In late November 2017, Dapper Labs released a blockchain-powered app called CriptoKitties in which users could collect and trade virtual cats. And just like all things cat on the internet, it was a sensation. A week later, the total number of pending transactions on the Ethereum blockchain had jumped six times, clogging the network not just for those selling kitten avatars, but for everyone else, too.
Blockchains are lists of records that are protected by cryptography and can be distributed across networks. They can serve as reliable ledgers of financial transactions, virtual kitten trades, and even the exchange of sports collectibles.In 2018, social video app SportsCastr launched a digital token called Fanz that its users can earn and then exchange for digital and physical goods or services. In October, Bayern Munich signed a licensing partnership with Stryking Entertainment to create digital tokens of its players. Stryking is currently developing a blockchain-backed player fantasy sports platform called Football-Stars.Last month, the Sacramento Kings launched a blockchain-powered auction platform for game-worn memorabilia and Panini commemorated Zion Williamsons NBA debut by releasing a blockchain-backed digital trading card of the New Orleans Pelicans star.
Dapper Labs is now working with the NBA to develop a digital platform and gameNBA Top Shotin which the digital collectibles will be in-game moments, such as a Joel Embiid dunk or a Kevin Durant 3-pointer. SportTechie recently spoke to Caty Tedman, VP of partnerships at Dapper Labs, to discuss the future of blockchain in sports.
SPORTTECHIE: How is blockchain disrupting the world?
TEDMAN: What it does is it has the power to remove intermediaries that would be able to consolidate power. Using CryptoKitties as an example: we created these assets, we created a game to prove that you could do something in blockchain outside of decentralized finance. The best example of how blockchain is going to work for consumers is in decentralized finance. There will be a lot more control and transparency around financial transactions. But for us, we thought it would be great to do something where consumers could adopt us without overhauling their financial systems. So we created this thing. And once those tokens are out there, other people can create stuff. We saw other games pop up that use CryptoKitties, and they didnt have to do the coding work that we did around the tokens. We saw secondary markets where people created services to analyze your CryptoKitties.
What that illustrates is that blockchain takes information, puts it in public, and then lets people do other stuff with it. If you think about that for finance: maybe finance is really confusing for a lot of people and there are a lot of terms and conditions around how we use banks and other financial services and theres a potential for a blockchain to make that more transparent so its really clear whats happening in financial transactions, and it also creates a system in which there can be more competition because the entrance fee, what it takes to enter the space, is a little less onerous than going against a major financial institution. It just gives people a lot more power without necessarily having to give them more confusion about it. Real estate is an example that people use all the time, decentralized finance is one of the most exciting areas. Were very interested in gaming.
Blockchain as a technology has the potential to underpin a lot of different areas, many of which used to be closed databases and can now be open databases.
Soon I think well stop talking about blockchain and itll just be a part of the technology stack that everyone uses.
SPORTTECHIE: How will blockchain change the fan experience?
TEDMAN: The way that people describe blockchain depends on the audience because you can go super deep on the technology side. When you think about the internet itself, it lets people access information at a fundamental level. Its kind of the information sharing place in a digital space. Think of blockchain as a new element of that technology. Its really a place where value is transferred.
Lets take a look at the practically of what that means now: when you do things online now, maybe youre playing a video game and you buy a lot of stuff. Then the season switches and you lose a lot of the stuff you bought. You put a lot of money into your fandom and you dont really see value back for that. Well, maybe you had fun with your friends, but basically money goes out the door and not back in the door. Blockchain enables money to come back in the door.
As a consumer, in a world where your assets are on blockchain, you own them, you hold them. If we were to go away, or if Electronic Arts or NBA2K were to go away, you would still own those assets and you could combine and sell them. Thats when microecosystems start to pop up. The main thing we think blockchain is going to do: theres going to be the ability where if you stop playing a game, you can sell all those assets and recoup that value. And some people might even play games to gain access [to later sell], and that might be a new kind of business model.
Blockchain is code, like anything else thats digital. And its at its essence a public ledger and a place where you can trust that any information is true because its been validated from multiple sources in an automated way. We call that environment trust-less because you dont have to have trust in it. You dont want to have trust in us as a company, you can trust that the structure of the blockchain is ensuring that information thats on that chain is accurate.
What that means is that if I buy a James Harden NBA Top Shot moment, which is a token, I own that moment and anyone can verify that I own that moment. So if I say, OK, someone else is looking for a James Harden moment because theyre playing the game and need someone with certain strength or someone in his position, I can go out to the marketplace and say, Hey, I own this thing but if you want to own this thing you can buy it from me. And that transaction also happens on the blockchain. Its not like selling something on Craigslist where you have to trust that someone is actually paying you for the goods. Its trust-less in that a transaction can automatically happen, allowing for peer-to-peer marketplaces.
SPORTTECHIE: What is Dapper Labs overall goal and focus?
TEDMAN: We are building a blockchain called Flow and its built specifically for entertainment. Weve seen such a strong interest in engaging consumers in this space, but we have not seen a platform that can really scale to accommodate mass consumer adoption. So were building one.
Weve got a great roster of partners that are working with us on that, and its bringing in people from sports, gaming, music and culture to really understand whats needed out of the technology thats going to scale for those kinds of brands. Thats a criticism the industry has had in the past, and when CryptoKitties launched, melting the Ethereum network was great for press, but bad for the industry as a whole. We know we need stable environments to build the consumer-facing side of the industry, and so were working on that.
We think about gaming as a little bit of a Trojan horse for the technology. Gamers adopt new technologies and try new things, sports fans do as well, so thats kind of a perfect match for us. But asking someone to go set up a new bank account in a new technology that they dont totally understand is really scary, but asking people to play a game thats really fun and provides some value and actually allows for that value exchange I was talking about, its a much easier thing to adopt.
We think about gaming as a way to get people involved in the space kind of passively, and then once youre set up in the crypto space and youre used to using maybe cryptocurrency, or alternate currencies, you have a wallet set up, you have all the systems set up around you, you can go and do anything in a decentralized space. And we expect to see that: maybe they come in and use custodial services, trust us for a little while with some of their crypto assets, but then ultimately say, I get it, I see how this benefits me, I understand how to use this technology a little and the kinds of options I have and Im going to take control of my own information.
Sports leagues are not just competing with [other] sports, theyre competing with everything that a consumer does in their day, whether thats playing Fortnight, shopping online, or watching the Emmys.
SPORTTECHIE: Why was CryptoKitties such a success?
TEDMAN: I think the crypto community was ready to see something that was different and exciting and I think we created something that really captured people's imaginations who were already interested in this. I always look at the U.S. market as an indicator, and a tremendous amount of people, millions and millions of people, hold cryptocurrency, tons of people who you wouldnt even necessarily think hold cryptocurrency. We do lots of user testing, talk to a lot of consumers, and were always surprised by how many people hold crypto and what the diversity of those people are.
First of all, there was a bigger market than people thought there already was. We tapped into that. We tapped into peoples curiosity about a practical way to understand the technology, which CryptoKitties does a great job of. I would encourage anybody who wants a 101 in the space to sign up for CryptoKitties and go through some of the onboarding because you get a much better idea of what the technology can do. And the internet loves cats. So it wasnt a far cry to say that if you at least hit a couple of those other notes that the internet was going to continue to love cats.
SPORTTECHIE: You have worked at ESPN, the NHL and the NFL. How did you help shape Dappers move into sports, and why?
TEDMAN: We have a joke internally that of my last almost three years with the company Ive been trying to turn us into a sports company. I finally succeeded with it. When we look at audience crossover, sports makes total sense. And in my role leading partnerships, I do a lot of talking to former colleagues, sports leagues, sports-related brands, talking to people who target consumers, specific groups of consumers.
I love sports and I thought sports was the perfect fit and having come from that world and frankly doing social media for so long, I felt like as brands we spend so much time giving content away on platforms that we dont own a piece of. It seems like Twitter, Facebook, Instagram, and TikTok, are so great for fan engagement. But those platforms built their back on our brands.
The thing that really hooked me into the blockchain work is that blockchain creates an environment for consumer engagement where consumers get to have some value in that environment and also the brands get to keep value. So when youre creating content, that content has a direct line of revenue and it seems like a much more virtuous cycle than just that hamster wheel of social where youre just giving away and giving away. Social and other existing channels are still going to be really important for reaching consumers, but I love that theres this value exchange with blockchain where fans get a piece of the value, sports leagues and teams get a piece of the value, and the network itself can continue to grow and people can continue to get involved in that space.
When you think about aligning fan interests with league interests, aligning financial interests with fan interests, it feels like a really good fit and it feels that everybody gets to benefit. I liked that because my whole career has focused on serving and engaging fans and making sure the kind of content being created is stuff fans really want. And now theres a value layer that gets layered on top of that and the brand also gets to benefit.
When you look at brands like the NBA, their fanbase is skewed younger. As a company, theyre really open to testing and adopting new technology. Theres a pretty good crossover in the crypto audience and the NBA audience, so when we started trying to figure out how we were going to go from internet cats to a larger mainstream audience, we were looking for those connection points to make sure that we were hitting the right kind of audience, a broader one. A brand like the NBA, and frankly sports in general, really hits that nail on the head.
SPORTTECHIE: What is the vision for the platform and game youre building with the NBA?
TEDMAN: The basic premise of Top Shot is that sports have really spectacular moments or plays every night. Theyre memorable and collectible and fans care about them and if you ask an avid fan of a team or fan of a league where they were when something happened, where were you when the butt fumble happened, where were you for the quintessential Jordan dunk? Fans remember that and they have deep connections to that. What we want is to take those amazing plays, tokenize them, and then create a gaming experience where you can play with them. Ultimately, youll take those moments, youll create a team that would play against another team, those teams will battle, there will be some points exchanged, and you still get to keep your tokens. So you get to both own the asset, the memory, and you also get to play with it.
We expect to see a few different archetypes to arise, which is what we saw with CryptoKitties. There will be speculators, there will be people who just want rare tokens, special moments, things that are re-sellable, and we certainly saw a spectator market in CryptoKitties. There will be collectors, people who will just collect stuff they love. I will fall into this category and I will have an entire collection of Serge Ibaka moments, I already know that. Working on this project has already changed how I watch sports broadcasts and certain plays within the game.
The third archetype will be gamers, people who dont necessarily have a certain allegiance to any team but really like the game and come in to buy tokens to be stronger within the game. We saw that with CryptoKitties and I think well see the same thing in Top Shot. Crypto allows for such a wide differentiation for the kind of people who play the game so youll actually broaden the market for what would just be a single game without the marketplace.
If what we think is going to happen actually happens, people will want to make sure they have access to these moments in real time. Were still working through with the league, which has been a phenomenal partner, how we can get a real time drop of these assets because its quite more complicated than just clipping video and shooting it out on social media. But we expect people to watch more games so they dont miss the moments that are clipped and dropped. We expect people to, in the same way fantasy football gives you weird sports allegiances and makes you love players that you had never really thought of before, love players that maybe you wouldve hated before, we expect this environment to do a bit of this as well. Maybe theres a slot in your team thats really weak, you need a better point guard asset, to be really searching out that kind of thing and learning more about players, their stats, when theyre playing.
What Ive seen in a former life is that when you serve fans well, they spend more time with you, they spend more heartshare and more mindshare with you. What we hope to see is that fans of the NBA and maybe fans of other sports as well see that value exchange deepen their fandom and that translates to not just more minutes viewed, but maybe more jerseys sold, more copies of 2K sold, because the fandom deepens and that results in more engagement across the life cycle of fans.
Once those tokens are out there, other people can create stuff. We saw other games pop up that use CryptoKitties, and they didnt have to do the coding work that we did around the tokens. We saw secondary markets where people created services to analyze your CryptoKitties.
SPORTTECHIE: How will Dapper Labs and the NBA monetize Top Shot?
TEDMAN: The way that the games so far have been structured, and we anticipate theyll continue to be structured to a certain extent, is that there's a primary marketplace and in that new content, new tokens, get introduced. And thats a primary revenue stream for the game and the brand. Both NBA and Dapper Labs make money when we sell tokens.
Then theres the secondary revenue source, which is the peer-to-peer marketplace where consumers get to participate in that exchange of value but there is also a small marketplace fee, that would be kind of like a transaction fee on a credit card, where the brand also gets to retain some value from that secondary marketplace, which is something that doesnt really exist. If I go to sell something on eBay, the brand that initially sold me that doesnt get to retain that value. But in the blockchain space, they do.
One of the things we get asked sometimes is about where we fit in that ecosystem. We see this as an entirely new category. We dont see us as competing against other games, we see ourselves as complementary. Everything thats in the market that helps to deepen fandom, also benefits us.
We see the opportunity for something like the Flow blockchain that were building to be something that maybe other games want to build on, or other games want to enter the ecosystem and participate in. We see all the different brands that interact with a league like the NBA as being part of that ecosystem. So if you think about sneaker brands or apparel brands, all different ways that you could consider powering up players or creating an environment for self expression, we see all that as fitting into that ecosystem.
For the launch of Top Shot, we want to make sure theres a great core game experience, but part of the joy of blockchain is that you can start to bolt other really interesting things on, whether theyre features or other games, other ways for brand assets to interact. The way that we think about the environment well be in probably a year from now, once we start to get real traction for adoption, will be nothing like what it looks like today. It will be a completely different world where brands are thinking about their IP differently, fans are thinking about the way they spend their money differently, and brands like gaming companies or studios will be thinking about how to make all those things interact with each other.
SPORTTECHIE: How will blockchain usage spread through the sports industry?
TEDMAN: The NBA is the ideal launch partner and we feel really lucky to have a relationship with them. I think every league will follow. The interest that weve seen internationally across leagues, not just in North America but also in Europe, is really strong. Clubs are thinking about usage, the Sacramento Kings have been active in the space. Nike recently filed a patent around blockchain. Its impossible for this technology not to succeed because, one, its actually useful, and two, brands are just so much more savvy around technology in general and have an understanding about how to be early adopters.
Twenty-twenty to me is a year where were going to see early adopters launch projects and see consumer adoption of those projects. Those projects are not going to be perfect, but they will be a great bellwether for what needs to be done for the next wave of adoption. In 2020, were going to see mainstream adoption, were going to see lots of different sports and sports-related brands participating in this space. The learnings from this year are going to be what helps finish mainstream adoption where people get a really good idea of what they could be doing in this space and consumers get an idea of the benefits of using blockchain technology through fun and games in a way that isnt scary to them.
I think blockchain is going to be a great revenue stream for sports bands, for brands in general, but particularly sports brands. The experience we bring from having early success in this space, from making mistakes and fixing them, from having literally the best blockchain engineers in the world in our office. All of those things are places where we add value. We add the understanding of what could be done in the space and what we think should be done in the space.
We have a vision of where we want to see this technology go and we have a lot of people in-house who really understand consumers, not just me with the sports perspective but also people who have worked in gaming for a long time, who have worked in other verticals for a long time. Bringing that consumer focus to the brands that were working with is really valuable because were skipping forward past where a lot of companies are in terms of understanding their own technology. We understand the technology and we understand the consumer. And everything that happens in the blockchain space creates new revenue lines, so we can help these early-adopting brands to find strong new digital revenue streams.
In sports, sports leagues are not just competing with [other] sports, theyre competing with everything that a consumer does in their day, whether thats playing Fortnight, shopping online, or watching the Emmys. So when you think about how important the relationship between league and fan is, and we hear this from other verticals as well, their primary focus is deepening that relationship because itll be much harder to attract a new fan than it will be to keep an existing fan and make that fan feel valued.
Sports have really spectacular moments or plays every night. Theyre memorable and collectible. Ask an avid fan where were you when the butt fumble happened, where were you for the quintessential Jordan dunk? Fans remember that and they have deep connections to that. What we want is to take those amazing plays, tokenize them, and then create a gaming experience where you can play with them.
SPORTTECHIE: There are many different blockchain platforms. Can they interact and work together?
TEDMAN: Blockchain especially allows for interoperability between different platforms so I could see a world in which one day SportsCastr assets have a place in Top Shot and vice versa, and that we have the opportunity to work collaboratively, especially in these early days but also as the industry grows.
I think the technology itself and the space is such a blue ocean so I hope no one feels like there are competitors that will prevent them from being successful, because as long as people are putting good products in the marketplace and theyre engaging with fans, then we can all work together.
SPORTTECHIE: Outside of just sports, what will the next 10 years look like?
TEDMAN: I think well stop talking about blockchain and itll just be a part of the technology stack that everyone uses. Itll underpin a lot of different business cases that are pretty dry, a lot of stuff thats just built on top of it with blockchain at the public database level.
For consumers, it will change the relationship they have with the way they spend money in the digital space. I think it will be really hard to go backwards to spending money online for digital assets without truly owning them or having that value proposition for them and I think well see cryptocurrency widely adopted, whether its the speculatory Bitcoin scenario, or whether its USDC or any number of stable coins that will allow people to interact online with confidence that the currency theyre using is either pegged to fiat currency or its more steady than some of those speculative vehicles.
But were not talking about 10 years, were talking about five years where we see pervasive adoption of the technology, because its useful. Once that consumer relationship changes, everyone will have to come to the table and start to integrate it and I think that is going to happen really quickly.
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Dapper Labs VP Caty Tedman: 'We'll Stop Talking About Blockchain. It'll Just Be a Part of the Technology Stack' - SportTechie
