22nd March 2023 | ZebPay Trade-Desk
Traditionally, fans’ interaction with sports teams, players, leagues, and clubs has been passive. Fans bought tickets and merchandise while the team or players collected the money, creating a one-way ecosystem. However, the advent of fan tokens with roots in blockchain-induced decentralisation changed the landscape. How does a digital asset help create stronger connections between teams and fans, and build a new type of ecosystem that is mutually beneficial?
These tokens help create a fan-based rewards system and are capped assets that fans can buy, sell, and exchange for collectibles, merchandise, or team meetings.Fan tokens do not function as traditional currency in the sense that they are not generally accepted as a medium of exchange for goods and services outside of specific fan token ecosystems. However, within their respective platforms,
Fan Tokens can facilitate the access to exclusive content and participation in voting and similar things like that. While the fan token model is famously known by a fan token platform and app called Socios, it has now been adopted by other blockchain companies. Fan tokens can be purchased from partners using CHZ, the native currency of the Chiliz blockchain. Fan tokens are associated with various sports teams that monetize their fans with rewards.By giving holders access to a range of engaging activities, fan tokens are assets designed to engage fans more closely with the team or player.
Fungibility is a property that refers to being easily interchangeable with an identical part at a given price. In fiat currency, a dollar bill is equivalent to another bill of the same denomination. Fungible assets can be broken down into smaller units and have no unique characteristics, making them convenient for holders to trade. Precious metals, bonds, and stocks are examples of fungible items. NFTs are unique tokens that cannot be replicated. Examples of NFTs are virtual event tickets, blockchain identity, metaverse assets, etc. By making it easy to claim ownership of a unique piece of digital data, NFTs sit on a blockchain like any other cryptographic token.
Fungibility is a property that means that any fan token can be easily replaced with another fan token. Since tokens are fungible, they are also easily traded as they become part of the secondary market. However, Fan Tokens are team-specific and there is only a limited supply available for each team.
As a usable digital asset, fan coins play an important role in the monetization of the fan ecosystem. Teams can use fan tokens to implement a new revenue stream. It could give a team a huge capital boost on the first sale. When Barcelona’s fan token ran out, it raised a whopping $1.3 million. The blockchain aspect, on the other hand, ensures the use of tokens for non-critical voting and other participation activities. Non-critical voting refers to cases where token holders vote on matters that may not have a major impact on the project. For example, fans can choose the colour of the squad car or the song they play after scoring a goal. This differs from governance tokens, where token holders are able to make important project-specific decisions.
In football, several clubs have partnered with socios to introduce tokens to their fans. Some notable names in soccer are AC Milan, FC Barcelona and FC Manchester City. Fans can buy their favourite fan token in Zebpay too. Professional mixed martial arts organisations like the UFC and PFL have issued fan tokens to give fans access to fan groups, chat forums and in-game rewards. Entertainment company Mogul offers entertainment brands that enable directors, actors, screenwriters and moviegoers to earn rewards in the film production process.
Additionally, celebrities issue NFT fan tokens denoting ownership of a specific celebrity item or experience. Examples of assets that can be represented by these tokens are access to exclusive content, experiences or even goods. Similarly, NFT fan tokens issued by gaming companies can be issued representing a variety of assets such as: In-game items, access to premium game materials or even voting rights for certain game-related decisions.
Teams looking to release fan tokens are working with blockchain-based platforms like Partners to mint the tokens on a blockchain. A Fan Token Offering (FTO) is planned, where fans can purchase the tokens at a fixed price. After FTO, the value of fan tokens may increase or decrease depending on team performance, use cases, demand, project execution and other similar parameters. Barcelona, Manchester City, Juventus and Paris-Saint Germain have also introduced their fan tokens. Additionally, the KPOP Fan Token (KPOP) is a utility token that gives K-pop fans a token share of influence in the Korean pop music industry through social apps and support.
The fan tokens work like an automated membership key and grant holders a variety of benefits. Tokens entitle holders to team recognition and unique rewards. Not only can you access collectibles and merchandise, but you also get a location for interactive sessions and autograph collections that are otherwise inaccessible. Since fan tokens give the holders a say in team decisions, they are comparable to corporate actions. While they may not give them a decisive vote like governance tokens do in tech-related roles, allowing fans to vote on club matters is a welcome move.It makes them feel like they are part of a club. When a user has more tokens, they often enjoy greater influence in the fan ecosystem. Some teams require users to have a certain number of tokens before they are eligible for votes and other perks.
Fan tokens work like other cryptos. With limited supply, these tokens can be purchased on the relevant project platform or on a supporting exchange. However, keep in mind that the concept of fan tokens is still new and will only become more robust as new use cases emerge. Teams that implemented these tokens were able to increase fan engagement. As more token holders use them to participate in related events, their value increases.
As a spectator, you like teams that operate with winning as their only goal. However, in order to sustain itself, consistently generate income, and make money, a team must operate successfully as a business.The creation of fan tokens has immense commercial potential. As more and more sports teams realize this, they are now looking to stake their own fan tokens to capture new opportunities and outperform the competition.