The digitalization of our world is nothing new.
For years now, people have become more and more interconnected as communication and collaborative barriers have been broken down, meaning more can be achieved now than ever online. In recent years, this growth has come to a head with the development and overall growth in legitimacy and understanding of general web3.0 concepts such as Blockchains and NFTs. Sports, in particular, has been quick to adapt to the ever-changing digital landscape, with a massive boom surrounding the attempts to harness this emerging technology in a way that brings fans closer to their team while helping to drive revenue for the organization.
This boom has come to a head in the last two years, particularly with the popularization of blockchain-backed tokenization.
So what is tokenization and blockchain?
Blockchain is the fundamental infrastructure that sits at the heart of the crypto boom. Defined by IBM as ” A shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a business network” Blockchain works by creating an account of all transactions that occur within a specific “block.” Like a page from a ledger, a block is a public accounting of transactions, delineating ownership. When transactions are made utilizing a blockchain, they cannot be modified or edited, ensuring ownership, even of digital assets such as NFTs, is indisputable. Tied chronologically to one another, blocks have finite space, and when filled, are linked to the next empty block, creating an interwoven record of all previous transactions in a chain of blocks. This technology has quickly been utilized to increase the viability of tokenization.
Tokenization is the creation of tokens, a digitized account of assets, that allow information and value to be stored, verified, and transferred securely and efficiently. These tokens can have a number of applications, something that has begun to be further explored within the sports industry.
Implication for the sports industry.
How will this impact the sports industry? Well, we have already begun to see sports organizations utilize this technology in a number of ways. Fan tokens, collectibles, ticketing, and esports applications are all ways to take advantage of this technology and drive teams’ revenue and engagement.
Fan tokens have quickly emerged as one of the most engaging and easily accessible uses of this technology. Several influential teams across the European Soccer landscape, such as Manchester City and Juventus, have partnered with Socios to provide their supporters with a new way to engage with the club. Socios, a rapidly growing NFT fandom platform, allows organizations to sell fan tokens, allowing fans the chance to interact with and influence the team in specific ways through a team-based economy.
Fans can use these tokens for discounts on merchandise, VIP experiences, access to exclusive content, and votes on certain team activities, creating new ways for fans to engage with the team. The potential for this functionality is endless, with teams having only touched the tip of the iceberg. The opportunity to engage fans exclusively through these crypto tokens is what is enticing teams into further investing in this space. The usage of tokenization in sports is not just held to fan tokens, as the NBA and many other sports organizations see the tokenization concept as central to a number of initiatives that can further drive guaranteed revenue.
The safety and security ensured by blockchain technology has made it increasingly attractive as the basis for several uses that hinge on the utterly ensured legitimacy of an item. Applications in both ticketing and memorabilia are the next major usages for tokenization within sports, as organizations utilize tokenization to drive memorabilia sales and ensure the secondary ticket market is regulated and fair. The NBA has gone a step further by tying these two concepts together, aiming to drive all ticketing to digital, with the promise that a ticket for “the big game” purchased in the blockchain can be held on to with the same unique nature and nostalgia of that of a paper ticket. Furthering this concept, the NBA has partnered with Dapper labs to create NBA Top Shot, a blockchain-backed catalog of tokenized basketball clips and moments for fans to purchase and trade. Items within NBA Top Shot have varying levels of rarity, which inherently drive value. Fan sentiment also plays a factor in influencing the fan economy, with a fan favorite Lebron James dunk highlight recently selling for $387,000 on the platform, making it one of the most valuable NFT marketplaces currently. As sports organizations continue to explore these uses, more and more will be made of the way in which blockchain and related technologies can shape the sporting landscape and bring fans closer to the teams they support.
Blockchain and Tokenization Beyond the Fans
A further use of blockchain technologies and tokenization is for athletes themselves. Headlines were made earlier this year when Lionel Messi moved from Barcelona to PSG, leaving the club of his youth in hopes of finding further success in the French capital. However, one of the more notable aspects of his transfer was Messi’s choice to take nearly €25-30 million worth of his fee in PSG’s fan tokens. Amidst all the speculation prior to his move, PSG fans traded roughly €1.2 billion of fan tokens in the days leading up to Messi’s announcement, raising nearly 30 million euros in the process and driving the token’s market cap from 52 million to 60 million, a 130% increase in 5 days. This usage of tokenization as a means of payment has grown more popular, with numerous athletes buying into this trend, with Messi being the most recent and most notable.
Similar to more conventional sports, tokenization and blockchain technology will significantly impact the esports industry and directly impact the future of gaming. As the pandemic showed, Esports has an ever-growing reach with an annual growth rate of roughly 15%, with casual viewers and enthusiasts numbering nearly 557 million worldwide. As organizations look to tap into and capitalize on this ever-growing marketplace, tokenization through blockchain technology has played a significant factor. For athletes competing in a digital arena, the ability to unlock one-of-a-kind items, goods, and monetary benefits rewarded through the blockchain is just another way blockchain and tokenization are shaping the future of the sports industry. This ties directly in with the future of online gaming and the development of the metaverse. Built around an infrastructure where blockchain and tokenization are central, you can read more about the metaverse here.
Metaverse: new opportunities for sports marketing has been further explained by the German colleagues from Beyond the Match here.
In all, blockchain technology has created the potential for an explosion of revenue and engagement streams for sports organizations. As these organizations search for ways to best utilize and monetize this technology, this area will only continue to see further development. With the increased investment that blockchain has seen, more teams will begin to utilize and engage with this technology, further strengthening the usage of blockchain infrastructure within sports. To read more about blockchain and tokenization in sport, check out this article from NASDAQ around how tokenization can drive engagement in gaming, sports and entertainment.
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