In June 2021, the Portuguese Football Federation announced that it was launching the country’s national team fan tokens on the Socios decentralized platform. Since 2019, similar tokens have been launched by the largest football clubs in Europe, including Barcelona, Juventus and Paris Saint-Germain, among many others.
The market for collectible NFTs featuring athletes or iconic match moments already totals hundreds of millions of dollars.
Fan Tokens are also planning to launch Formula 1 teams Aston Martin and Alfa Romeo and the American UFC mixed martial arts league. We figured out how the fan token market works and what are the prospects for its development.
How do fan tokens work?
Fan Tokens are crypto assets that target sports fans and celebrity fans.
There are two main types of fan tokens:
- The first type is digital assets that allow their owners to participate in the life of their favorite sports clubs. For example, vote for the color of the new uniform. They also provide early access to ticket sales for sporting events. These tokens transform fans from passive observers into an organized community that can influence the lives of their favorite clubs.
- The second type is collectible NFT (non-fungible tokens) with an image of a player or a video of an important moment of the game (for example, a goal). This is a digital analogue of a collectible card. More details on how NFTs work can be found here.
The leader of the first sector is the startup Chiliz and its decentralized platform Socios․com. Today the company is a de facto monopoly in this direction. Second sector leaders are Sorara startup and NBA Top Shot project from Dapper Labs.
Let’s take a closer look at how these companies work.
Chiliz and Socios Platform
Chiliz startup has been operating since 2018. The company’s goal is to build an entire infrastructure of football club tokens. During the closed ICO (initial coin offering), Chiliz raised $ 66 million, and among the investors in the startup were such major crypto players as Binance, FBG Capital and OKEx.
Chiliz has several products combined into one ecosystem.
Socios․com is a decentralized platform where clubs can issue their tokens and users can buy and vote. Technically, this is a sidechain, that is, an additional network built on top of the Ethereum blockchain. However, unlike the Ethereum network, Socios․com operates on the basis of the Proof-of-Authority (PoA) consensus algorithm.
Since its launch in 2018, 27 of the largest European football clubs have joined the Socios․com platform, including Atletico Madrid, Barcelona, West Ham United, Galatasaray, Paris Saint-Germain and Juventus among others. Socios.com also has tokens for Dota 2 teams, UFC and PFL fighting leagues, Formula 1 teams Aston Martin and Alfa Romeo, as well as tokens for basketball and cricket teams. According to the latest data, the company plans to announce a dozen more new partnerships soon.
In addition to fan tokens, Socios․com also provides access to the internal CHZ token. It exists in two formats: ERC-20 on the Ethereum blockchain and BEP-2 on the Binance Chain. All fan tokens are purchased for CHZ only.
At the same time, clubs can issue and sell their own fan-tokens with the help of Socios․com. Such tokens are distributed using a kind of ICO analog – a procedure called FTO (Fan token offering). Under the FTO, the initial price of the club’s fan tokens is equal to the price of CHZ. And then it is determined by the demand for the asset.
Fan token holders can trade them on Chiliz Exchange, a centralized fan token exchange integrated with Socios.com, as well as other partner platforms. CHZ and fan tokens do not have mining, but the Chiliz team is considering adding staking.
At the same time, the entire Chiliz ecosystem is actively expanding. So, in March 2021, the startup announced its entry into the American market. To this end, the company is investing $ 50 million to open an office in New York and develop fan tokens for the teams of the five largest sports leagues in the United States: the National Football League (NFL), National Basketball Association (NBA), Major League Baseball (MLB), Professional Football league (MLS) and the National Hockey League (NHL). The company also intends to enter the music and other entertainment markets.
Football clubs are interested in cooperation with Chiliz. This is evidenced by the pace of the conclusion of partnerships of the largest teams with a blockchain startup. Moreover, Chiliz is a very profitable project: last year, Socios.com partners earned about $ 30 million from the sale of fan tokens, and this project has already brought in $ 150 million.
But these numbers are not surprising as Chiliz and Socios.com allow clubs to engage fans in their lives, providing them with additional sources of income.
How do Chiliz Fan Tokens enable fans to participate in club life?
Fan tokens issued on the Chiliz platform allow their holders to be closer to their favorite team.
For example, with their help they can:
- choose the best player of the match;
- participate in the raffle of fan merchandise, tickets or collectible cards;
- become a member of the loyalty program;
- attend exclusive events such as training sessions, club meetings, or meet the players in person;
- choose the color of the uniform or even the composition of the players for the next game.
The club’s management of the decisions made by the fans is guaranteed by the agreement between Chiliz and the club. At the same time, all voting takes place using smart contracts, which ensures the transparency of the entire process.
Among real examples of the use of Socios.com fan tokens, the following cases are worth noting:
- Juventus fans chose the music that plays after the goal at their home stadium and the color of the team’s bus.
- Milan fans have voted for the official motto to appear in the club’s dressing room – “Succede a chi ci crede” (“It happens to those who believe”);
- Professional Fighters League (PFL) fans have selected two fighters for one of the league’s bouts.
For the most part, these decisions are on the periphery of the club’s activities. But this may not always be the case. In October, Cypriot club Apollon FC allowed their fan token holders to select the starting squad for a friendly match.
Collectible NFTs on Sorare and NBA Top Shot
Since 2018, the French startup Sorare has been developing another direction of fan tokens – collectible NFTs.
According to Nonfungible.com, Sorare ranks third in activity among all projects on the NFT market, behind only CryptoPunks and SuperRare. The platform now has over 120,000 active monthly users.
Sorare users play fantasy football on the Ethereum blockchain. They buy and exchange NFTs with real footballers’ profiles, forming a team from them. Depending on the results of their players on the real field, users receive credit points. For example, if a user has a Neymar card and he scored an assist, then the holder of that player’s NFT card gets a point.
Moreover, the more productive and popular a football player is, the more expensive the token with him and the more limited its circulation. Prices for cards vary from a couple of euros to several thousand. Users can both trade tokens and participate with them in tournaments of various levels, earning points, rare cards and cash prizes.
For some, this may seem like a silly game, but in reality it is much closer to a complex investment strategy. To make a good profit, you need to track the lineups and the performance of the players. At the same time, new cards are issued once a season, and after the first sale, the price for them is determined by demand. As a result, such NFT cards can grow in price several times.
Let’s say a player bought a goalkeeper for $ 200, and now it costs $ 2,000. The player has to decide whether to sell his token or keep it and continue making money on the results of the games. If the holder of this NFT is lucky, he can buy a card of a new, but promising player (for example, the future Ronaldo), and after a few years sell it tens or hundreds of times more expensive.
There are users at Sorare who have made the game their main job: they are constantly optimizing the lineups of the collections. This is addictive – more than 70% of users continue to play Sorare 6 months after registration.
Like Chiliz, Sorare is actively developing partnerships with football clubs and leagues. Currently, tokens are available on the platform for about 130 teams from different leagues, including such top ones as Liverpool, Milan, Paris Saint-Germain, Real Madrid, Juventus and others.
NBA Top Shot is another sports-themed NFT project. The platform has been operating since July 2019, and in March it raised $ 305 million.
On the platform, basketball fans can trade tokenized moments from NBA basketball matches as NFTs. The cost of one such token ranges from a few dollars to $ 250,000. In the near future, the platform plans to release a game like Sorare, in which users will be able to earn on the performance of players and participation in tournaments.
NBA Top Shot is a joint venture of the Canadian company Dapper Labs, which previously launched CryptoKitties, the NBA and the NBA Players’ Association.
Fan tokens as investments
Fan Tokens are not only fun for fans. They can be a great investment. Above, we gave an example of how you can make money on the growing popularity of a football player for owners of registered NFTs. Let’s see how the fan token rate changes on Socios.com.
Last year, fan tokens grew along with the entire market – some of them increased in value several dozen times. This spring, following a general correction, prices for such tokens began to decline, and most of them dropped in value several times. However, before the European Football Championship 2020, prices went up again and added tens of percent. But now this growth is almost lost.
The CHZ token was launched in July 2019 when its value was $ 0.016. Now its price has risen to $ 0.24 – an increase of 1,340%. And the capitalization grew to $ 1.36 billion. At its peak in April, the price of the token reached $ 0.7739.
The ARS token of the Italian club “Roma” was launched in July last year. During this time, it grew from $ 4.22 to $ 5.03 – 18%. In December last year, the ARS price even reached $ 24 – this is already an increase of 5.6 times in six months.
Juventus token JUV since April last year has grown from $ 2.11 to $ 7.15 – by 230%. The price peaked in mid-May at $ 26.22, an increase of 1,100%.
ATM, the token of Atlético Madrid, rose from $ 4.86 to $ 8.38 over the year, peaking at $ 52.26 in May.
ACM, Milan’s token, was only launched in February with $ 6.56. Having reached a peak of $ 21.24 in 2 weeks, the token began to fall in price and is now worth $ 6.04.
BAR, Barcelona’s token, has grown from $ 6.27 to $ 14.09 in a year, up 125%. At its peak in March, the token price reached $ 53.64.
As you can see, investing in fan tokens can be very profitable, but the risks are also significant. In addition to the volatility traditional for cryptoassets, investors should take into account the relatively small capitalization of projects (which leaves room for manipulation), the novelty of the market and the excessive dependence of prices on the actions of the club’s management.
Market size and prospects
Fan Tokens are a billion dollar market. Popular clubs have tens of millions of fans, and the total audience of football matches exceeds 3.5 billion people.
In the spring, the market capitalization of Socios.com fan tokens exceeded $ 190 million. In 2020, cooperation with the platform brought the clubs $ 30 million, and this year the company aims to bring them at least $ 60 million. $ 150 million. Such figures may seem insignificant, but one must understand that this market is only 2 years old. If fan tokens become more popular, then the profits of market players will increase significantly.
At the same time, now the same startup Chiliz and its platform Socios.com are focused mainly on the European market and are just beginning to enter the United States. At the same time, investors from Asia are also showing interest in fan tokens.
The market for collectible sports cards in the NFT format is about $ 10 billion. According to DappRadar, in two years, NBA Top Shot sold assets for $ 618 million, and Sorare – for $ 87 million. In a few years, the sector may well claim its billion. The question here is the rate of growth. Indeed, this winter and spring, the entire NFT market experienced a real boom, but now the excitement has subsided: sales volumes, the number of active wallets and transactions have been steadily decreasing over the past few months.
Projects like Socios.com, Sorare, and NBA Top Shot introduce blockchain to people far from the crypto market. And it is very important that the products of these projects have practical applications: tokens are used by fans and accepted by real clubs.
At the same time, Socios.com, Sorare and NBA Top Shot could not work without the support of sports clubs. It is obvious that for the time being this is only one of many marketing tools for clubs – modern, profitable, but also risky (it is not known what regulators will see in fan-tokens).
Additionally, fan tokens can split fan communities into those who have a vote and those who don’t. But the fact that the clubs still issue their tokens speaks of their interest.
There are also prerequisites for widespread distribution of fan-tokens: a huge audience and the desire of fans to participate in the club’s life. If blockchain gains a foothold among large teams, it will bring millions of new users to the sector.