Fan tokens changing the face of Football

Football clubs from around the world are already onboard with the hype train for crypto fan tokens. Most devoted fans of FC Barcelona, AC Milan, Arsenal, Paris Saint-Germain, and Juventus have access to them already.

The clout crypto fan tokens are gaining makes it likely that they will make their way into the music industry in the near future. Where will this go? 

In 2021 alone, Socios claims Fan Tokens have generated $200 million in revenue for participating clubs, providing a much-needed cash injection for clubs that were suffering from the effects of COVID-19.

Even Lionel Messi’s signing fee, which had a reported total value of $29-35 million, included $PSG fan tokens as a “significant” part.  Fanmarketcap, a sports analytics company, estimates the market value of fan tokens at $300 million.

The issuer of fan tokens and the sports entity collaborate and issue each other’s tokens, using a smart contract based on the market segment in which each entity is present.

This is a collaboration between two entities, but it is the sporting entity that decides what rights and entitlements should be given to token holders, and the issuing entity is involved in suggesting what rights should be granted, based on their knowledge and expertise in the demographic in question.

 In both cases, surveys and polls are issued for the fans to understand the type of engagement they prefer, so they can vote on their preferred question and engage with the sporting entity accordingly. 

The tokens are issued through the ‘Fan Token Offering,’ where the price is fixed and the tokens are then traded on exchanges, where their value fluctuates. The tokens can be bought with fiat currency or cryptocurrency. Their value is only decreased if the holder decides to sell or exchange them, and they are locked once they are used for voting for the duration of the poll.

Once users own a certain number of fan tokens, they will be able to vote on various issues regarding their favorite club. Fan-voting and fan-decisions are determined largely by the club, but generally include:

It could be a club’s next kit design. A tour bus design. A match location. The ‘Man of The Match’ winner. Such perks, as well as many others, enable fans to feel more connected to their favorite team.

With fan tokens, you can create an exclusive community of fans on the trading platforms that you run, and you can also offer rewards. Fans move up the fan ladder the more tokens they own. Once they own enough tokens, they can unlock VIP benefits.

Europe’s governing body of football, UEFA, recently announced a sponsorship agreement with cryptocurrency company Socios.com, which sells fan tokens accessible only on Chiliz’s blockchain. 

UEFA is not the only one with commercial relationships with a company in the cryptocurrency sector. Six Premier League clubs, including Arsenal and Manchester City, have signed up with Socios.com.

 In addition to football, other sports, including cricket, motorsports, ice hockey, basketball, tennis, and fighting (MMA, etc.), have also invested heavily in fan tokens.

This is because it is a new and innovative monetization measure that is aiding in curbing the loss of revenue as a result of gate receipts, sponsorship income, broadcasting returns, and other promotional activities, in addition to dealing with spikes in expenditures due to additional costs incurred, such as player fees without any events, bio-bubble arrangements, frequent testing obligations, etc. 

Business everywhere has been affected by the Covid-19 pandemic, with most stakeholders suffering, and the sporting world was not spared either. Due to the suspension of the events or the closing of the turnstiles, the sporting entities have been subject to huge financial losses.

Fan tokens, too, are volatile, as their prices fluctuate based on the supply and demand on the market. In an interesting observation, sporting fanatics who purchase these tokens have indicated that the prices of these tokens are relatively affected by the movements, performances and activities of the concerned sporting entity. 

Fans’ emotions and engagements determined how much they are willing to spend on these tokens, and as such, it is quite evident that some sports enthusiasts see these tokens as status symbols, bonds with the sporting entity they support, and loyalty indicators rather than as investments, thereby adding to the popularity and demand of these tokens, which result in notable monetary returns for sporting entities.

It is a general principle of investing that a sporting entity should always consider and analyse the risk-reward ratio, which is quite foreign and uncharted, because fan tokens are a new and unexplored area.

The fan is benefited because they feel more involved; the team is benefited because they are adding a layer of monetisation; and the crypto industry as a whole is benefited because it attracts the masses and is closer to adoption.

Though critics say it’s unregulated, volatile, and the asset can be manipulated by people with a large holding of the asset.

That being said, Fan Tokens themselves are therefore intrinsically valuable. The tokens can also be traded on the blockchain as an asset of value (often for profit) like most crypto-assets, and therefore are liable to price movements (often volatile). 

Several Fan Tokens have soared in value at the beginning of some exciting footballing news (as more fans purchased the token) and fallen when speculation or excitement faded (as fans sold the token).

Olumide Adesina a France-born Nigerian, a financial market analyst and Investment Trader, with more than a decade of working expertise in Investment Trading.