DeutschSome time ago, the media reported on record sums that the renowned Christie’s auction house had taken in through the sale of a digital work by the artist “Beeple.” It was art based on a non-fungible token. The artwork fetched more than 69 million dollars. The so-called mainstream media eagerly reported on these developments. For many, this was the final proof that the bridge between the crypto world and the real world is increasingly being closed. With fan tokens, there has been an example for quite some time of what applications there can be for coins and tokens away from the crypto universe. Meanwhile, a whole range of football clubs are relying on this exciting approach of fan engagement with added value for clubs and supporters alike.
Reason enough to offer this topic its own article with a view to the opportunities and the potential. However, the rule also applies here: Where there is light, there is also shadow. There has also been repeated criticism that the providers of fan tokens in particular benefit from the developments. So what technology is behind the tokens and how quickly does the sector unfold within the crypto industry?
Number of Fan Tokens Tradable on Crypto Exchanges is Rising
The crypto analysis platform Coinmarketcap already dedicates its own section to fan tokens, which (as of 04/2021) includes almost 20 different tokens from more or less large clubs. Represented here are such well-known names as Galatasaray Istanbul (GAL token), FC Barcelona (Fan Token BAR) and, last but not least, Paris St. Germain’s Paris Saint-Germanin Fan Token (PSG) of the same name. The Parisian success club is considered by many observers to be a pioneer in the industry. The French club had already announced its collaboration with the Socios platform at the end of 2018, which has since cooperated with various clubs to develop fan tokens and bring them to the market and/or the fans.
Insights: How do tokens differ from coins?
Digital Engagement of Old and New Fans through Club Tokens
Behind the term fan token is basically nothing other than a kind of digital credit – but with certain advantages that are not apparent in normal trading with digital currencies. Holders of the coins can use their tokens for various purposes. Depending on the design of the application areas, these can be, for example:
- the exchange of tokens for fan merchandise
- Acquisition of (VIP) tickets
- Entitlement to access special events
- Right to have a say in the context of (digital) member collections and votes
- Distribution of various rewards by clubs to token holders
As far as the optional exchange of fan tokens for certain services is concerned, they function similarly to “normal” cryptocurrencies, which can be used as a means of exchange on the market. The bombastic promises of many clubs arouse great interest among fans.
Fan Tokens Will Soon not Only be an Issue in Football
Juventus Turin fans were given the opportunity after the token purchase to help decide which song would be played as the anthem after a goal by their team. The sometimes very impressive successes in connection with the token issue in the field of football are also calling other sports actors into action. There have also recently been reports from the environment of the huge “money machine” Formula 1 about possible plans for fan tokens. In view of high token prices, it was probably only a matter of time. FC Barcelona took in a seven-figure sum in just two hours by issuing its own token at a token price beyond the 40 US dollar mark. Money earned quickly, or what?
| A goal of many publishers:
→ Give fans more opportunities to have a say! |
Formula 1 teams, like football clubs, could have a variety of ways to involve fans. What should vehicles look like, how should drivers be dressed in the future? Of course, proponents praise the opportunities of the tokens in the highest tones; after all, fans could take far more influence in this way than is possible via social media such as Facebook, for example. Providers and platform operators emphasize: Anyone who owns a fan token can actively participate. No matter whether I have one token or many. It goes without saying that the “e-sports” sector in particular has enormous potential. Because here, digital currencies are per se open to them for technical reasons. Likewise in the field of online gaming, in which cryptocurrencies are playing an increasingly important role as a means of payment anyway. So why not start fan tokens as well? And so probably many other industries are already in the starting blocks.
Technological Aspects in the Distribution of Fan Tokens
An important aspect of FAN tokens are the technical aspects. The company Chiliz has developed into one of the leading providers for the emission of digital coins. The service provider cited sales of the equivalent of over 25 million for its token partners from the world of sports for the year 2020. The company has laid two important technological cornerstones for the issue of FTOs – i.e. the Fan Token Offerings. On the one hand, Chiliz has developed its own special blockchain, which serves as the basis for the fast and fair distribution within the framework of the offerings. This blockchain allows fans worldwide to participate in promotions. In addition, there is a special exchange that specifically takes care of the purchase and sale of fan tokens.
- Chiliz
(CHZ) - Price $0.042
- Market Cap
$414.81 M
In this case, the internationally successful Binance exchange is also on board. Because a large number of the fan tokens already launched are tradable on this. Technologically, the distribution of already available and future club tokens as well as the pendants from other sports areas takes place in a similar way to classic cryptocurrencies, which are traded blockchain-based on crypto exchanges.
Exchanges are Happy about the Positive Advertising Effect of Fan Tokens
There is also criticism of the concept of the “coming generation of fan-club relationship”. Precisely because the clubs in particular could supposedly benefit, while the benefits for supporters are sometimes limited – at least according to the skeptics. The second group of profiteers are, by the way, the exchanges that act as partners of the token issuers. Of course, they earn on the one hand from trading fees on the purchase. In addition, however, according to data, they also gain a number of new customers who ultimately do not only acquire fan tokens. A win-win-win situation, one might think. Opponents, however, see fan tokens more as a clever advertising ploy with a high sales guarantee. Not all experts are of the opinion that the promised far-reaching participation in the fortunes of the favorite club is guaranteed. Fans without sufficient technical knowledge could be left behind if they are not familiar with blockchain and Co. Almost every fan knows how to use social media portals today.
Also, some club members probably ask themselves why they should buy tokens in addition to the annual fee in order to be able to have a say in the new jersey or other aspects. What is true, however, is that the pandemic has shown that new digital ways of participation are necessary. And the above-mentioned use cases are ultimately only the beginning. Creativity is needed here to make fan tokens even more appealing to potential users.
Earlier Purchase could Bring Token Holders Considerable Profits
Anyone who criticizes the sometimes high issue prices of some fan tokens should of course not leave out positive developments in some places. In this context, we would like to point out Barcelona’s BAR token again. Anyone who got in early and acquired enough tokens could increase their wealth enormously. To cite the volatility of the tokens as a counter-argument is basically only conditionally fair to the club currencies. After all, newcomers should be aware of the risk of strong price fluctuations – regardless of the area of the crypto world they choose. Every investor should know the dangers of their investments. Why should this be any different in the case of fan tokens. Of course, the prices of these currencies can also collapse. The worst-case scenario: My tokens are worth almost nothing anymore, so that I only benefit from the various fan-related promotions, but not from price gains. It is irrelevant whether fans initially did not think about the economic opportunities at all and simply wanted to become part of the digital fan community.
Clubs themselves can of course create desires by limiting the quantities – however, this is a possible further problem in the case of fan tokens. Because further fans who do not receive digital coins through emissions are excluded from participation in the virtual world. So how fair can such approaches be? Exactly this sticking point is for some clubs then also the reason for the sometimes unusual restraint. In Germany, those responsible at Borussia Dortmund discussed the approach for supposedly more fan co-determination. For the time being, however, they decided against their own token project, although a so-called beta test phase had already been initiated. In particular from the environment of the so-called “Ultras”, i.e. the particularly committed fan groups, there was headwind and demands for a quick end to the project. The criticism was mainly aimed at the increasingly extensive marketing measures of the traditional club.
Many other fans also spoke out against it. This is not really surprising for one reason. Many BVB fans lost a lot of money years ago due to the club’s IPO. The management relented and took on the criticism from the fan side. By the way: The German record champion Bayern Munich has also refrained from a token so far, but has repeatedly praised the possibilities of blockchain technology.
Experts Name Advantages and Disadvantages of FAN Tokens
Economic experts see tokens as an opportunity for the world of sports. The main problem, however, could be the unequal distribution of influence. A credo of the future could be: Whoever owns more fan tokens becomes a first-class fan. And could have a greater say than those supporters who can or want to afford only a few tokens. In addition, tokens would probably mainly benefit those clubs that have a large fan base worldwide. They could fill their war chests extremely quickly with comparatively little effort in order to sign new players and put massive pressure on the competition with less international fan engagement. The already recognizable distortion of competition in many leagues could become even more dramatic. The point of quantity-dependent co-determination, in turn, could also change the fan culture in a rather disadvantageous way. Even if publishers like to present this somewhat differently to the outside world for obvious reasons.
Influence Mainly by Investors than by Fans?
Investors with strong capital could therefore ensure that they shape the club’s fortunes more strongly than the mass of loyal fans, whose voice at members’ meetings has so far had the same weight. According to critics, the often criticized lack of justice in co-determination threatens to advance more quickly through fan tokens. Convinced fans who are already enthusiastic about the world of digital currencies are probably not very meaningful to such concerns. Despite all the criticism, reports about considerations in more and more areas of the sports sector at least show that clubs and actors are opening up to the rapidly growing area through token issues and partnerships with crypto companies. And what new technology is characterized by advantages alone? The question is therefore less whether fan tokens make sense, but how, how they can be used fairly and transparently.
