With the pandemic separating fans from their stadiums and sports clubs from their revenue, fan tokens are now big players in the game, helping teams generate revenue and bringing fans back together.
Although stadium seats have been filled with paper cutouts from fans in some countries to present a well-intentioned but creepy facade of normalcy during the pandemic, the distance between teams and their supporters has grown further apart. A solution can be found in sports fan tokens. With fan tokens, many fans can feel a more direct connection to their teams – emotionally and financially.
In the broadest sense, fan tokens are digital assets that are associated with the fan experience. They come in two different varieties – fungible and non-fungible.
On the fungible side, dozens of European soccer teams have so far been associated with actively traded “fan currencies” or “fancoins”, the sales of which have brought in over US $ 200 million in annual Covid income. In contrast to non-fungible tokens, where each token is unique, every unit of fungible tokens like Bitcoin, Ethereum or Dogecoin is the same as any other – like dollars.
Malta-based blockchain sports company Chiliz and its fan engagement platform Socios are the undisputed leaders driving the fungible fan token / fan currency business model with the help of over 160 employees. With a new office in New York, Chiliz aims to further shake up the sports industry by partnering with the National Football League (NFL), National Basketball Association (NBA), National Hockey League (NHL), Ultimate Fighting Championship (UFC) and others.
Five years from now, Chiliz and Socios CEO Alexandre Dreyfus envisions “hundreds, potentially thousands of major sports organizations and some of the largest film and music entertainment franchises” having fungible fan tokens as “a core part of their digital engagement strategy ” accept. “This means that the potential of the fan token phenomenon extends well beyond professional sports and is expected to impact other areas of entertainment, including music Kpop fan token as an early example.
From passive to active
Dreyfus believes that fan tokens will “transform passive fans into active fans through transactional fan engagement” and provide sports teams with “a strong source of income” in the post-physical world. Very soon, the company will include NFTs as a likely next step in its strategy, considering entertainment numbers like Paris Hilton have already done this. He adds:
“We believe that fan tokens are the biggest new trend in the industry and that it will be widely recognized as we add hundreds more partners in the future and millions more fans adopt them.”
However, there is no clear precedent for fungible fan tokens. These fan currencies are breaking new ground.
In blockchain terminology, fungible fan tokens are called “utility tokens,“An apt description, as they have an undeniable benefit as part of“ gamifying ”the fan experience. Buying and using tokens allows fans to show their support and to gather in online communities where they can make a small contribution to running the club by voting for suggestions (regarding things like the Music played during a game), raffles for merchandise items, and even interacting directly with the team.
Juventus fan Giuseppe Bognani told Reuters: “It’s nice that the song you voted for is the one you hear and you think, ‘I took part’.”
Preferential entry for @socios fan token holders in San Siro. @chiliz #bemorethanafan pic.twitter.com/1xxIQcdtrI
– Alexandre Dreyfus (@alex_dreyfus) September 16, 2021
But are fan tokens a real way for clubs and fans to interact, or are they just a way to squeeze fans for extra dollars?
While securities regulators have yet to strike, many in the sports industry are suspicious of the fan token trend. One of them is Malcolm Clarke, Chairman of the UK-focused Football Supporters’ Association, the recommended that fan tokens couldn’t mean much more than clubs “trying to squeeze extra money out of followers by creating petty online” engagement “polls.”
It wouldn’t be surprising if they were – especially after sales at Europe’s 20 top-revenue clubs fell 12% to 8.2 billion euros ($ 9.9 billion) in fiscal 2020.
But Jorge Chemez, an Argentine football fan of the national team, the Chiliz project is optimistic, “because it can be used in many ways and for all sports, even eSports – everyone likes at least one sport, the potential is infinite.” He assumes that most sports fans likely not to accept tokens, but those who do will be able to “be closer” with their teams.
“Socios gives you privileges, just as Inter Milan fan token holders were invited to a VIP area to watch the soccer game”
The phenomenon of sports clubs collecting money by selling cryptocurrency is certain to continue to spread around the world as the established Chiliz platform encounters new competitors and business models. Do fungible fan tokens represent a new type of indirect equity in the teams (or celebrities / groups) themselves?
Fungible fan tokens
Fungible fan tokens are generally marketed as “utility tokens”, which means that the tokens have specific use cases. This concept of utility tokens dates back to the Initial Coin Offering (ICO) boom of 2017 when companies began raising money by releasing cryptocurrencies to the public in a manner comparable to stock offerings.
In the regulated securities market, these are known as Initial Public Offerings or IPOs, and issuers of cryptocurrencies used the term “utility tokens” to circumvent securities laws, since tokens with use cases were unlikely to be securities. Some early use cases included access to proprietary services or online communities, as well as for gameplay.
In contrast to “security tokens”, “utility tokens” tried to avoid being viewed as an investment. Digital currencies of all kinds are often released directly from an exchange on which trading is to begin via initial stock exchange offers or IEOs.
Today, fungible sports fan tokens are launched as utility tokens via an IEO. the Chiliz platform is the largest player in this sector and sells fungible fan tokens for its native CHZ, the Chiliz platform token, in what is known as a fan token offering or FTO.
Although fan token use is largely limited to Chiliz’s Socios app, the Turkish exchange is bitC.I offers a competing fan token platform and has signed contracts with the national teams of Spain, Brazil and Uruguay alongside Mclaren F1. Despite Bitci’s break-ins, Alexandre Dreyfus, CEO by Chiliz and Socios, isn’t concerned about losing its dominant market position, claiming that “we don’t think we have competitors, we only have those trying to compete.”
The sale is over! The pre-sale of the Rangers tokens is closed!
Thank you to all of our investors who bought Rangers Fan Token, which sold out in seconds! @ RangersFC # BitciTechnology #Bitcicom #Bitcicoin #RangersToken pic.twitter.com/bfwVLOKNhw
– Bitci Global (@bitcicomglobal) July 5, 2021
Socios’ slogan “influence your team and be rewarded” invites comparisons with governance tokens for decentralized autonomous organizations or DAOs, which are also equipped with voting rights. You can find an emerging example of this in The Krause House DAO, which has a roadmap to purchase a “fan-owned” National Basketball Association (NBA) team after reaching a treasury valuation of $ 2 billion.
The key difference from the DAO’s plan is that fan tokens, as they exist, do not currently include any collective ownership of a sports club’s assets, nor will fans likely be given the opportunity to make material business decisions regarding important things like signing new ones Player or coach.
And despite the “utility” function of fan tokens, it seems impossible for buyers not to see their fan tokens as an investment, at least in part. Also the prominent risk notice Chiliz’s IEO portal states that “users are strongly advised to carefully consider their investment objectives” when participating in the IEO. The same opinion was repeated by competitor Bitci CEO Alan Tan who made it clear that “these tokens will also be an investment vehicle”.
Concerns from fans
There were technical issues that disappointed fans – Chemez, for example, is upset because Socios, despite sponsoring the Argentina national soccer team, struggled to get fully verified through its mobile operator in order to buy tokens. “You can not be an official sponsor of the Argentine national football team and let the Argentines out,” he complained.
Even after review, users like Thomas Ragauskas were disappointed after unable to purchase tokens during an FTO as the tokens on offer were limited and sold out within 17 minutes.
Ragauskas describes that although he had set up an alarm to make sure he didn’t miss the event, five seconds after it started he was forcibly logged off due to an issue described by Socios as a technical issue. “The system kicked me out of the app and there was no way to get back into the app,” he said, adding that all tokens were gone when he managed to come back three hours later. “The advance booking price was € 2, now it’s € 7. I wanted to buy 250 coins. “
Aware of the issues, Dreyfus, CEO of Socios, says “a few growing pains are inevitable” when millions of fans are brought to the platform. With the hiring of new employees, he is confident that the platform-related issues will subside and the company will be able to “provide our users with the best experience possible”.
“The speed at which business grew this year, especially over the summer, with several large new partners and weekly fan token launches, meant we had to act extremely quickly to keep up.”
The lion’s share – tokens as club capital?
When Lionel Messi, one of the most famous football players in the world, signed his two-year contract with the Paris Saint Germain (PSG) football club after 21 years at Barcelona, it was a “significant” part of his $ 30 million The signing bonus was paid in $ PSG tokens. This was a point of pride for the club, which boasted that Messi’s tokens “instantly tie him with millions of Paris Saint-Germain fans around the world”. However, Messi’s overall share of the tokens is small when you consider that the supply cap of nearly 20 million tokens results in a market capitalization of over $ 500 million.
𝐁𝐑𝐄𝐀𝐊𝐈𝐍𝐆: Lionel Messi becomes the first player in the world to receive fan tokens as part of the signature package with @PSG_inside. $ PSG ⚡️ $ CHZhttps: //t.co/4Fzm6HGTFG
– Socios.com (@socios) August 12, 2021
So what use can PSG tokens have for Messi, arguably the team’s star player? He is unlikely to vote for “a motivational message on the locker room wall” or exchange tokens for “personal video calls” with his teammates or himself. The only thing he can do is hold it, hope for an increase in value, and eventually sell it – maybe after his 2-3 year contract expires.
As a company, PSG has invested heavily in getting Lionel on the team, and it makes sense for the club to coordinate incentives with him, just as a company is likely to give golden handcuffs to newly recruited executives in the form of generous equity packages.
Last week we gave away 150 tickets / experiences to fan token holders, games, etc. That’s 20 a day, that’s 7,000 a year. It’s just the beginning of @socio’s investment in fan experiences. #bemorethanafan
– Alexandre Dreyfus (@alex_dreyfus) August 28, 2021
But why part with stocks when you can distribute hype stocks? After all, hype is the currency of entertainment. As a star, Messi can cheer fans up, resulting in revenue for the club in the form of ticket sales, broadcasts, merchandise and likely PSG due to the association. With this “hypequity”, Messi is financially rewarded for increasing the team’s brand power. This wouldn’t surprise the club, who praises “The hype surrounding the last signature” as the cause of the recent surge in “interest” in PSG.
Day trading sports teams?
Sports betting is big business with the global industry attached to with $ 203 billion and supports nearly 200,000 workers in 30,000 companies. The online fantasy sports market is a smaller but growing force at around $ 8 billion. With this in mind, it seems obvious that there is enormous potential in combining the online community aspects of fantasy sports with “crypto betting” and sports.
Although the first place to buy fan tokens is the Chiliz Exchange, where they are traded against the local CHZ tokens, other “traditional” cryptocurrency platforms have come into play. To Partnership with Chiliz, Binance has listed several top trading tokens such as FC Barcelona Fan Token (BAR) and Atletico Madrid Fan Token (ATM) and is vying for new users who hope to become crypto traders after being introduced to the asset class by their favorite teams became.
The ability to simply rotate fan token positions like stocks or other tokens invites users to actively trade, a practice implicitly encouraged by the chiliz exchange atmosphere.
Chemez agrees, noting that “if you’re smart, the fan tokens can make money even if you’re not even a huge fan.” He thinks holding the CHZ token long-term along with occasional fan token trading is a viable strategy.
While it is clear that each club is targeting their own fans in the IEOs, nothing is stopping speculators and traders from entering the market – which we could perhaps better see as a new breed of sport.
However, there are concerns about the merging of the two worlds as people who are unable to understand the crypto markets can involuntarily find themselves in a potentially addicting gaming experience. The advocacy group Clean Up Gambling has described Socios-style fan tokens as the “gateway to speculative cryptocurrency,” which makes it clear the implication that speculative cryptocurrency is a bad thing.
On the other hand, depending on the development of the sector, the development of a proxy stock market for sports teams would have a huge impact on the entire industry as private sports clubs could suddenly look like public corporations, with token holders a new type of stakeholder in the overall business. Players who traditionally do not receive equity could receive large chunks of their bonuses in blocked team-specific tokens, the exercise schedules of which could affect their loyalty to the team long after their contracts have expired.
As entities in which anyone around the world could invest indirectly and without barriers, sports clubs that can generate enough hype could go from regional and national actors to truly international entities in the form of multinational corporations.
It gets really interesting when DeFi, crypto games, decentralized social media, JPEGs and community / social / fan tokens * can * be combined with one another *.
– Qiao Wang (@QwQiao) August 29, 2021
The rise of fan tokens also opens additional doors into a digital and decentralized future that we don’t yet understand. Consider the DAO fiction trend, whose proponents see decentralized autonomous organizations operating on the blockchain as serious competitors of the modern corporation, which means that pre-existing fan bases – cryptographically organized fans – could be a great foundation for unknown future transitions.
Wild ratings, slight scarcity
But that’s a long way off, and right now, fan tokens seem like an unsafe bet for seasoned crypto holders. While circulating supply and total market capitalization are key metrics, the Chiliz platform does not readily display such information, making it difficult for traders to make informed judgments.
According to CoineGecko, only a small portion of the full issuance of fan tokens was circulated. Approximately 7.5% of FC Barcelona’s 40 million BAR tokens are in play, which means that at the current market value of $ 16 per token, the club is sitting on over $ 600 million in unspent tokens – in theory, that’s about Add 10% to the club’s $ 5.76 billion valuation, or about the turnover of a whole year.
Even more extreme, the number is in the case of Paris Saint-Germain, whose $ 440 million tokens add 18% to the club’s $ 2.5 billion paper valuation – and there’s no guarantee that the clubs won’t take the offer will be further diluted to infinity. It is fascinating to think about how this could affect the true ratings of sports teams in the future and what regulatory changes the fan token trend could trigger.
Many questions remain as to how different types of fan tokens will revolutionize the entertainment industry in the future, but it is clear that they represent a new front of disruption in line with the macro trends that are driving digitization, gamification and globalization.
While such tokens offer fans many new ways to interact with the teams they love, one remains to wonder what aspects of the sport this advancement of history is leaving behind. With more accessible global fan bases and active markets that respond to team progress on a daily basis, will the sports teams of tomorrow stick to their local roots, or will they become global players with little reference to their old hometown?