Some Background

Since the early days of Top Shot, the potential of burning Moments has been a hot topic. If you’re unfamiliar with the idea, burning Moments would serve as a deflationary mechanism that simultaneously could add an important interactive level of utility. In simpler terms, burning Moments could help manage supply, preventing an oversaturation of Moments, which in turn could prevent price depression, leading to a healthier market. In the worlds of crypto and NFTs, burning mechanisms are relatively common.

Before getting into the benefits of burning, it’s important to get a solid handle on the premise of supply. At face value, “supply” is an easy concept to grasp – it’s the number of Moments that are available on the platform. But, finding the appropriate level of supply in a nascent ecosystem is a much more difficult equation. The fact that the NFT landscape moves at hyper-speed complicates this issue further, where growth can explode overnight, or the bottom can drop out and plummet in minutes.

The Supply Question

Last year, in the midst of the astronomical rise, Top Shot announced a very consequential change to their S2 mint sizes. On February 19th, 2021, Top Shot posted a blog entry where they detailed the retirement of the S2 15k Moments, which turned them into “Limited Edition”, or “LE” Moments. From there, Top Shot would be minting 117 additional Moments – starting at a mint size of 25k, though Top Shot stated “…we fully intend and expect to increase this count, at least for most of these plays, as long as you’re all still interested in buying Base Set packs.” Ultimately, S2 retired their 15k Moments, and then introduced both a 35k and 40k batch of Moments over the next few months. Top Shot always stated that they wanted the platform to be accessible, and the inflated entry prices during the mad pump were both unsustainable and problematic for Collectors with lower bank rolls, making joining the platform a difficult proposition. However, the decision to introduce 35k and 40k Moments (on top of the previously existing 7.5k, 12k, and 15k Common Moments, let alone a 4k Rookie Edition and other special sets) let to a massive flood of Moments and oversupply. Put simply, demand did not come close to matching this supply, both in terms of new money from existing accounts, or from new sign ups.

From an economics perspective, an efficient market is said to be achieved when supply and demand match. During the pump, demand far exceeded supply, largely due to scarcity – S1 and early S2 Moments had low mint counts, topping at 15k at that time, while Top Shot’s experienced a gold rush as prospectors rushed to the platform, looking to capitalize on the next big thing. However, once this initial fervor receded and Top Shot added a massive amount of supply, the equation flipped. Going back to the blog post from early 2021, it is true that the community was collectively “still interested in buying Base Set packs” regardless of the mint sizes, largely due to the lottery ticket effect and the sheer fun of ripping packs.

However, the community’s sentiment seemed to shift and account values dropped sharply. To exacerbate the issue, Top Shot endured a handful of strategic miscalculations, at least from the community’s perspective. The Seeing Stars set was quickly watered down by the 2021 All-Star Game set, and there were way too many Playoff Moments. It’s hard to fault Dapper Labs to an extent – after all, Collectors did keep purchasing every pack, and the ability to sell packs results in a massive influx of capital on a regular basis. But from a long-term perspective, this approach can be problematic.

When it was all said and done, 1,105 Moments existed in S2. In total, there was a max circulation of 15,620,779 S2 “unique” Moments. To clarify terminology, Zion’s S2 Seeing Stars is considered a Moment, whereas the 10,000 in circulation are considered “unique” Moments. In some cases, specific players ended up with a ton of Moments, with Giannis Antetokounmpo taking the prize with 15 Moments in total:

If you take a look at the chart above, Giannis ended up with five different Playoff Moments – three Common, one Rare, and one Legendary. In total, he had three Rare and three Legendary Moments, to go along with nine Common Moments, totaling more than 134,000 unique Moments. In S1 Giannis actually had 22 Moments, but the total unique Moment count was drastically lower, coming in at just over 12,000.

The Plan for S3

In October, Top Shot launched their roadmap for S3, much of which was geared at correcting the oversupply from S2. Notably, the roadmap ensured that there would be a limit of two Base Set Moments per player, a stark contrast from S2 when 36 players had three Base Set Moments, seven of whom had four Base Set Moments. One of the Base Set Moments was to be a 60k CC+ Moment (meaning that this Moment could theoretically grow to more than 60k Moments, like how the February 2021 blog post for S2 mentioned Moments would start at 25k and then increase, ultimately settling at 35k), while the other Base Set Moment would be either a 4k or 12k mint, with a handful having a mint size of 9,999. In the post, Top Shot mentioned several reasons for introducing a 60k Base Set, compared to the 40k max Base Set in S2:

Top Shot also gave credence to Collector concerns by limiting the number of non-Base Set Common Moments, which included Playoff Moments, while also honing in on more suitable Rare and Legendary drop counts. In total, Top Shot clearly sought to provide a more definitive roadmap that considered mint sizes. The 60k Moments would serve as a means of allowing affordable accessibility, and the capped Moments/player meant that there wouldn’t be an oversaturation of similar Moments, thereby devaluing one another. The roadmap might not have been perfect, but it was a big step in the right direction and made clear that Dapper Labs was listening to Collector feedback and adjusting accordingly. After a great offseason, S3 started off strong before enduring a deep slump that began about six weeks ago.

Many accounts dropped by 40% or more from their February peaks, even though the platform had not undergone significant volatility, making the underlying reason for the dip difficult to diagnose. While crypto markets were experiencing a pullback at that time, ETH actually saw its peak decline going back to early November. Contrary to what may seem like an obvious correlation, as ETH prices continued to dip, starting in earnest in late December, Top Shot experienced its best two-month span since the peak in early 2021.

Burning Has Entered the Chat

Back in September, I wrote an article about the state of the market, touching on what the ability to burn Moments could accomplish, especially in relation to Trade Tickets. At OTM, we had discussed the various burning scenarios that could take place, just as the community at large contemplated ways to balance supply. While Top Shot committed to burn more than 10k unreleased unique S1 Moments from their Rare Eastern and Western Conference Finals packs, that was the only solid confirmation we had that burning might be on the table. Additionally, those Moments were not actually in circulation, so the equation was a little different. Rather than allowing Collectors to burn existing Moments in their collections for some sort of utility, Top Shot was simply not releasing these additional 10k unique Moments. This prevented an additional increase of supply, a good thing to be sure, but didn’t actively shrink circulating supply.

Then, about three weeks ago, we got the confirmation that a true burning mechanism was going live. Rather than the Locker Room simply serving as a centralized repository for discarded Moments, traded in via Trade Tickets but still capable of being re-released in future drops, some Moments that were traded in would now be permanently removed from circulation.

The first experiment with burning Moments came during the Standard and Elite All-Star Pack drop. Standard Packs would cost 10 Trade Tickets, and you’d receive four new Moments, meaning a net of six Moments were removed from active supply. Elite Packs would cost 25 Trade Tickets, and you’d receive five new Moments, meaning a net of 20 Moments were removed from active supply. Here’s a summary of the drops that utilized this burning mechanism since it went live:

March 9th Elite All-Star Pack
- 18,920 packs
- 20 Moments/pack net reduction in supply
- 378,400 total unique Moments reduced from supply

March 9th Standard All-Star Pack
- 28,100 packs
- 6 Moments/pack net reduction in supply
- 171,600 total unique Moments reduced from supply

March 17th Elite Pack
- 20,000 packs
- 20 Moments/pack net reduction in supply
- 400,000 total unique Moments reduced from supply

March 17th Standard Pack
- 37,500 packs
- 6 Moments/pack net reduction in supply
- 171,600 total unique Moments reduced from supply

In total, more than 1,121,000 unique Moments were removed from the Top Shot ecosystem, something that Roham touched on during the recent AMA. Removing over a million Moments is a great first step, especially when Trade Tickets can be used to potentially upgrade their Collections via blended rarity packs.

But to understand the potential impact of burning, we have to look at the cumulative supply across all Series to gauge the magnitude of this introduction. If you use our tools and export the entire Top Shot ecosystem to an Excel sheet, you’ll see that there is currently a total mint size of 35,331,441 unique Moments. Of this number, 24,816,954 are currently owned and in circulation, or approximately 70% of the total potential mint. Of the remaining 30%, a small amount has already been burned and removed from circulation, either via the S1 Eastern and Western Conference Final pack burns or via Trade Tickets. The rest are planned for future releases, likely over a significant amount of time to prevent a shock to the market, or their fate has not yet been determined. Of course, every pack drop that is not accounted for via Trade Tickets will result in a net addition in market supply.

The Future of Burning

Removing over a million unique Moments from circulation is a fantastic first step, especially because it provides Collectors with the ability to “craft” their Moments into something else. If you’re familiar with the simple (but surprisingly fun) app NHL Skate, you know that you can take a designated number of lesser cards, combined them, and trade them in for a slightly better card via the “craft” mechanism. NHL Skate doesn’t operate on the blockchain, and crafting is only available for Base Sets, but the idea is similar, although Top Shot’s ability to potentially land a Rare or Legendary Moment via a bunch of burned S3 60k Moments makes it an even better option.

That said, the sheer number of Moments, in my opinion, is still much too high given the platform’s existing userbase, which means that there needs to be a large net reduction in unique Moments to reestablish equilibrium. Accomplishing Top Shot’s desire to make collecting available to everyone is not mutually exclusive from increased scarcity, which would ultimately provide a healthier market and a more even distribution between buyers and sellers. Top Shot seems to realize that, evidenced by their decision to turn the existing 60k Commons into 60k LE Commons while simultaneously stating that new Base Set Moments will be capped at a 30k mint count rather than a 60k mint count. These are all very positive developments, and Roham’s AMA probably served as the most encouraging news we’ve heard from Top Shot in some time, coupled with the fantastic additions: of adding another level of real-world utility to platform via NBA League Pass, blended rarity packs serving as the new $9 standard, ability to withdraw Moments to a non-custodial wallet, more “Access Unlocked” experiences for the playoffs and much more. Aside from simply utilizing the Trade Ticket methodology to remove supply, I’d love to see Top Shot offer Collectors a variety of ways to make use of Moments they wanted to burn. The increased importance of “IRL” utility could serve as a great option. For example, give Collectors the option of redeeming NBA tickets if they burn 50 Moments, or let make it so Collectors could get an NBA jersey for burning 100 Moments, similar to Caesars Sportsbook’s offer from a few months ago. Capitalizing on NBA fandom would provide significant value to all Moments while simultaneously building hype and passion for Top Shot’s own product.

Following these announcements, the market has seen a nice little bounce, one which will hopefully sustain through the rest of the season. But, it’s going to be important to monitor the market over these next few months. Top Shot has taken major strides in managing their supply but will need to aggressively remove additional excess supply via innovative burning (or crafting) opportunities, without simultaneously offsetting these efforts with too many new drops. And, Top Shot will need to continue monitoring supply increases with platform growth going well into S4 and beyond in order to prevent the same fate that befell the physical sports card industry in the late 1980s and early 1990s. This ultimately means potentially forgoing short-term profits via pack drops, but it could have long-lasting positive ramifications for the market’s health. Putting the genie back into the bottle on the supply side is not an easy feat, but Top Shot appears committed to feeling the burn.