NBA Top Shot Creator on NFTs & Ethereum's Usability

Roham Gharegozlou and the Rise of NFTs

For years, Roham Gharegozlou anticipated the widespread adoption of Non-Fungible Tokens (NFTs). This year, that prediction materialized.

Early Success with CryptoKitties and NBA Top Shot

Gharegozlou, leading his startup Dapper Labs, pioneered the first widely popular blockchain game, CryptoKitties, in 2017. Subsequently, the launch of NBA Top Shot late in the previous year ignited significant interest in crypto collectibles globally.

Discussion at TechCrunch Disrupt 2021

Last week, at TechCrunch Disrupt 2021, we had the opportunity to speak with the CEO of Dapper Labs regarding the obstacles confronting the cryptocurrency landscape, the evolution of Ethereum, and the rapid expansion of NFTs this year.

“I foresaw a swift uptake, but NBA Top Shot experienced growth from 4,000 to 400,000 users within weeks,” Gharegozlou stated.

Dapper Labs' Funding and Future Plans

The success of Top Shot has positioned Dapper Labs as a highly sought-after venture. The company recently announced a $250 million funding round, achieving a valuation of $7.6 billion. This substantial valuation reflects confidence not only in Top Shot’s continued performance but also in the potential of the platform Dapper Labs is developing for blockchain developers focused on consumer applications.

Dapper Labs has created its own blockchain, Flow, deliberately diverging from the prevalent Ethereum blockchain, which currently hosts the majority of successful NFT platforms. The company believes this distinction will not persist for long.

The Challenges of Building on Ethereum

“During the first year and a half of Dapper Labs, we invested approximately $30 million in attempts to build on Ethereum. We developed the Dapper Wallet – the user interface seen on Top Shot – initially designed for Ethereum,” he explained. “However, we identified several issues, including cost, scalability, throughput, and, fundamentally, user experience. The user experience required for financially astute traders or dedicated DeFi participants differs significantly from that needed for consumer applications.”

Layer 2 Solutions and User Experience

Many within the Ethereum community are optimistic about so-called Layer 2 scaling solutions to address the issues Gharegozlou highlighted. However, he contends that these solutions are insufficient and place undue complexity on consumers during onboarding.

“Layer 2s lower gas fees, but they significantly complicate the user experience. It remains challenging for an average NBA fan to acquire a Layer 2 wallet, transfer Ethereum between wallets, or utilize stablecoins,” he said. “On Flow, we can offer products designed for genuine fans, where the underlying NFT technology remains largely transparent to them.”

Flow Blockchain and Third-Party Experiences

The Flow blockchain currently supports a limited number of third-party experiences and platforms within the NFT space. However, none have yet matched the success of Top Shot. Currently, the majority of NFT transaction volume is concentrated on a few dozen projects on the Ethereum blockchain, leveraging its extensive ecosystem.

Scarcity and Scalability in NFT Economies

Due to Ethereum’s platform limitations, many projects prioritize finite scarcity. In contrast, platforms like Top Shot have consistently increased the number of collectibles to accommodate a growing user base.

“Most established collectible economies and projects on Ethereum maintain simplicity – for example, there are 10,000 CryptoPunks and that is all,” Gharegozlou noted. “With Top Shot, our goal is to create a product accessible to the billion NBA fans, and a model scalable to the 3 to 4 billion sports fans worldwide.”

Maintaining Scarcity and Addressing Sales Trends

The startup has strived to preserve the rarity of its most valuable Legendary moments, while simultaneously introducing more common moments to attract new users. However, maintaining user engagement within the platform has presented challenges. Publicly visible sales data on Top Shot has both demonstrated the initial rapid growth of the platform in early 2021 and revealed a subsequent decline in sales, transactions, and unique buyers.

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NFT Market Performance in 2021

August 2021 marked the highest month ever for NFTs, with OpenSea generating a record $3.4 billion in transaction sales. However, it was not the peak month for Top Shot, which recorded $37 million in August – a substantial increase from July, but nearly 85% lower than its February high of $224 million.

As September nears its end, the platform is projected to experience its lowest monthly sales this year. The conclusion of the NBA regular season in late July contributes to this seasonality, but with the 2021-2022 season commencing soon, Top Shot has significant ground to regain.

Future Growth and Partnerships

Gharegozlou remains confident in the company’s position and highlighted the recent introduction of WNBA moments as a key area for growth. Beyond the recovery of the Top Shot market with the new NBA season, the company’s partnership with avatar startup Genies to launch a crypto collectibles store for celebrity avatar accessories may be the most telling indicator of the success of investments in Dapper Labs.