Blockchain

Blockchain and the Sports Industry | Penrose Partners

Blockchain offers new sources of growth for the sports industry. All stakeholders in the sport ecosystem stand to benefit from this technology. Many organizations are looking to blockchain to increase fan loyalty, find new revenue streams, and engage a global market in ways that were unimaginable years ago. Clubs and organizations can optimize their business models. Blockchain brings increased efficiency and automation which will lead to significant cost-savings. Ticket and athlete management will become increasingly streamlined. Blockchain will also allow teams to tap into new revenue streams through fan tokens, digital memorabilia, and data monetization.

Blockchain technology can revolutionize fan experiences. Fans can engage on a deeper level using fan tokens and loyalty rewards programs. Digital game tickets will help to bring more fans into stadiums and decentralized streaming will reach views from around the world. Betting and buying tickets and merchandise will become more secure. This is thanks to the trust and security blockchain provides.

Athletes also stand to benefit. Players can create financial flexibility by tokenizing their contracts and monetizing their performance data. A level playing field can be ensured through reliable blockchain-based drug testing systems. This technology protects athletes and the overall integrity of sport.

In this article, we will highlight some of the exciting use cases of blockchain technology in the sports ecosystem.

Fan Tokens & Fan Engagement

The fan experience is about to be taken to a whole new level, offering fans ways to interact with their favorite teams in a way they never have been able to before. Teams can create their own tokens and raise money through a fan token offering. Fan tokens are fully “fungible” utility tokens that give fans exclusive access and influence with teams. There have been over 50 token issuances (ICOs/STOs) dedicated to the sports industry.

Fan tokens can be purchased for merchandise, collectibles, exclusive interactions (i.e. VIP meet the player experience), voting rights (i.e. goal celebration song, color of training kit, player of the match, starting lineup, transfers) or even ownership. Teams can also reward fan interaction by issuing unique tokens to fans who interact with clubs’ sites, share content, or like posts. They can use these tokens to buy merchandise or collect other rewards (think of a fan loyalty program). Tokens and smart contracts can promise fans future revenue shares in exchange for immediate funding and liquidity for the club.

FC Barcelona’s $1.3 million first round of fan tokens sold out in less than two hours. FC Barcelona supporters were able to acquire the first ‘Barça Fan Tokens’ ($BAR) to take part in surveys and polls connected to the everyday activities of the Club. They also earned unique prizes and experiences. Other football clubs who have used fan tokens include Barcelona, Juventus, Paris-Saint Germain, Galatasaray, Atletico Madrid, and A.S. Roma.

Organizations can get to know their fans better by engaging with their fans using blockchain. Fans can create blockchain-based profiles in exchange for providing insightful and actionable data to organizations. This will support increased personalization of fan experiences at scale.

NFT Sports Memorabilia & Game Moments

The future of collectibles is digital. Teams and organizations have the opportunity to design and produce the next generation of collectibles using NFTs. NFTs represent a wide range of unique tangible and intangible items. Official limited-edition digital and real-world assets (collectibles in the form of trading cards, video clips, signed merchandise, or game worn gear) can be created and verified using blockchain. Blockchain technology can store authentic merchandise records and create digital marketplaces for the fans to exchange these assets. The technology will also provide trusted verification of authenticity to reduce fraud and counterfeit items.

There has been an explosion of sports-based NFTs in 2021. Three projects paved the way: NBA Topshot, MLB Champions, and the Sacramento Kings.

The NBA has recently created a digital collectibles platform called TopShot. Fans can purchase, own, or sell numbered versions of specific, officially-licensed video highlights. Fans can also participate in a fantasy sports game using the platform. So far it has generated over US$230 million in gross sales. Another example of a blockchain-based NFT platform is MLB Champions. This is a sports game built on the Ethereum blockchain where collectors can buy, sell, and trade baseball crypto-figures.

In partnership with CryptoKaiju, the Sacramento Kings gave away 100 limited-edition Kaiju collectible toys throughout the 2019-2020 basketball season. Each collectible was backed by a non-fungible token, meaning that no two were the same. 15 of these toys became a unique experience or prize, such as courtside seats, VIP tours, and signed merchandise, among others. The Sacramento Kings also launched a live auction platform with blockchain development firm ConsenSys. Fans can bid live on in-game sports gear. The platform authenticates auction items to protect fans against counterfeit items.

Game Tickets

Gone are the days of lining up for tickets and long waits to enter stadiums. Game tickets can be issued by the event organizer on a decentralized blockchain platform. This will enable organizations to efficiently and securely manage ticket sales and refunds. Smart contracts can automate cancelation insurance. For example, if weather conditions are bad and a game was canceled, ticket holders would be automatically refunded.

A global base of fans can be reached because blockchain makes distribution of tickets across many countries much easier. Allowing ticket holders to purchase in cryptocurrency will help in selling to fans from around the world.

When fans arrive for the event, they won’t have to visit ticketing offices but rather just scan their QR code and enter the stadium. This will make for a much more pleasant fan experience. Also, the use of digital tickets eliminates paper waste and will help to make these events more environmentally friendly.

Blockchain gives organizers control over the secondary market (ticket sales/swaps). This guarantees the authenticity of the swapped tickets, greatly reducing fraud and the circulation of counterfeit tickets. Tickets are all issued on the blockchain: buyers can be sure their tickets are genuine and that they really belong to them.

Some sports organizations are constantly fighting against hooliganism. Using blockchain, organizers can be sure of the buyers’ identity and hooligans can be barred from accessing tickets on the primary and secondary markets. This will make events safer and more enjoyable for the majority of well-behaved fans.

2020 was the 16th edition of the tournament and was hosted in 12 cities across Europe. The tournament drew over 28 million ticket requests from over 200 countries. The UEFA used a blockchain-based mobile application as a ticketing solution to provide over 1 million tickets. The UEFA was also successful at using the technology at the UEFA Nations League finals in June 2019 for which over 110,000 tickets (representing 80% of the tickets available) were successfully delivered to mobile phones for the four matches.

Lancashire Cricket Club in the UK uses blockchain-powered ticket platform TIXnGO. They created a unique encrypted ticket for smartphones that is traceable and removed the risk of counterfeit tickets.

Tokenizing Aspiring Athletes & Payments in Cryptocurrency

Aspiring athletes commonly face financial hardships in their pursuit of their athletic dream. Using blockchains, athletes can tokenize themselves and then raise funds through the sale of these tokens. It is another way fans can engage and crowdfund their favorite players. Smart contracts can create complex agreements for funding up-and-coming athletes. In exchange for upfront funding from investors, athletes agree to give away a certain percentage of their income for a defined number of years.

For example, Jetcoin has a cryptocurrency that fans can use to invest in their favorite athletes and get a portion of their earnings. Jetcoins can also be used to get into VIP events, seat upgrades, purchasing tickets, and many other things. The Jetcoin Institute has successfully been able to launch this approach in collaboration with various soccer teams in Italy.

Contract tokenization is not just for aspiring athletes either. In 2020, NBA player Spencer Dinwiddie tokenized his contract. Dinwiddie turned his three-year US$34.4 million contract with the Brooklyn Nets into an investment vehicle. He put 90 token shares worth US$150 thousand each up for sale to accredited investors. The goal was for Diwiddie to receive the majority of his contract up-front instead of over the three years. He would then reinvest the money with the goal that it will have grown to a larger amount in the future. In return investors were guaranteed returns over the three-year period, with their principal repaid plus interest. Although Dinwiddie didn’t reach his fundraising goal, he showed what was possible in

Blockchain is changing the way business is done between athletes and teams. There are a number of clubs who have paid their players in cryptocurrency. In early 2021, the owner of the NBA Kings offered to pay players in Bitcoin. Athletes such as NFL’s Trevor Lawrence and Russell Okung have also negotiated to be compensated in digital currencies.

Athlete Data & Performance Management

Teams and companies can use blockchain-technology to license and sell player data. This information can be sold to organizations such as fantasy sports leagues, sportsbook companies, broadcasters, and health and fitness companies. Using blockchains, players will have greater control over their data. It can ensure that there is no illegal access, scrutiny or replication of the game data other than from authorized individuals.

When blockchains are paired with wearable technology, there are exciting opportunities to enhance broadcasts, differentiate fan experiences, improve player health, and generate revenue. Athletes’ past physical performance data and videos can all be recorded in blockchain networks. These recordings can be used by players to review and improve their future performance. In 2017, the NFL Players Association came to an agreement with Whoop that allowed players to sell their personal health data collected by the wearable. Players have full ownership over their data and the power to track their own health with strain, recovery, and sleep through key metrics like resting heart rate, heart rate variability, respiratory rate, and sleep staging. Although this project did not use blockchain, it is a proof-of-concept that could significantly benefit from the integration of blockchain systems.

Drug Testing

The Russian doping scandal that came to light in 2019 is still fresh on the minds of everyone in the sports world. Russian authorities were accused of covering up systemic drug abuse of their athletes. Blockchain technology can combat this type of fraud by regulating and securing data, and protect it against tampering.

Organisers can use blockchains to ensure that the athletes competing in the event are not involved in doping. Global networks of organizations can manage the results of players, information about banned substances, government regulations, test history and test schedules in a very efficient manner. Athletes can supply their historical medical data of anti-doping controls and automatically provide their geolocation to avoid being logged as “no shows” on a random control. Blockchains will also prevent critical and classified information from getting shared by outsiders. The transparency of testing and reporting of checks for all athletes will provide greater equity. This will ultimately help to uphold and maintain the spirit and integrity of high-performance sport across the globe.

Streaming

There has been a rise in pay-per-view streaming of live sports. Companies providing these services experience issues such as limited bandwidth, low quality of streams, security, and censorship issues. Many times, video streams are illegally recorded, downloaded, and uploaded on other networks to be used for commercial purposes. Blockchain prevents the theft of such data and enables the owner to easily prove the ownership of the stream.

The decentralization created by blockchain technology allows for bufferless and smooth streaming. It reduces bandwidth requirements and lowers costs. This will create a more enjoyable experience for fans. DLive is the largest live streaming community on the blockchain and has proven the power of decentralized streaming.

Smart contracts on blockchains will provide a high-level of security. Licenses and contract related issues can all be managed in an open, transparent, and fully traceable manner. Blockchain will help providers to establish the ownership of their content and secure the necessary licenses and rights. The ownership information and all transaction details are stored in the blocks which are located on many servers throughout the world. It is very difficult to tamper the information within the blocks. Hence, the data is always secured in a blockchain ecosystem. It will enable content owners to limit access to the stream and also help in authorizing users. Only users with certain private keys can be allowed access. Post-stream access to who can view and download the content can be tightly controlled and limited.

Providers can use blockchain technology to get to know their viewers on a more granular level. Data can be gathered for advertising and marketing purposes while respecting the viewers right to security and privacy of their information.

Betting

Blockchain can be used in sports betting by using smart contracts on a decentralised platform for payment of automated odds. Blockchain will create more trust and ensure fair betting. It offers increased security and reduces the risk of human error.

Companies such as EtherSport are building blockchain-based betting platforms. EtherSport is a platform where people from all over the world can bet on sports events. The lottery mechanism uses Ethereum contracts that guarantee fair and transparent results, avoiding risks and corruption. EtherSport offers many advantages, including security, a simple user registration process, anonymity, an open and transparent process for all monetary transactions and fast payment of the prize, with no hidden fees.

Changing the Game

With the limitations that the Covid-19 pandemic has brought upon the sports industry, organizations have been forced to respond in creative ways to keep fans connected. The industry has recognized that blockchain is capable of helping organizations to not only survive, but thrive in the digital era we now find ourselves in. Blockchain is changing the game for athletes, teams, and fans.

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