• Wed. Feb 28th, 2024

Are fan tokens dead? Are sports tokens good investments

  • Fan tokens are cryptocurrencies created by teams and organizations.

  • The tokens have a major utility flaw.

Fan tokens are important assets in the blockchain industry. They are cryptocurrencies that are issued by teams in a bid to boost their fan engagement. Most fan tokens are powered by Chiliz, the blockchain company that owns Socios.com. So, what is the future of fan tokens?

What are fan tokens?

A fan token is a cryptocurrency token that is issued by teams in all industries. The tokens have been embraced by some of the biggest clubs in the world like Paris Saint-Germain (PSG), Barcelona, Manchester City, and FC Porto among others.

According to Fan Market Cap, there are now 82 fan tokens that have a combined market cap of more than $244 million. At their peak, these tokens were all valued at over $700 million. Lazio’s token is the most valuable with a market cap of over $21 million. It is then followed by other top tokens like PSG, Santos, and Barcelona.

Fan tokens were created as a way for teams to embrace blockchain technology. In theory, their utility comes from the value that holders derive from their investments. For example, some token holders can vote on various matters pertaining the club. 

Some fan tokens also make it possible for holders to receive discounts when they shop online or when they buy tickets. 

The problem with fan tokens

However, the reality is that fan tokens have a major flaw. First, the perks they offer are not all that necessary. For example, Lazio fan token holders can vote on the most memorable goals of the season or the best playlist for the last match of the season. 

For fan tokens to work, they need to have a real utility such as the ability for holders to vote for a lineup or even the best player to hire.

Second, it is incredibly difficult to evaluate the real value of a fan token. We saw this recently when FTX collapsed. While FTX held FTT tokens worth billions, the reality is that those tokens had no real value to save the company. Fan tokens are highly illiquid assets.

On a positive side, data shows that fan tokens are not dead yet. In November, the total volume of fan tokens traded was worth over $7.7 billion, up from the previous $4.7 billion. This increase happened as the World Cup continued. Therefore, while fan tokens are not dead, the industry needs to change to survive.

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