A look at Chiliz: The blockchain behind PSG, Barca, Juventus and numerous other fan tokens – CNBCTV18

By CNBCTV18.com Aug 09, 2022, 09:40 AM IST (Published)

Fan tokens have become immensely popular over the last couple of years. They allow sports fans to interact and have unique experiences with their favourite teams. They also allow sports clubs to monetise their fan base, offering an additional revenue stream besides ticket sales and merchandise.

Today, several top sporting organisations such as Barcelona FC, Manchester City FC, the Golden State Warriors NBA team, Aston Martin Cognizant Formula1 team, and many others have a fan token to their name. And all of these tokens are powered by the Chiliz blockchain.

What is Chiliz?

Chiliz is a blockchain network that was launched in late 2016. Sporting organisations can partner with the Chiliz network to create customised fan tokens for their teams. These fan tokens are listed on Socios, a fan engagement and rewards app built on the Chiliz network. Fans from across the world can then purchase these tokens using CHZ, the native cryptocurrency of the Chiliz network.

These tokens can grant fans exclusive access to meet and greets with players, memorabilia giveaways, friendly matches, practice sessions, and so on. It also gives users governance rights, allowing them to decide the design of upcoming jerseys, choose celebration songs, vote on stadium/stand names, etc. Not to mention, it can also provide returns if the value of the token increases over time.

How does Chiliz work?

To begin with, a sports club needs to decide the tokenomics of its fan token, including its sale price (denominated in CHZ) and supply. They also need to determine what kind of rewards and benefits the fan token will provide holders.

After these details are decided upon, Chiliz will raise awareness regarding the token and announce when it will be available for sale. The token is sold through a Fan Token Offering (FTO). Fans buy the tokens that will be available on a first-come, first-served basis.

After the tokens are sold, they can also be burned to increase their valuation. For instance, if a team wins a major trophy or title, some of its fan tokens may be burned, creating scarcity and increased prices.

The blockchain’s native cryptocurrency, CHZ, has a fixed supply of 8.8 billion, minted on the Ethereum network in 2018. These tokens were sold through select crypto exchanges and distributed to early investors.

Since it is based on the Ethereum blockchain, CHZ is an ERC-20 token. However, it was later designed to be BEP-2 compatible since FTOs are now carried out through the Binance Launchpool.

Socios operates as a permissioned sidechain on the Chiliz network. Fan tokens are minted through a Proof-of-Authority (PoA) consensus mechanism. With PoA, only a few preapproved nodes are tasked with creating and validating new blocks, hence the term ‘permissioned.’ This means there is less decentralisation, but the network can scale without issues.

The individuals who run these nodes are part of the Chiliz team and are publicly disclosed to establish trust within the system. However, in April 2021, Chiliz announced a partnership with European retail giant Rakuten, who will also set up an official node validator for the Socios network.

Conclusion

Chiliz’s roster of sporting organisations is growing rapidly. Today, it hosts fan tokens for more than 30 top sports teams and has six more in the works. At the time of writing, CHZ was trading at $0.15, up almost 50 percent over the last month. And with the utility it provides fans and sports clubs, the future looks bright for Chiliz.