The 22nd World Cup, which takes place every four years, is being contested in Qatar. As the most popular sporting event, it brings with it a plethora of commercial prospects and traffic. As it approaches, fan token, as part of the crypto industry, has attracted more interest.

Based on this hot issue, this article analyzes the history and current market position of fan tokens and presents tactics for selecting a fan token with potential during the World Cup. As the most general form of fan economics in Web3, the fan token is also an extension of conventional fan economy to Web3.

The fan token's function in the Web 3 fan economy is examined in this article, along with how it supports the new kind of economy supported by fans, clubs/idols, and exchanges.

What is a fan token?

The fan token is a creation of the fan economy: it is essentially a cryptocurrency and nothing more than a tokenized relationship between fans and stars/sports organizations. The fan economy is an all-encompassing and comprehensive chain of industries with enormous potential that has impacts on entertainment, sports, arts, and many others; integrating crypto into the fan economy is an innovative way of introducing traffic to crypto from outside the crypto industry. Fans who carry a fan token can demonstrate their affection for idols while also receiving different membership privileges such as direct incentives, the opportunity to participate in organizational governance, invitations to designated special events, and contacts with the idols. The fan token is still in its early stages, and the token's empowerment is getting more diverse and exciting as commercial enterprises emerge and participate. With the World Cup coming, the fan economy symbolized by fan tokens in soccer may see a significant surge.

The history and current developments

David Bowie, the iconic artist, utilized asset-backed bonds, or Bowie Bonds, to gain financial assistance from his fans in 1997, before blockchain was even a thing. This was the first fan token prototype, in which Bowie offered bondholders a 7.9% annual return on revenues derived from streaming his music for 10 years. This type of crowdfunding is also quite widespread in the creator ecosystem of today's age. Similar crowdfunding campaigns are now being performed by creators by releasing their private social tokens on the blockchain. For example, Alex Masmej (the renowned ALEX token developer) tokenized himself and sold $ALEX tokens to his admirers. This enabled him to acquire the capital he needed to launch his own social network in the United States, and token holders are entitled to a portion of Masmej's earnings for the following three years. Anyone, including celebrities, artists, sportsmen, and the general public, may generate personal assets on the blockchain, while tokenized fan tokens expand the fan economy into the web3 area.

Currently, commercial fan token issuing platforms are launching the majority of the main fan tokens, with Chiliz (CHZ) being the largest fan token issuer so far. Chiliz, which completed a $66 million private placement in 2018, has joined the sports fan market by supplying and developing customized fan tokens for various clubs. Chiliz (CHZ) and Socios.com (its own fan interaction and reward systems for fans) have already produced over 59 fan tokens, some of which have been listed on multiple big exchanges and crossed over to the BSC chain at the same time. Commercial fan tokens, unlike early social tokens, have additional functionalities, transferring the original fan economy into web3. The club may retain supporters by launching a fan token, which maintains the connection between stars and fans, enhancing fan loyalty and shrinking the social gap between stars and fans. Before the advent of the fan token, such activities and incentives were impossible to execute. Such a fan token has also been studied in various forms of empowerment, such as indicating voting rights that allow supporters to select the slogan for the team captain's armband, designs for the team's jerseys for the following season, and receiving benefits in the interim, such as watching games in a VIP box, accessing the team's stadium's backstage and meet players, enjoying exclusive discounts on club memorabilia, and many more.

Sport fan tokens

Both the sports fan economy and the sports business are already quite significant. The bulk of the fan token ecosystem is made up of sports fan tokens, which are also the most in demand. There are several sports fan tokens available, with soccer being the most popular. American football, basketball, tennis, and racing are the other popular sports. As many as 65 clubs have joined the L1 chain, which includes Chiliz, Binance, Huobi, and OKX, to produce specific and specialized fan tokens, making soccer the sport with the most advanced fan token economy.

sport fan token fundamental

Source: Coinmarketcap

The table above makes it clear that soccer continues to be the most popular fan token, with major issuances coming from Chiliz and Binance. The most well-liked fan token in terms of holders is the AC Milan Fan Token, which has over 30,000 owners. This figure represents just 0.006% of the club's real supporter base (which is estimated to have 500 million fans worldwide). Fan token currently has a lot of opportunities for promotion, as is evident. Other than soccer, $ALPINE is the only fan token in the top 10 hottest categories (racing). Outside of the sports and soccer sector, fan tokens' market value is rather low, and their user base is much less. K-pop fans may collect, trade, and personalize digital collectibles for more engaging interaction with their idols. K-pop has a sizable fan following, and Levels' actions will ultimately inspire other businesses to explore the potential of fan tokens.

Idol fan token

Although fan tokens are not yet distributed to entertainment industry celebrities, businesses are actively promoting NFTs: Upbit, the biggest cryptocurrency exchange in Korea, operates through Dunamu, and Hybe is a K-pop entertainment firm that also represents the well-known boy band BTS. In order to investigate blockchain and economic potential in Web3, Dunamu and Hybe established a joint venture, Levels, in Los Angeles, California, earlier this year. According to PANews, Levels announced on October 4 that MOMENTICA, a K-pop-specific NFT platform that documents the special moments of K-pop artists through pictures and videos, will premiere in the same month.

Fan economy in web3

The fan economy is a method of income streaming that is built on the interaction between fans and influencers. It is a business model designed to increase user loyalty through word-of-mouth in order to generate profits on both an economic and social level. Through the use of a specific platform, businesses are able to unite followers around a shared interest and provide a variety of tailored products and services that ultimately lead to consumer demand and financial gain.

As an expansion of the conventional fan economy on Web3, fan token is now the most pervasive fan economy manifestation. Since fan tokens can offer greater liquidity and funding options than the conventional club and fan models, they are unavoidably preferred by many teams, particularly in light of the present pandemic.

Developments in the fan economy may result from the introduction of fan tokens. A new economic structure made up of the four roles of fans, clubs/idols, merchants, and exchanges will be evident. In this economic structure, clubs and idols draw in and keep fans, merchants offer services to encourage consumption, fans elaborate the business value of clubs and willfully increase the user base, and exchanges coordinate resource allocation and facilitate cryptocurrency investors' and fans' reciprocal transformation. In the next section, the functions of fan tokens will be illustrated from the perspectives of fans, clubs and merchants, and exchanges.

fan token economy

Source: Substack

Fan tokens and fans

Fan tokens may be an asset as well as a communication mechanism between fans and idols, but they also come with a changing price due to their limited availability. The price of fan tokens varies according to market conditions; the financial qualities are stronger when the value is correlated with game or company performance outcomes.

Fan tokens also maximize the distribution of resources among fans. Fans frequently differ from one another in all respects: some are extremely devoted and will watch every game of the team; others are wealthier but may not see all games, choosing to get VIP seats for significant games instead.

Third, fan tokens will improve fans' ability to recognize their own identities. Being a fan for a long time is a privilege, especially for devoted followers, and a fan token might be used as proof of that privilege.

Fan Token, however, lacks some of NFT's strength in this area. A stronger effect may result from the combination of NFT and fan tokens; the effect might be enhanced if NFT's application can be expanded to include fans in addition to players. Imagine a situation where a fan purchases a ticket one day and the system informs him that this game will mark the team's 100th game. The minting of this specific NFT requires only a portion of the fan token holdings, which is all that this fan requires. On game day, the fan goes into the stadium, the NFT is projected on the huge screen, and the following statement is made to the entire crowd: "Please welcome xxx (fan's name), and special appreciation to our faithful supporter for xxx (number of games attended)" These activities cost nearly nothing, yet they offer this fan with an incredible sense of dignity and belonging, strengthening his commitment to the team. This event will undoubtedly become a wonderful asset for talks that will be remembered for a lifetime. The objective of giving fans NFT is not to encourage fans to buy NFT but to encourage fans to buy tickets on a regular basis and to keep fan tokens for the honor. It also discovers a mechanism to ingest fan tokens, therefore boosting both the team and the token.

Chiliz (CHZ) is the world's largest and most successful fan token ecosystem, as well as the most successful in enabling and investigating fan tokens as a token issuance platform. Chiliz (CHZ) has developed the fan interaction and incentives platform Socios.com particularly for fans, with the goal of bridging the gap between fans and merchants, teams, and organizations. Socios.com allows fans of teams or idols to purchase, trade, and communicate with clubs, and the platform provides a terrific experience and exclusive ownership in the interaction: Token holders might get access to a variety of privileges, such as final decision voting rights, VIP prizes and experiences, "super fan" status, discounts on club and sponsored items, game engagement, match forecasting, and more. However, it cannot be denied that the fan token is still in its infancy, and most fan tokens do not provide genuine benefits to fans. However, if other supporting infrastructure grows, the fan tokens will most likely become stronger tokens with more uses.

Club and merchants

Clubs and merchants are more closely tied and behave similarly in a fan economy, thus they will be described together.

To begin with, releasing fan tokens can generate more income since issuing tokens can transfer future operational cash flow upfront and generate new revenue in a short period of time. Many clubs have been functioning in bad conditions in recent years as a result of negative external variables like the COVID pandemic, local disputes, and inflation. The revenue generated by issuing fan tokens might serve as an antidote.

Second, with the use of fan tokens, improved governance may be established. Fans can utilize fan tokens to engage in team governance, as an aspect of user profiling, and as a means of motivation.

Voting using fan tokens determines the design style of items such as the team bus and captain's armband. The holders' rights may be enhanced in the future, giving supporters greater rights for deeper involvement in the creation of the club and the stadium. Wealth and loyalty might be evaluated by the number of fan tokens held, allowing marketing and promotions to be customized especially to a focused demographic, maximizing income. Fan tokens might also be an excellent advertising tool, with fan token giveaways dependent on the number of tickets purchased in the past: the more tickets purchased in the past, the more incentives in the giveaway.

Purchasing tickets is analogous to mining for fans, and the tokens acquired might be considered a subsidy. Staking fan tokens, on the other hand, might result in ticket reductions or other benefits. Furthermore, fan tokens might be awarded to a fan as commissions anytime this fan introduces new fans. Finally, similar to dividends, the redemption, and burning of fan tokens might reinforce the link between fans and the team. For example, for every goal scored or game won by a club, a specific amount of money can be distributed from ticket income or TV broadcast revenue to buy back and burn a certain number of fan tokens, reducing the circulation of fan tokens. Chiliz (CHZ), for instance, introduced the Head2Head fan token burn method to strengthen fan tokens. As an illustration, when Paris Saint-Germain defeated Atalanta B.C. 2-1 in the UEFA Champions League knockout stage, the Paris Saint-Germain fan token PSG was partly burned, and the price of PSG rose by more than 20% on that day. This principle is activated when the club associated with a fan token wins or accomplishes a goal during a match.

Exclusive NFT incentives from club star sportsmen may also considerably improve the motivation of fan token holders. For example, at a pre-match ceremony versus Benevento in Serie A, Juventus awarded 770 JUV fan tokens to Portuguese superstar Cristiano Ronaldo. The Chiliz blockchain was used to create the fan tokens, which were then used to launch exclusive fan NFTs, causing the price of the fan token, JUV, to rise.

Third, fan tokens can be used to make payments. Fan tokens can be used to purchase tickets and accessories, as well as to compensate for fan events. By collaborating with merchants with high relevance to sports enthusiasts, fan tokens might become a key form of payment if they could be used to buy sports products, razors, automobiles, and other things. Furthermore, fan tokens may be used to purchase virtual products such as NFTs of player cards and membership for broadcasts. When sports are coupled with Metaverse, new application possibilities, such as metaverse travel or games, become possible. For example, visiting the Santiago Bernabéu arena and snapping images in the metaverse may spark the interest of soccer enthusiasts all around the world.

Exchanges

In the fan economy, exchanges are significant infrastructure, and the fan token is essential to exchanges.

Since sports fans and cryptocurrency investors are highly interchangeable, one of the most important roles that fan tokens play from the perspective of exchanges is as a tool for user acquisition. Sports fans can be presented to the crypto world through fan tokens, and ultimately have the opportunity to learn the benefits of blockchain technology and become owners of other crypto assets. A crypto enthusiast might also become a sports lover in the meantime by learning about fan tokens.

Additionally, as fan token is frequently connected to entertainment and sports, which is never in shortage of breaking news, more attention might constantly be drawn to exchanges using fan token. There will always be variables affecting the price of any token if the price of the token might be linked to circumstances in specific occurrences in the design of an economic model, like the above-mentioned scheme. Additionally, the market value of the fan token is comparatively lower than that of many other tokens, meaning that even a tiny shift in price might have a significant impact. In this scenario, the fan token may receive greater attention and there may be increased trade activity.

ChilizX (Chiliz's fan token exchange), Binance, OKX, and Huobi are among the exchanges that have a greater variety of fan tokens. Huobi has lately accelerated fan token development and will soon offer a fan token battle to enable fans with a quicker and more efficient route for fan token listing.

fan token on exchanges

Source: Substack

How to spot potential fan tokens as the world cup is live

Every four years, the FIFA World Cup is a world-class soccer athletic event. The following factors might be used to screen prospective fan tokens: theme, social media buzz, and match performance, among others. Some star-studded national teams and clubs have already produced fan tokens, which have recently experienced a considerable surge in trade volume and price swings. Because the World Cup is a country-based event, country-based fan tokens will have more heat, and club-based fan tokens may also have some heat concurrently.

The World Cup's most anticipated tokens will be the fan tokens $POR and $ARG for national teams. The fan tokens for the Argentine Football Federation ($ARG) and the Portuguese national team ($POR) are both distributed via Chiliz's famous Socios.com website. Since 1921, the Portuguese national football team has competed on the world stage in men's football. Portugal secured a berth in the 2022 FIFA World Cup after defeating Turkey 3-1 in the play-off semifinals and North Macedonia 2-0 in the play-off final five days later. On the other hand, Argentina is a powerful traditional South American soccer team that has made it to five World Cup finals. Argentina qualified for the 2022 World Cup by finishing second in South America. Furthermore, Argentina is the team with the most Copa America championships (15). Cristiano and Messi, two soccer superstars, will compete in the Qatar World Cup for Portugal and Argentina, respectively, which is why the two fan tokens are so popular. Furthermore, players connected with $PSG include Mbappe in France, Messi in Argentina, and Neymar Jr. in Brazil. It's not only for $PSG: Pogba is associated with $JUV and Team France, while Griezmann is associated with $ATM and Team France. Because these clubs have star players, more fans are likely to be aware of them. Prices for these fan tokens will also be strongly tied to the overall outcome of each tournament: national teams who perform well will add more heat to the corresponding fan token, while those that lose early will most likely pull the price down. Furthermore, the success of star players might have an impact on the price of fan tokens for their clubs or nations.

Some bottom lines

After the World Cup, fan tokens may lose their luster as people become less interested; volume will fall, and so will the opportunity for speculation. Further investment in fan tokens must adhere to the project's and the club's growth dynamics, such as the release of new products to reward fan token holders and the token-burning mechanism, all of which may be viewed as positive things. Currently, fan tokens are so tied to the market buzz that only the entry of new players can keep the token price stable.

In addition to the tactics stated above, fundamental information about the club, team, and star should be investigated in order to uncover undervalued fan tokens. Under an arrangement with the platform, some fan tokens of clubs, teams, or stars are issued. The contract will indicate an expiration date, and if the contract is not renewed, the related fan token may be risky because it is no longer tied to the club/team. If the underlying entity does not support the fan token, or if a new fan token is issued by the same underlying entity, the existing one may become worthless instantaneously. The underlying entity's state should also be evaluated. If the club is disbanded, becomes bankrupt, or has bad news circulated about it, the price will suffer. To assess the value of a fan token, the reputation of the underlying business should be considered, together with reasonable expectations for future development and important events.

Disclaimer:
This article is intended for and only to be used for reference purposes only. No such information provided constitutes advice or a recommendation that any investment or trading strategy is suitable for any specific name.

The fan token industry