortage of reasons to take up sports collectables as a hobby. Some participate in the pastime because they’re fans of an athlete or professional sports team, while others enjoy the social aspect of trading with fellow collectors to build impressive sets.
Fans of sports collectables have filled their shelves with cards, game-used items, apparel, and more for over a century — and in that time, collecting has more or less stayed the same. But the web3 revolution has brought a bold new approach to sports collectibles, offering a fascinating twist on the hobby. Sports NFTs, made possible by the power of blockchain technology, are empowering anyone to build collections of fractional stakes in sports collectables and develop valuable portfolios that are fun and potentially profitable. Keep reading to learn how sports NFTs work, how to buy and sell them, and which collections could be the most lucrative in the future.
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What is a Sports NFT?
Sports NFTs are tokenized assets that represent either real-world sports collectibles or ownership of a digitally native asset. Each token can correspond to an individual asset itself, or a fractionalized share of an asset — the latter case allowing for more accessible trading of physical collectibles that might otherwise be too expensive for most collectors to own.
Sports NFTs are a type of NFT, which stands for Non-Fungible Token and refers to an individual token on a blockchain that can’t be replicated. Cryptocurrency tokens such as Bitcoin and Ethereum are fungible — one Bitcoin is functionally identical to another, so both Bitcoins carry the same value and can be used as money. Being non-fungible means NFTs are unique, one-of-a-kind tokens, though their provenance is backed up by the same blockchain technology.
Blockchains are decentralized peer-to-peer public ledgers that are secured with cryptography. Everyone who mines or holds cryptocurrency related to a blockchain contributes to its security. Additionally, the public nature of blockchains means every transaction on the chain can be traced. You can learn more about how blockchain works by reading the original Bitcoin whitepaper written by Satoshi Nakamoto.
To understand the difference between cryptocurrency and sports NFTs, consider a numbered and graded collectible sports card. Even if there are several other printings of this card, the specific grade and number of one card renders it non-fungible — it cannot be duplicated, and any similar cards will have different values than this specific card. Sports NFTs function the same way; the biggest difference is that blockchain technology is used to account for their ownership.
Types of Sports NFTs
As mentioned above, there are essentially two types of NFT sports collectibles: NFTs that represent digitally native assets, and NFTs that represent real-world assets:
Digitally Native Sports NFTs
One of the biggest success stories in sports NFTs is NBA Top Shot. These are NFT highlights of noteworthy moments in NBA games, like Houston Rockets rookie Jalen Green’s layup on October 20, 2021 — the idea is you own the moment itself, rather than a physical good associated with it, though this is typically represented in the form of an image or brief video. Over $400 million worth of NFTs were sold on this platform in February and March 2021, making it one of the most lucrative and successful projects in digital sports collectibles.
The biggest benefit of a digitally native sports NFT is its versatility. While traditional trading cards have a photo, some stats, and maybe a patch or autograph, NFTs allow fans to collect memorabilia dedicated to more conceptual aspects of the game. For another example, look at this OpenSea collection made by the San Antonio Spurs with hand-drawn plays from Coach Pop.
On-Chain Collectible Trading Cards
Another type of sports NFT involves taking physical collectibles and creating an asset that represents its ownership on the blockchain. An intermediary securely stores the collectible in a physical location and then creates its blockchain token counterpart, to be resold later. The biggest benefit to this method is it allows users to own portions of a valuable card, which is an affordable way to build a portfolio of valuable sports memorabilia.
Where To Buy Sports NFTs
Currently, the landscape of blockchain collectibles is vast, with many competing chains and intermediaries. Here’s a quick breakdown of the different NFT sport marketplaces.
Owning a token on a physical-backed exchange one of these networks means you also own the physical collectible it represents (or a piece of it). This is different from all the other sports NFTs listed below, which are exclusively digital files with ownership represented by ledger.
There are some potential downsides to this method, but it depends on which exchange you use:
- Some major marketplaces only accept crypto as payment, requiring more upfront work to set up your crypto wallet and fill it with currency.
- Not all marketplaces allow you to purchase fractionalized assets, significantly increasing the upfront cost.
The biggest centralized online marketplace for all kinds of NFTs is OpenSea, a web3 company valued at over $13 billion. Many sports leagues and teams host their NFT projects here, but individual athletes such as LaMelo Ball and Zion Williamson also mint personalized collectibles here.
The biggest benefit to collecting sports NFTs on OpenSea is its widespread adoption by the greater crypto community. With a larger pool of creators and collectors, there’s a lot of activity on this platform that can appeal to day traders.
However, there are some downsides to this platform worth mentioning:
- All of its trades are handled with Ethereum, a cryptocurrency that has recently seen significant fluctuations in value.
- Additionally, transactions made on the Ethereum blockchain cost gas fees, which are also prone to fluctuation..The open nature of OpenSea can make it more difficult to track down potential counterfeits, and some sellers take advantage of this fact.
Official League Exchanges
Another option for sports NFT collectors is a centralized marketplace that’s officially endorsed by a sports league. This includes NBA Top Shot, UFC Strike, and NFL All Day. These exchanges are powered by Dapper Labs, which uses a blockchain consensus mechanism that decreases power consumption without sacrificing security. This platform also allows users to buy and sell their collectibles in traditional currencies, which can be more accessible.
As with the previous option, there are some negatives worth mentioning:
- These platforms tie the value of their cards to fiat currencies like the dollar, the pound, and the Euro. While this means your assets are safe from negative volatility, the tradeoff is that you won’t have exposure to positive volatility. In other words, if the price of Bitcoin or Ethereum skyrockets again, your assets won’t increase in value.
- Centralized exchanges run by official organizations could be seen as antithetical to the distributed ethic of crypto at large, and it still remains to be seen how this will influence their broader adoption.