Fan tokens represent a type of digital asset released commonly by sports teams, bands, and other clubs to offer membership benefits to their supporters. The token holders can access a variety of perks, including taking part in club decisions or merchandise design, exclusive prizes, experiences, or events.
Introducing Fan Tokens
Fan tokens permit holders to access a variety of membership benefits, from taking part in the decision-making to accessing exclusive deals or experiences, and are ultimately used to create a more engaging and close-knit relationship between the fandom and brand.
They enable the fandom members to be more engaged with the club, association, or band, by expanding their way of interaction, and for the brand, it means additional revenue and a way of encouraging brand loyalty.
So far, fan tokens have taken up the most across sports teams, from soccer to cricket, from Formula 1 to NFL, it’s easy to find major teams releasing their own line of tokens representing an array of privileges.
How Do Fan Tokens Work?
The organizations or individuals with a fan following typically partner with a development firm to launch a project where they mint fungible tokens — tokens that are interchangeable, as opposed to non-fungible tokens (NFTs), which constitute unique cryptographic tokens that cannot be duplicated.
After the project is finished, the teams schedule a Fan Token Offering (FTO). At this stage, anyone can buy the associated fan tokens at a flat price. After the FTO period, the price of fan tokens is subject to fluctuate in value based on demand, much like other cryptocurrencies like Bitcoin or Ethereum.
Within the context of sports, the value of fan tokens is typically tied to the team’s performance; if a team is not performing very well, the token value may sink and vice versa. The value of PSG’s fan token, for example, has risen exponentially when the team signed five-time Gold Boot winner Lionel Messi.
What can fans do with these tokens is determined by the brand, team, or organization. Once they have gained enough tokens, they may unlock a series of access to voting rights, services, or deals.
These tokens often grant holders low-level decision-making rights. Examples include,
Juventus supporters have voted on the goal celebration anthem using JUV,
FC Barcelona fans choose the message to be displayed on the captain’s armband, it read ‘NO CHILD OFFSIDE’,
Inter Milan’s bus design was determined by the token holders.
Providing exclusive offers and experiences is also quite common, including;
S.S. Lazio offers VIP tickets for a certain amount of token holders,
Alpine F1 team token holders can meet the team’s two drivers.
Fan Tokens in Action
So, how successful has the fan token initiative been? Despite being picked up by major brands, including Manchester United, AC Milan, Aston Martin Cognizant F1 Team, and many more, the market capitalizations of respective tokens are not sizeable.
As of this writing, the top three fan tokens include Santos FC, S.S. Lazio, and Alpine F1 Team with market capitalizations of $53bn, $40bn, and $34bn. To compare, Bitcoin’s market cap edges $400bn, while Ethereum’s is close to $200bn. Despite modest market caps, fan tokens proved to be a lucrative stream of income for the effort. AC Milan and FC Arsenal, for example, were able to raise $6m and $5.5m, respectively, solely by using fan tokens.
Fan tokens are undoubtedly more popular among European soccer teams, but they slowly made their way across the pond. In April 2022, the major fan token platform Socios made multi-year marketing partnership deals with 13 NFL teams, including Chicago Bears, Miami Dolphins, and New York Giants but barring the actual token.
The lack of fan tokens in deals stems from NFL’s cautious approach to cryptocurrencies. Instead of jumping on the bandwagon straight away, the federation has decided to establish relationships initially, while educating teams and fans on the use of the technology. Fans will be able to engage in similar activities such as prizes or voting on campaigns, but without using fan tokens as passes.
How Can I Buy Fan Tokens?
Fan tokens are bought, stored, and traded much like cryptocurrencies via centralized and decentralized exchanges.
Socios.com, launched by Chiliz, is one of the major marketplaces for fan token trading. The sports-oriented platform lists some of the major teams, including Manchester City, AC Milan, and Juventus. Android and iPhone users can download the Socios app. It provides a smoother experience. The app contains polls, awards, and other perks. In order to purchase fan tokens, users must first purchase Chiliz’s native token CHZ, and begin trading among fan tokens thereafter.
Binance has also recently launched its fan token platform, with listings including Porto, S.S. Lazio, and Alpine F1 Team. Other major platforms supporting fan tokens include Coinbase Pro, KuCoin, and Huobi Global.
The fan token platforms are more versatile than mere trading. Depending on the platform, they partner with teams by which they can release their own tokens, run fan voting polls for influencing team decisions and prize winnings, and include brand-associated NFTs for fans to collect.
The Future of Fan Tokens
Fan tokens create a unique opportunity for sporting teams, or any organization with a fandom, to engage with their communities by giving them a chance to participate in related activities. This specifically bodes well with supporters who are geographically limited in the events they participate in — through fan tokens, global fans can also have a taste of belonging to the teams they support.
The use of such tokens also allows fans to be invested in the teams they support beyond one-off bettings. By purchasing a fan token, supporters become financially invested in their team, which may end up doubling down the excitement of game/match/race days.
In any case, fan tokens opened the door for blockchain technology to enter the sporting world and opened a new chapter in sports marketing. Although it's still in its early days across the US, with the NFL’s gradually easing outlook on blockchain-based projects, it's expected that they will become a part of the overall experience in the future.
