The Rise of Fan Tokens
To this day, the crypto space is very narrative driven. One of the most recent narratives that has been making the rounds is the World Cup that kicked off on November 20, 2022, in Qatar. The World Cup 2022 event is one of the many reasons why fan tokens have been rising in popularity lately.
In fact, according to FanMarketCap, at the end of October 2022, the global fan-token market cap currently stands at over $380 million, with the top five fan tokens being SANTOS, LAZIO, PORTO, PSG, and CITY at the time of writing. The SANTOS token is the leading fan token with a market cap of over $50 million and a total supply of 30 million tokens. The LAZIO token comes in second with a market cap of $30 million and a total supply of 40 million tokens.
But what, exactly, are fan tokens, how do they work, what are their key elements, and how can you buy them? Let’s take an in-depth look below.
What are fan tokens?
Fan tokens, also known as sports cryptocurrencies, are a type of digital currency designed to offer sports fans membership benefits specific to a given team. For instance, the SANTOS token is specific to the Brazilian football club Santos FC.
Although fan tokens are a type of cryptocurrency, they are not built on their own blockchain. Instead, they rely on a third-party blockchain for their existence. As such, they are more like a token than a coin. In much simpler terms, fan tokens are digital assets that allow sports associations, clubs, leagues, players, and teams to grow their fan base and strengthen their engagement by organizing and offering experiences for their fans.
Sports cryptocurrencies not only provide fans with monetary rewards but also offer exclusive access to sports content and an intimate association with the club or team involved. Simply put, fan tokens provide something for everyone as they are completely interchangeable. This means they can be exchanged for VIP experiences or even sports merchandise. They get their worth from community-driven engagement and the benefits they can earn.
With fan tokens, fans can determine and predict the future of their beloved sports club or team while musing over its success in the Web3 market. For the favorite player or sports team, fan tokens are social tokens that can generate for them additional capital resources. Fan tokens have encompassed different kinds of sports, from cricket and the NFL to soccer. These tokens are so popular that in March 2022, the global sales volume shot up to $3.5 billion. But, while things might seem rosy, when it comes to price, sports cryptocurrencies aren’t any different from other cryptocurrencies because they are highly volatile.
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How do fan tokens work?
The mechanics of fan tokens makes them attractive. Similar to other cryptocurrencies, fans can easily purchase fan tokens and trade them. The price of a sports cryptocurrency is set by supply and demand and is ultimately a function of the token’s popularity and market movements.
For instance, a sports club can mint an infinite or finite amount of fungible tokens and opt to distribute or sell them to its fans. Fan tokens can be purchased on secondary marketplaces such as Binance or the Chiliz exchange. Once fans can access a given amount of sports cryptocurrencies, they are given voting rights and numerous other perks offered by their beloved club.
Some of the issues that fans are permitted to vote on typically depend on the club and can cut across the club’s merch and tour bus design, match locations, and ticketing. These benefits enable fans to feel completely involved in their favorite club and help offer an extra layer of prestige and pride. In addition, this also helps the particular club’s tokens to increase in value as the club continues to grow.
Key Elements: Chiliz and Socios
Now, the subject of fan tokens or sports cryptocurrencies cannot be discussed without mentioning Chilliz and Socios. But, what are they, and what role do they play in the fan tokens space?
Chiliz is the company behind the Socios.com platform. Inspired by the crowd-sourced, fan-driven, and public ownership model of Spanish soccer teams known as socios, Chiliz utilizes blockchain technology to allow for a new type of direct interaction between fans and their favorite sports team. Fans can purchase their team’s token using Chiliz’s native digital currency, CHZ.
How to buy fan tokens
Just like other digital tokens, the CHZ token can be purchased on cryptocurrency exchanges before proceeding to acquire the fan tokens on the Chiliz network. However, some sports cryptocurrencies exist independently of the Chiliz website and Socios.com app and are listed on other trading venues. Still, the easiest way to buy the most popular fan tokens is through a centralized exchange.
Such tokens are specific to a club or team and help provide access to an encoded ledger of membership and voting rights. Sports cryptocurrencies can be bought and traded on Chiliz.net — Chiliz’s in-house crypto exchange and trading platform. Besides the Chiliz exchange, fans can purchase fan tokens on well-known centralized crypto exchanges or swap them on decentralized exchanges (DEX) such as PancakeSwap. The caveat with the DEXs, however, is that you will need to have a gas token (BNB, in the case of Pancake Swap) to buy fan tokens.
CHZ, being the underlying coin to power fan tokens, can be bought on Chiliz.net. And if, with Chiliz, you don’t only want to hold the fan token’s underlying blockchain coin, there are fan tokens, such as SANTOS, LAZIO, PORTO, or even PSG, that have a high market capitalization. Also, there are already fan tokens for national soccer teams, like the one from the Argentine Football Association or from the Portugal National Team. Remember though, fan tokens are no different from other cryptocurrencies when it comes to price volatility, and you should do your own research before purchasing them.
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