Few examples are as effective as NBA Top Shot in highlighting the good, the bad, and the ugly of relying on a centralized approach to scale a crypto consumer product to the mainstream.

Despite its missteps along the way, Top Shot is one of the most successful crypto consumer products the space has seen thus far. Disagree? Here’s how Top Shot measures up vs the field all-time.

Contextualizing Top Shot vs incumbents

First, I want to denote the distinction between new age digital cards platforms vs physical card players. What is the best way to think of Top Shot, Dapper Lab’s OG Flow project? Borrowing the dependency spectrum from Derek’s excellent piece on Storing Value in Digital Objects, I’ve placed Top Shot on the product/service side below.

Though one can make the argument physical cards can be stores of value, digital collectibles like Top Shots are more influenced by external dependencies (Dapper, Flow, etc). For example, Dapper has the authority to change the rules of gamification and utility of moments how they please (burn, lock, points accrued, challenges, etc). The cheaper a moment is the more reliant it is on external dependencies (represents majority of Top Shot moments). On the flip side, as you scale up to higher value & more scarce moments, those exhibit some Store of Value characteristics and function as a hybrid of sorts. Ultimately, the success of Top Shot is ride or die with its parent company, Dapper.

Grasping the value prop

As a lifelong NBA fan, you could imagine how excited I was when I first found that Dapper was working with the NBA to create digital collectibles. The NBA is a globally recognized brand consistently on the cutting edge with tech experimentation. When Benny tweeted out in Feb. 2020 to gauge interest in the prototypes, I knew I had to look into it in more detail.

The appeal of Top Shot differs on who you ask. For some, it’s a StockX for digital collectibles. For others it’s a social product, an entry into a community of like-minded basketball enthusiasts where folks bond over shared experiences like collecting moments and watching the NBA.

It is financialized fandom with verifiable ownership, transparency, liquidity, and trade settlement all under one roof with reduced barriers to entry.

Digital moments are superior to physical cards in that they unlock portable fandom. There’s no need to worry about condition, grading, shipping, and authenticity. Top Shot NFTs are easier to design experiences around (token-gated events, loyalty scoring, etc).

Which was smoother? Onboarding or Ray Allen’s jumpshot?

Top Shot’s secret sauce was in executing a simple onboarding experience for non-crypto natives onto its platform. Little to no mention at all of crypto, NFTs, gas, or blockchain. As a refresher, I re-visited the site just now to see what the onboarding experience feels like for new users. Enter email, set password, add CC details, and buy moment. That’s it. <1 minute.

However with centralized systems, tradeoffs are made and only under platform duress do you often see the negative consequences emerge (more on this soon 👀).

Calm before the storm

Despite so few users in Summer ‘21, it was still hard to purchase limited edition Legendary packs in the primary market. Many collectors were already doing the mental math around the scarcity of the season 1 moments in relation to the size of the NBA fanbase and card collectors market.

There were days where $1k volume was something to celebrate so luckily the secondary market was quite ripe with opportunity. Affordable secondary entry across all tiers truly enabled basketball enthusiasts to collect what they resonated with. Pack drops and ripping packs were a delightful experience at the time. My strategy was fairly simple. Focus mainly on the top blue chip players’ moments (Lebron, Luka, etc) and those that may be blue chips in the future (Rising stars like Ja).

Permission to full send

Remember how I mentioned how seamless the onboarding process was? As Top Shot garnered interest, many non-crypto native users starting joining in droves thanks to the easy on-ramp and their pivotal first touches with the product were seamless. Catalysts like Jonathan Bale’s article on his $35k Ja Morant Cosmic purchase, struck a cord with a ton of folks from the gambling/fantasy sports world.

NBA players like Josh Hart were hopping in on YouTube streams, interacting with the community and ripping packs together. For a brief moment, crypto had finally broken out of our crypto twitter echo chamber. From appearances on national media to being touted as the future of the digital frontier, Top Shot began dominating attention airwaves and the meta.

We also had the now infamous and arguably most lopsided NFT trade in history with Pranksy’s swap of Top Shot moments for 5 of Beanie’s punks. In fairness to Beanie, he’s crushed NFTs otherwise.

Everyone wanted in. When every pack felt +EV, what could go wrong? It was the type of euphoric market where Dapper could have a snuck in a Kwame Brown rare moment and someone would have dropped $5k for it...

The Unwind

In the upswing, the makeup of NBA Top Shot’s userbase had shifted gears rapidly from basketball enthusiasts and card collectors to largely all kinds of speculators who wanted an easy way to make money. Pack drops went from a once cherished event to miserable lines of 50k+ in pack queues, making Black Thursday lines look weak in comparison. Odds of getting a randomized draw for a pack kept dwindling and frustration began boiling over.

It was noticeable that there were scaling issues and throughout the whole time, Dapper Labs continued to full-court press and meet this abnormal wave of demand with pack drop after pack drop. As supply flooded the market and began to exceed demand, flippers started going into the red and demand began to rapidly dissipate. As quickly as demand shows up, it can disappear. Classic case of reflexivity.

With a centralized company and decision making process, an edge over decentralized protocols is the ability to react more quickly but I like to view centralized decision making as being on leverage. It’s far easier to make big adjustments but one wrong step and it amplifies the problem by an order of magnitude.

Now for the fun part. Let’s take a look at the updated graphic below. Think of Dapper Labs as the puppeteer behind Top Shot, playing God. As folks headed for the exits, it was time to slow the social media pushes, pull the “We’re still in beta” card, and start pulling some strings.

The most frustrating experience for me was the imposed “Marketplace cooldowns” which made an already cumbersome trading experience even slower. The collapse in value of moments couldn’t even happen naturally. At the extreme ends, there were also instances of de-platforming and operational headaches from cases like multi-account fraud.

For some, learning about needing to KYC to withdraw was a surprise. Others were frustrated by the inability withdraw funds in a timely manner. Easy to get in, hard to get out is a classic tactic where you bring in as many users and liquidity as possible and keep money sloshing around in-platform.

Taking a step back, we can see demand has fallen off a cliff with monthly volumes of $2-3m. I’d argue Top Shot almost hit the spotlight too early in its lifecycle, not to mention the macro environment at the time. The broader physical card market has not escaped the bear market either. Even Sorare NBA in the fantasy sports world is running into some issues balancing its economy.

Dapper’s outsized role as a decision maker and simultaneous dismal of concerns from the community only amplified issues. To be fair, it’s also a massive scaling issue whenever facing unprecedented growth early. An encouraging sign is that although the # monthly unique buyers is down bad from peak, at 11.5k it’s still significantly higher than most crypto products today even without a token to fuel speculative growth and this is more representative of an organic userbase.

Silver lining - future of fandom

Top Shot paved the way for the digital sports collectibles category with Panini and Topps opening up to it afterwards. It gave various sports leagues and other brands a sneak peak on how to better engage with their audiences. This shift from physical to digital cards/moments has led to a collapse in time to production. The rise of digital collectibles will continue as the secular trend is digital first → leading to networked products. Digital first is the wedge but also given that it’s “on-the-go”, this presents layup opportunities for bridging with IRL utility like bringing fan to games, access to players, and exclusive token-gated events.

Nuance aside, let’s walkthrough a hypothetical example of mine illustrating the potential of Top Shot:

• Tapping into my crystal ball, let’s say it’s game 7 with the #8 seed Lakers playing the #1 Nuggets on the road. Lebron hits a game-winning LeFuckYou three at the buzzer to pull off the historic upset.

• Since it’s infinitely easier to produce natively digital assets vs physical, Top Shot can near instantly monetize off of this at a time where fan attention is near its peak while also rewarding loyal fans based on fandom scores.

• Within a 24 hour period, Top Shot could then produce a limited edition (count 299) moment of the shot. Airdrop 15% of the supply to fans with the highest collector score in locked Lebron moments and distribute the rest via the randomized pack queue and sale. Just like that, a shot memorialized in NBA history would have a real-time valuation and act as a currency of fandom.

Now take into account that there’s a much larger combination of moments that can be created with players x highlights instead of the old model of player cards. You can see the double-edged sword that this scalable business model presents.

Takeaways and learnings to be mindful of

Closing thoughts

I’ve had my laundry list of frustrations with Top Shot. At times, it felt like a part-time job trying to sell out of a majority of my moments. I’ve locked a bunch of the remaining ones as a NBA fan. It was one of my early big wins in the NFT space although I should’ve timed selling much better in hindsight. I’m not really interested in participating in the day to day like trade tickets and challenges but I’m still keen on the collectibles aspect, new mobile focus, and increased amount of IRL perks being introduced.

Sure metrics are down but the product experience continues to get better. Communication underpins almost everything in this space and what was once a weakness for Dapper has been steadily improved upon.

Looking back on the last few years, Dapper’s impact in onboarding the masses into NFTs can’t be understated. Much of the TS community eventually discovered other ecosystems like Ethereum too and the rest was history.

In an industry that struggles to attract retail users without the promise of a token and/or ludicrous token incentives, it was refreshing to see Dapper :

• 1) build a kickass product experience for retail superior to the status quo card market

• 2) work towards enabling net new behaviors thanks to opening up the D2C of the NBA to fans

I hope this piece raises awareness about the perils of centralization. How does that saying go? Nobody cares about decentralization and trustlessness unless it’s too late. I think it’s inevitable though there will be a mix of products on the “centralized to decentralized spectrum” that collectively reach the masses. The onus should be on the user to be aware of tradeoffs going into the product.

More importantly, for a startup that faced unprecedent scaling issues and demand, it’s important to give kudos to Dapper. They’ve pushed the industry forward and reminded us all that in order to get mainstream adoption, build things that people want. I’m eagerly awaiting Dapper’s next big plans. Which team(s) will hit the consumer jackpot? Whether it’s from Dapper again or new builders on other L1s/L2s, I’ll be actively seeking out game-changing projects that can bring the space one step closer to mass adoption.

The answer all boils down to attention. How do we best contextualize where attention, the most valuable commodity, of the typical NFT user lies?

My mental model is simple. Think of every NFT related product you’ve used in the past 6 months. Chances are most of them fall under and serve at least one of the four attention buckets in the below graphic.

We all either a) consume information (information layer) or b) take action whether that is with financial or non-financial intent (action layer).

Let’s call “NFT Godmode” the north star, a point in time where all users’ needs are sufficiently met by products serving these four attention modes. We are not there yet.

How close are we to achieving NFT Godmode and how are products positioning today across these attention buckets? Let’s dive in below.

Breaking down the action layer

Passive (Action Layer)

Have you ever curated your NFTs on Gallery or OnCyber? Created UGC based off your NFTs in a community like Storyverse? Products under the “passive” actions group often give users things to do after the NFT collection process and are predominantly non-speculative.

Active (Action Layer)

Active actions are centered around financial intent. Most products in this attention mode focus on improving the trading experience or leveraging NFTs in productive ways (See NFTfi).

Wherever attention goes, liquidity flows. Speculation is still the biggest use case of crypto by a landslide. It’s no surprise that this quadrant dominates in terms of attention, revenue generated, and number of teams building within it. Look no further than Opensea whose breakout success has led to fierce competition for a slice of the NFT volumes pie. Even in a bear market, Opensea is 2nd after Ethereum in revenue with $391m over the past year.

Breaking down the information layer

Push

The “push” layer, or information layer comes into play often times after the action layer. Products building here often focus across two key pillars: saving users time and money.

You’ve bought assets but now need a level of personalization around information pertaining to your existing assets. Otherwise you will struggle with a firehouse of fragmented information. I’m not the only who’s having trouble tracking information across twitter, discords, telegrams and newsletters. People are forgetting free claims, whitelist entries, proposals and much more.

A great example of a product catered towards personalization is Daylight. Think of Daylight as a personal assistant whose sole job is telling you what pending actions you can take with your NFTs.

LuckyTrader can be setup to deliver personalized news and markets information pertaining to the assets in your wallet. It is your context layer and keeps you informed.

Pull

Another big problem today is the lack of discoverability and curation in the space. Users often run into issues when it comes to a) finding new products to try, b) discovering what others are getting into, and c) keeping up with what’s trending.

Sites like DappRadar and Dapp List are trying to tackle the app discovery angle. Products like Context and Soho are keying in on wallet tracking which can surface new insights. There is progress in this quadrant but perhaps a web3 native search platform can further move things along. In an ideal world, we see more projects like Ora Labs pushing along natural language search for web3 data while also leaning into app discovery based off this data (“Show me the top 5 most used blockchain games in the sports category in the past 7 days on Ethereum”)

Unlike “push”, this layer is less about tailor-made news flow around existing apps one may use and more towards nudging the user towards the next set of products or trends they can pull themselves into. There does not yet exist a comprehensive solution for this. If this section interests you, you can read more in my prior note So you got a new wallet, now what? .

Key Takeaways

• Products that try to service all four modes simultaneously likely struggle in a losing effort as specialized competitors provide more value. Better to start in one mode and expand

• Certain quadrants are synergistic. “Active” products like marketplaces can slowly integrate the information layer to grow the pie faster

• The timing of the user journey in NFTs if depicted by quadrants would be as follows 1) Pull 2) Active with Push and Passive interchangeable at 3) and 4)

• The least developed quadrants today (Pull and Push) likely fall under the information layer. Most products are focused on action rather than information, leading to fragmentation in the space.

• “Pull” mode, is a largely untapped opportunity and sits at the top of the funnel for new user acquisition. It is the key to growing the tam of all the other buckets.

• Monetization in “Active” is quite easy as a function of take rate based on economic activity whereas others are still being sorted out (pay for personalization, etc)

What quadrant excites you the most? Building anything interesting across one of them? Happy to chat and dms are open.

Imagine Steve Jobs was around today and you onboarded him to crypto with Metamask. I’ll leave it to your imagination to think of his reaction.

I’ve been thinking about the pain points for new users after downloading a wallet, how products today are trying to shape that user journey, and what may come next. There’s a gap when it comes enjoyable web3 experiences for first-time wallet users that keep them engaged. The “fun zone” doesn’t stop at day zero, it’s merely the beginning.

The Missing Piece

Many liquidity mining incentives are unsustainable given high CAC and low retention, so projects are rightfully leaning further into using credentialing and bounty platforms. Are quests and bounties the best we can do for new users? Sure they’ve been effective to a degree, but for some, they’ve made using crypto feel more like a laborious task than something leaning into the magic of crypto. This leads to a tough spot for the day 0 - day 90 wallet age cohort in the proverbial “fun zone”. Web3 is missing a fun entertainment experience that evolves alongside you in your crypto journey.

In some cases like with Degenscore, on-chain reputation is used as a means for early access to products. The more history a wallet has, the more valuable it becomes as a “target user” to design around. However, this leads to the chicken and egg problem. You need solid on-chain scoring to access early products (which also leads to airdrops) but new users who have potential value are left on an island as they start with a lack of wallet history. You can’t open the floodgates to these new wallets because of sybil attack risk.

Brenner nicely articulates the problem we are facing, “Every transaction on a blockchain tells a small piece of a larger story. We are in the hieroglyphics era, staring at Etherscan, trying to make sense of what’s happened”

Perhaps we make web3 less confusing to start and repackage that into easy to understand information in the form of features or products.

We need a better context layer that surfaces information and leverages it into a fun experience whether it be during wallet transaction #1 or #1000.

So what else exists today?

Phi is built on top of ENS and creates a social graph by visualizing on-chain activity as digital objects which users can organize to represent their web3 identity. Phi is versatile in that it can turn into a social metaverse play while simultaneously being able to serve as a quests layer. I would caveat that while the composability of ENS is powerful, for the day 0 - day 90 cohort it adds an extra layer of friction to have an ENS domain as a prerequisite. Perhaps offering subdomain names like Coinbase does can alleviate this.

From a wallet standpoint Rainbow and Coinbase have done a good job giving more life to the onboarding experience. They are leaning a bit more into curation and encouraging exploration. While Coinbase’s above approach mirrors some successful patterns of web2 onboarding, it doesn’t necessarily capture the magic of the birth of a new wallet and how the evolution of that wallet’s transaction history impacts the experience.

Now let’s dive into another project that is on track to the “fun zone” but perhaps a few ingredients away from becoming more exciting and thus viral.

Metagame takes a crypto-native approach towards solving for the “fun zone” and has a lot of white space it can grow into. Like many others, Metagame is building infrastructure for NFTs earned by on-chain and off-chain activity but with a twist using the help of dynamic NFTs. Let’s dive into 4 types of NFTs they’ve rolled out as outlined by the team on Twitter.

• Birthblock - “Birthblock is an NFT that represents your wallet’s age. Each tree ring represents 100k Ethereum blocks. The color of the tree changes based on the age of the wallet, too. The 5 other circles represent the month/day/hour/min/sec your wallet was born”

• Token Garden - “Perpetually-expanding 3D garden of flowers that grows with every NFT your wallet mints. Listening for mint events on your wallet, Token Garden sprouts a new flower with every new NFT"

• Heartbeat - “Heartbeat is the heartbeat of your on-chain activity. It speeds up the more active you are in the past week. It grows brighter the more you are over the last month. It grows spikier the more active you've been in your lifetime. It even stops moving after a week of inactivity and turns grey after a month of inactivity.”

  • My screenshot above doesn’t really do things justice, check out the real-time heartbeats and graveyards here

• Logbook - “Detailed aggregation of on-chain activity like an "Earned Loot". It combines…

  • The data you have produced on-chain

  • Evm-translator: an open-source package by Metagame

  • Community-contributed interpretations of contract interactions”

After browsing through Metagame’s NFTs, it’s clear to see how organically earned NFTs bring a fresh vantage point in how gamification can be built.

There is no shortage of brilliant founders and teams building towards long term goals of identity and reputation layers, but what has been overlooked in the interim is the fun factor. I’m sure I’m not the only one who views doing quests as more of a chore and don’t care for grinding to get whitelisted. Realistically, any existing projects could easily lean more into the “fun zone” if desired, but I think it’s fair to say that more exploration should always be encouraged regardless of who gets there first.

Looking Ahead - “Fun Zone” Creation

Lean into Further

• Curation / Discovery - Until wallets have enough on-chain activity to offer “smart recommendations” of new apps to try based on tx history, a Spotify-like onboarding experience to set the groundwork for discovery features could suffice. For example, upon wallet install, users can browse through prompts and pick areas of irest:

  • What are your favorite categories (Art, Music, Games, Sports, etc)?

  • What are your preferred DeFi segments? (DEX, Perp, Lending, etc)?

• Display - Users will need a proper place to display their various earned and interactive NFTs, express themselves, and discover other like-minded wallets. 2D environments to display NFTs like Gallery or an OnCyber virtual world would keep early users engaged.

• Sponsored Transactions - New EOA wallet users today can’t even make a transaction without first sending themselves crypto from a CEX for gas payments. With account abstraction (ERC-4337), sponsored transactions will allow app developers to pay fees on behalf of their users. This opens the design space for more creative onboarding care packages delivered to new users too.

Ideas to Explore

• Games - What if new wallets were paired with free digital companion NFTs that dynamically update alongside a crypto user’s journey. This could be something as complex as an egg to start, eventually hatching into an interoperable game character with various power-ups based on the “highlights” of a wallet’s on-chain repertoire. Alternatively, wallets could lean into cutility by offering NFTs similar to Finiliars out of the gate.

• Art - If a wallet is the paint brush and its transaction history is the color palette, what if wallet owners could mint unique generative art at different periods in the wallet’s lifecycle. Wallets can be visualized in many ways as demonstrated by Metagame.

• Multiplayer Mode - Every new wallet today starts in single player mode. What if there was an option to opt into a multiplayer environment from the get-go and compete in mini-games amongst small groups of users to both learn how to interact with crypto and earn prizes in the meantime? Games > Quests

• Crypto Chronicles - Digital scrapbooks for wallets could be used to preserve and share a user’s journey in crypto. Don’t you want your grandkids to get riled up to see you made generational wealth the last cycle only to blow it by investing it all into Pixelmon? More simply, web3 versions of “Spotify Wrapped” for wallets and “Myers Briggs personality tests” (Shoutout Charisma), would also work here.

• Dynamic NFTs tied to the real world - Since most new users’ activities like events and purchases are tied to the real world, it’s important to also bridge the gap between IRL and crypto. Sporting tickets can be implemented as interactive NFTs for game attendees. Tickets can update based on in-game results (i.e. if a home team scores 100 points, the ticket updates to reflect a free taco voucher).

  • Brands could better engage with users by targeting them with metadata trait drops or NFTs based on relevant PFPs or prior events attended (i.e. POAP tracking). Check out Playground for more on dNFTs.

Wallets start off as empty digital backpacks. Let’s fill them with enjoyable experiences.