This Venture-Backed Company Uses Physical Sports Card To Collateralize NFTs

The following post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga.

Like any industry, the physical sports card space has had its fair share of booms and busts (the 90’s junk wax era being the most notable of its busts). Even just two years ago, sports card trading was considered more of a niche-interest and hobby. Most collectible cards, even those with crazy market value, were buried in basements and shoeboxes in closets. However, as the pandemic shuttered everyone at home, people began dusting off their old sports cards and driving the value of the industry to an unprecedented height, with estimated projections of $100 billion by 2027, as reported by Spectrum.

Blockchain Is Transforming Collectibles 

Now, deep into 2021, the skyrocketing sports card market is showing no signs of slowing down, and it’s adapting to the new age. Sports cards, with the launch of NBA Top Shot, are no longer even physical. Thanks to a partnership between the NBA and the blockchain company Dapper Labs, the collectibles world has been introduced to an interesting new wrinkle between the traditional and digital. In simple terms, NBA Top Shot allows sports fans to buy, sell, and trade numbered versions of distinct, individually licensed video highlights in the form of an NFT. Just like luxury watchmakers, Breitling began delivering a blockchain-based digital passport on all new watches; NBA Top Shot has helped usher in a new era in which elements of the traditional are rewritten for a world where digital reigns supreme. Top Shot has also been key to ushering in this year’s new and recent wave of NFT enthusiasts, with total NFT sales topping $2 billion in Q1 alone, explained by CNBC.

To operate NBA Top Shot, the NBA cuts game highlights and sends them to Dapper Labs, the parent company and owner of Flow blockchain, which decides how many of each highlight they are going to sell and what they are worth. They then arrange each highlight into digital packs and sell them on the NBA Top Shot marketplace. Once purchased, the highlights go into your encrypted highlight user’s wallet, where they can be showcased or resold. When something sells, both Dapper Labs and the NBA get a cut. 

Record Revenues Being Realized. 

With the traditional sports card industry bringing in $5-6 billion annually, Roham Gharegozlou, CEO of Dapper Labs, predicts NBA Top Shot could easily gross $1 billion alone and are already close to hitting that number by recording $700m in sales in less than a year. Despite their numbers cooling down since February and March highs ($230m/$231m, respectively), NFT insiders like Drew Austin from Red Beard Ventures (an investor in both Dapper Labs and Due Dilly) believe there are some key reasons those sales will drive back up again, including their new physical stands that will be present at NBA games, allowing fans to purchase moments in stadiums creating a new online to offline interaction.  

Due Dilly Will Change How NFTs Are Collateralized.

Sports cards, after all, are the original non-fungible tokens. It only makes sense that new iterations are beginning to take over the NFT world. NBA Top Shot isn’t the only venture bringing elements of crypto into the sports card space. Another breakthrough company to keep an eye out for is Due Dilly, a startup that uses physical sports cards to collateralize digital NFTs. The team has deep domain expertise and is backed by notable investors, including Tribe Capital, Ace Cap, Baller Ventures (Dapper Labs), and Eric Ries. 

Where the sports card hobby started, and NFTs tried to take over, Due Dilly marries the two providing a further way to revolutionize the future of the physical and digital trading card market. As exemplified by PSA and BGS both shutting down submissions, Target TGT halting the sales of cards, and overall industry problems, the existing infrastructure in the sports card hobby is inefficient and outdated, lacking transparency, authenticity, and any way to track ownership (yes, blockchain fixes this with smart contracts). Also, before Due Dilly, digital grading was practically nonexistent. With no means to instantly verify authenticity and no central database for transparency, the industry was splintered and challenging to navigate. Due Dilly enhances the space by introducing a machine vision assessment system that renders human card graders as no longer necessary. 

Due Dilly's Competitive Advantage Is Their Cutting-Edge Technology.

Due Dilly’s advanced computer vision software can instantly analyze the quality of a sports card and output an assessment for that card’s main features, like surface, corners, and centering. Their system then spits out a letter score, and that letter determines the rarity of each NFT. Andrew Medal, the cofounder of Due Dilly, explained to me the thoughts behind the computer vision and blockchain element. “Anyone can put anything on-chain - that’s not revolutionary. Our competitive value resides in the fact that we’ve been building computer vision assessment technology that scores the quality of the physical card. This score becomes the trigger for the value of the NFT. We have a few years’ jump on anyone coming into the space and are excited to roll out our tech.” The team has announced their first series drop scheduled in the coming weeks, as explained on their website here and in the Vimeo VMEO promo video below. 

https://vimeo.com/591753392/a6b9f2d511
Due Dilly's NFT promo video 

Due Dilly uses Flow blockchain technology to write all user assessments to smart contracts, allowing card traders to collateralize digital NFTs with physical sports cards and to keep track of provenance. All users have to do is request to mint on the mobile app, follow the prompt, and then mail in the chosen physical card. Upon reception of the card, Due Dilly will then store the card in their vault and provide customers with an asset-backed NFT version of their card. With card details, player info, and the computer vision assigned quality assessment score, customers can decide to hold or sell their cards in the marketplace. If they do sell, Due Dilly’s system will change ownership of the physical card in the vault and track the new owner via the NFT on the blockchain.  

Anyone can put a collectible on-chain, but with Due Dilly’s advanced computer vision assessment technology, the company creates a unique and unrivaled way to create rarity. The NFT becomes a Proof of Collectable (or Proof of Card), and the assigned quality assessment letter score becomes the way to create rarity. The sports trading card market borrowing from crypto and blockchain first principles makes the NFT future look more profitable and exciting than ever. Asset backed NFTs are the most valuable way forward creating new layers of liquidity, and integrating the physical to the digital creates an entirely new way to store value.

Image by Manfred Guttenberger from Pixabay

The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.