What was absolutely unimaginable has suddenly become the buzziest trend of the modernistic sports ecosystem. Cryptocurrency, blockchain, and non-fungible tokens (NFTs) are taking the sports world by storm. These technologies are distinctively monetising and enhancing fan engagement and sponsorships, which was just a figment of imagination until a few decades ago. Today, sports teams, clubs, leagues, individuals, and sports bodies are making the most of these innovative advancements to effectively survive in the present-day market while simultaneously upholding fans’ expectations.
As a result, fans are investing millions of dollars to buy authentic ownership of unique digital images, videos, and other content of their favorite sports star or team. In fact, in 2021, BBC News Reports estimated that approximately $350 million had been invested in virtual assets in the form of football club crypto tokens, proving that digital assets are leading the world on the back of their unique value proposition.
Another research highlighted that 47 percent of sports fans are somewhat familiar with the rising role of cryptocurrencies in sports, such as Bitcoin and Ethereum, and at least 27 percent said that they own some. Due to this trend, cryptocurrency has witnessed an upward spiral in the last two to three years as the fastest-growing sponsorship category in sports.
The sudden spike of crypto involvement in sports
The onset of cryptocurrency involvement in sports had already begun a few years ago, but the pandemic brought restrictions that simply triggered its accelerated promotion.
Extended lockdown restrictions, fans barred from going to stadiums, social distancing norms, and an imminent threat of a new COVID-19 variant, such factors forced the hitherto sports industry leaders to devise enhanced fan engagement strategies.
The basic idea behind this advancement was to keep fans connected and satisfied even while following the social distancing and other precautionary rules. This paved the way for the introduction of blockchain technology, digital currency norms, crypto-sponsorship, and NFTs that completely revolutionized the traditional aspects of the sports world.
How cryptocurrency and blockchain are revolutionizing the sports segment?
Over the last decade, cryptocurrencies like Bitcoin, Ethereum, XRP, Tether, and many others have been incorporated and accepted as payment methods. It is also being used by fans to purchase tickets and merchandise.
Clubs and sports bodies gain considerable profits by leveraging blockchain technologies to establish and implement a secure and transparent ticket exchange market.
In addition, clubs today are paying partial or full player salaries and transfer fees in cryptocurrencies. Lionel Messi is the most recent and popular example of this fast-evolving phenomenon, the record seven times holder of the Ballon d’Or award.
As per reports, Messi was paid a significant part of his signing fee (£25 million) to Paris Saint Germain in cryptocurrency.
Another such example is the Turkish Football Club named Harunustaspor. As per media reports, it is the first club to buy a player using cryptocurrency (Bitcoin).
In 2018, Omar Faruk Kiroglu received 0.0524 in Bitcoin as part of a first-of-its-kind deal with this crypto-forward football club. The same year, Gibraltar United Football Club paid partial salaries to its players in cryptocurrencies.
In terms of tickets and merchandise, during FIFA World Cup 2018, International Payment Services Companies (IPSCs) allowed fans and sports enthusiasts to buy world cup tickets with digital currencies like Bitcoin, and Litecoin.
Recently in 2021, NBA franchise Sacramento Kings also offered crypto salary options for all their players, strengthening their core pro-crypto model.
The growth trajectory of crypto assets and fan tokens
Most die-hard sports fans are always on the lookout for new methods that enable them to interact with their favorite sports team in a comprehensive and personalized capacity.
The emergence of fan tokens or sports tokens is the most exciting bridge between sports and fans. These exclusive tokens equip fans with certain powers to influence binding and non-binding decisions made by the club or the sports teams, to vote on team-related matters, including kit designing, ground names, and even choosing the right charity initiatives.
It is almost like having a VIP card of a renowned club, where you get some perks and premier benefits. With fan tokens, the owner can gain exclusive rewards and express their concerns or views about a team’s growth and development.
In contrast to Initial Public Offerings (IPOs), owning sports tokens doesn’t give you any equity shares, but it is still relatively profitable.
In mid-2020, FC Barcelona sold fan tokens worth USD 1.3 million in less than two hours. The lucky fans who were able to purchase the token now have a chance to voice their opinions and concerns during club surveys every season and opportunities to win special prizes in token-owners-only polls.
Additionally, fans can leverage these tokens to gain VIP access in Camp Nou, the home stadium of FC Barcelona, and meet players in person.
Similarly, in India, Pro Kabaddi teams like Gujarat Giants, Tamil Thalaiva, Dabang Delhi, and India Premier League (IPL) franchises such as Punjab Kings, Royal Challengers Bangalore, and Kolkata Knight riders have joined hands with reliable token platforms. These teams aspire to elevate the fan-engagement ecosystem while simultaneously earning profitable returns.
Beware of looming threats
Despite the fact that digital currencies are booming like never before, the sports industry should remain vigilant against all sorts of risks that new and advanced technologies are likely to bring.
The biggest reason is the uncertain stance of legal and regulatory authorities worldwide regarding crypto-assets. The lack of consistency poses serious challenges, and sports teams need to remain cautious not to place too much money in crypto.
Moreover, many people believe that lack of stability in the crypto world requires sports businesses dealing with crypto assets to maintain a contingency plan. This plan can be used in the face of unforeseeable fluctuations in value.
Having said that, the reign of the cryptocurrency world has just begun, and it will surely come up with better opportunities for the sports industry.
— The author, Siddarth Jaiswal, is Founder, SportZchain. Views expressed here are personal.