Fan Tokens are an exciting new kind of cryptocurrency. They are tokens bearing the effigy of soccer clubs such as PSG, Manchester City, AS Roma and many others. But also, sports leagues such as the UFC or even Formula 1 teams like the Alpine F1 Team Fan Token and other sports such as rugby, tennis, e-sport and so on. There are already over a hundred Fan Tokens.
These cryptocurrencies are completely fungible and interchangeable tokens. So they don't work like Sorare's collectible NFTs cards, for example, but do have a unique and general value of their own, defined by supply and demand.
These cryptos are governance tokens with numerous use cases. Each club issuing these tokens in partnership with Chiliz chooses the benefits to which holders will have access. Generally speaking, these cryptos can be exchanged for official club merchandise at attractive discounts, making them a real currency of exchange. But holders can also benefit from VIP experiences such as invitations to matches or private events organized by the clubs. Last but not least, these tokens can give the right to vote on more or less important decisions concerning the clubs.
The aim of this concept is to provide an even more immersive experience for the fanatical supporters of these organizations and clubs, by offering a highly inclusive community experience. Previously, fans just had the right to support their clubs but not really to make their voices heard, those days are over thanks to blockchain and fan tokens!
This concept is particularly interesting because it opens the door to cryptocurrencies and decentralized finance to a mass of new people who could potentially enter Web3 through sport. We know that it's very complex to onboard new users on DeFi via complex lending and borrowing protocols that often frighten novices and have less than user-friendly UIs that represent barriers to entry. Here, the concept is very simple and gamified, so that any fan, once they've discovered the concept, can buy fan tokens on Binance or on the Socios app and take part in the governance of their favorite club.
How legitimate are Fan Tokens?
This concept is taken very seriously by clubs and is promoted in many ways. For example, Manchester City Football Club were the first to issue a Fan Token featuring their club's logo, enabling holders to vote on most minor club-related decisions.
The Inter Milan club, meanwhile, advertised their $INTER Fan Token directly on the players' shirts for the 2021/2022 season like this picture is illustrating:
We can also think of Ronaldo, who was the first player to receive part of his salary in Fan Token, which shows and supports the real underlying value of these tokens.
More recently, the Paris-Saint-Germain club has officially announced that it has become a validator of the Chiliz Chain (the blockchain on which all fan tokens are based) to help secure the network, and has committed to reinvesting all profits generated in the purchase of Fan Token $PSG. They are the very first club to take the decision to be fully implied into the blockchain protocol.
We can hope that other clubs will follow this path and motivate new companies and private organizations to do.
The revolution in the way sports organizations communicate with and include their fans is underway, and as Alexandre Dreyfus, CEO of Chiliz and Socios, says: "It's not anymore about if you believe it or not, it's happening". Clubs that actively involve their community could potentially attract more new fans than those that don’t and build a much longer-lasting loyalty by fully integrating them into the sporting ecosystem and listening to their opinions.
Some figures about Fan Tokens
Today, Fan Tokens have a capitalization of around $450M for 150 tokens, according to CoinMarketCap. The most highly capitalized tokens are $PSG, $SANTOS, and $BAR, which are valued at between $30M and $35M. We can consider that these capitalizations are still relatively low compared with the huge markets represented by ticket sales for matches, sales of derivative products, sports betting, and so on. For example, Statista tells us that PSG had sales of over $300M in the 2017/2018 season alone.
The most committed fans would do well to invest regularly in their team's token to qualify for discounts on merchandising and can look forward to unique experiences in addition to taking part in the governance of the organization. Of course, they can also look forward to an increase in the price of the token over the long term, and why not resell it at a higher price in the future.
A good idea for investors?
Of course, this new kind of asset is not primarily intended simply as a new way for traders and investors to speculate. But taking all the above parameters into account, Fan Tokens, which are still a very small market, seem to have a bright future ahead of them.
One of the most reassuring observations we can make is that, unlike a DeFi protocol or other "classic" crypto project, competition for these tokens is non-existent and unlikely to ever arise. For example, if you're a fan of FC Barcelona and you venture to invest in the token, you know that a competitor to the official $BAR token will never see the light of day, as it will be the one and only way to invest in the club. The organization will have no interest in creating a new token with the same functionalities and utilities with a company other than Socios and Chiliz. Where a DeFi protocol will inevitably see a new competitor offering the same services emerge.
We have observed that, like all cryptos, Fan Tokens have not escaped the Bear Market and are now far from their ATHs. On the other hand, they have formed accumulation structures, and some have already turned around to start an uptrend as we can observe on the following charts of $PSG and $ACM tokens:
Today, there are probably many more people who would be potentially interested in voting for a soccer club or sports organization than for a DeFi protocol. While these tokens are particularly prone to short-term fluctuations every time a match is played, and the outcome of the match very often determines the price action over the following days, in the long term, they could be one of the cryptocurrency classes that has the least difficulty in detaching itself from the rest of the market, being supported by a growing mass of fanatical supporters, proven real-life use cases, and a real sense of belonging.
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