Source: Adobe Images/Thaut
More and more football clubs are turning to the cryptocurrency industry to increase their income by issuing a new type of digital asset called fan tokens.
In this guide, we will explain what soccer fan tokens are, how they work, and what soccer fans think about them.
What are fan tokens?
Fan Tokens are utility tokens that grant fans access to membership benefits such as exclusive promotions, merchandise, or events in sports and entertainment circles.
Additionally, they give fans the opportunity to vote on minor club decisions such as jersey designs, players participating in certain games, and goal-scoring music. Owning a Fan Token can also give you the ability to unlock VIP rewards, including meeting your favorite player, VIP seats, and other unique perks. The more tokens you have, the greater your access and opportunity for team governance.
Fan Tokens can also be used to access and purchase exclusive team memorabilia. The value of these rare items tends to increase over time, and when this happens, only fans with access to the memorabilia will be able to enjoy them. Still, a distinction needs to be made between these rare items and the digital collectibles (NFTs) sold by some football clubs.
Essentially, Fan Tokens offer an unorthodox form of fan engagement similar to club membership.
How do fan tokens work?
Fans can buy Fan Tokens and trade them just like any other crypto asset. The price of a fan token is subject to external pressures such as the cryptocurrency market and its popularity with club supporters.
Many clubs offering fan tokens have done so through the blockchain company Socios, which arranges the initial sale and subsequent exchange of fan tokens. While there are other platforms like Binance, the Socios model probably offers the best example of how fan tokens work.
Socios typically pay football clubs a minimum sum and share a percentage of the revenue generated from fan token sales on their app. During the initial sale, the Fan Tokens are sold at a fixed price, after which they go to the secondary market.
If the token sale reaches a certain threshold, the company benefits from subsequent trading fees and receives a 50% commission on each token sale. The balance is donated to the club.
The tokens are then released in batches over a period of time, usually years, until they reach a predetermined supply limit. Depending on a club's preference, certain steps can be taken to limit the number of votes a token holder can cast.
The fan tokens issued by Socios are based on the Chiliz protocol, which is a fork of the Ethereum (ETH) blockchain. In fact, Socios uses Chiliz's native crypto, CHZ, as its exclusive currency on the platform.
In other words, all fan tokens are minted on Chiliz, and smart contracts are used to execute all votes on the platform.
You can buy Fan Tokens on some centralized exchanges, but other Fan Tokens may not be big enough to be listed yet. In this case, you can trade fan tokens on decentralized exchanges (DEX).
The best football clubs that have issued Fan Tokens
Here are the top five soccer fan tokens ranked by market cap (at the time of writing).
Amount of Fan Tokens Price (€) Market Cap (€) Description 1. Paris Saint Germain Fan Token (PSG) €15.12 €47,798,095PSG is ranked 684th in terms of crypto market capitalization.
The fan token is capped at 20 PSG and has a circulating supply of 000 million PSG coins.
You can trade PSG on Binance.
Perks include free game tickets, merchandise, player meet-ups and more.
2. Manchester City Fan Token (CITY) €10.49 €40,978,913CITY is ranked 738th in terms of crypto market capitalization.
The fan token is capped at 20 coins and has a circulating supply of 000 million coins.
You can exchange the city on the Paribu exchange.
Benefits include exclusive merchandise discounts and in-app voting privileges.
3. Atlético de Madrid Fan Token (ATM)€7.09€30,276,260ATM is ranked 849th in terms of crypto market capitalization.
The fan token is capped at 10 ATM coins.
You can buy and trade the ATM on Binance.
4.FC Barcelona Fan Token (BAR)€8.74€26,568,216BAR is ranked 886th in terms of market capitalization
The fan token is capped at 40 BAR and has a circulating supply of 000 million BAR.
You can buy or trade BAR coin on Binance.
Benefits include governance, rewards, and participation.
5. Juventus Fan Club (JUV)€8.48€23,477,827JUV is ranked 923rd in terms of market capitalization.
The fan token is capped at 20 and has a circulating supply of 000 million JUV.
You can buy and trade JUV on Binance.
Clubs make money, fans (potentially) lose money
For football clubs, fan tokens are a way to raise funds without changing their business structure or taking substantial financial risks. This would not be the case if clubs used more traditional avenues such as private equity or bank loans.
In addition, fan tokens provide clubs with a more international appeal that replaces merchandise and digital media presence. Additionally, the convergence between cryptocurrencies and football is interesting given the demographic overlap between fans of both industries.
However, fan tokens are not without controversy.
In December last year, the UK advertising regulator banned Arsenal football club fan token promotions for potentially misleading investors about the risks of getting into crypto assets.
Football fans around the world have also expressed their discontent with the appearance of fan tokens.
Borussia Dortmund ultra group The Unity, for example, protested against fan tokens with a banner outside the stadium reading "Stop the marketing madness - smash the fan tokens", while the group of supporters of Crystal Palace Homesdale Fanatics shared their thoughts with a banner reading read "Bankrupt Parasites Morally Unwanted. Partners Unwelcome.
Crypto analysts have raised concerns about the risk posed by giving these digital assets to fans. For one thing, most Fan Tokens are highly volatile due to the small number of people who want to trade them. Speculators are aware of this and are looking to trade the tokens for short-term profits.
Coupled with the fact that many fans are unfamiliar with crypto assets, the danger of fans losing money buying tokens from their favorite club is very real.
Football clubs need to communicate the risks of owning these incredibly speculative assets. For now, the benefits of fan tokens largely depend on clubs receiving upfront revenue and a share of the profits, while the risks posed by volatility are borne by the fans.