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Overview

Fan tokens are a specific type of cryptocurrency that provides a form of “membership benefit” to fans of specific sports teams, music groups, or other popular entities. They serve as verifiably scarce crypto assets that are linked to the success of an individual, team, or community. Holders often get exclusive perks and utilities just for owning the fan token. The economics surrounding fan tokens, along with their specific benefits, vary wildly.

Some benefits include the following:

• Own a share of influence in the organization
• Earn exclusive rewards
• Gain access to a unique community

Overall, fan tokens give an issuing organization an additional revenue stream via token sales while also offering their audiences a unique way to support and connect with the issuer. Fan tokens can give fans a limited form of governance within the issuing club or organization. This can be officially organized in different ways but generally allows fans to vote on certain things like experiences.

Many fan tokens are released via the Socios platform, which is powered by the Chiliz protocol. Socios and Chiliz hold a dominant market share over fan royalty assets and fan tokens, with some of the more popular assets being tied to international football. The Socios platform has established world-renowned partnerships with the likes of:

• FC Barcelona
• Inter Milan
• Manchester City
• Multiple NFL Franchises like the Miami Dolphins
• Multiple NBA Franchises like the Golden State Warriors
• Multiple NHL Franchises like the Pittsburgh Penguins
• UFC
• Major League Soccer
•  Motorsport Organizations

In total, per the Socios website, the platform has over 145 different partners spread across 25 different countries. This gives the platform a target audience well into the tens of millions worldwide.

Fan Token Economics

For Socios, fan tokens are referred to as utility tokens that exist on top of the Chiliz (CHZ) ecosystem. The Chiliz ecosystem itself is powered by the Ethereum blockchain network, with the CHZ native token existing as an ERC-20 token. However, Chiliz maintains its own privately permissioned portion of the Ethereum blockchain, existing as a form of permissioned sidechain. This de facto sidechain powers Socios, giving organizational partners, like NFL franchises, privacy and security guarantees. To do this, Chiliz utilizes a proof-of-authority (PoA) consensus mechanism that uses a set of authorized nodes to create new blocks in the sidechain. Only nodes that receive this special authorization have the ability to validate blocks.

Many of the leading fan tokens around the world are associated with international football, such as FC Barcelona’s BAR token that holds a market cap of ~$2.6 million. In total, the global market cap of fan tokens (per CoinMarketCap) sits around $310 million, with an associated trading volume of $92 million.

Fan Token Demand and Outlook

Fan tokens have seen tremendous growth as an asset class since 2021. During the peak of the previous bull market cycle, fan tokens appreciated significantly, crossing over $2 billion in sales. In March 2022, this figure crossed $3.5 billion for the first time. Despite the bear market environment, Chiliz (CHZ) has actually grown its staff by upwards of 70% as well. However, many have underperformed ETH (the underlying asset on which they are built) in the 2022 bear market.

Although fan tokens have experienced significant volatility, there is ample room to grow within the market as demand continues to rise and projects get better at reaching their audiences. So far,  social tokens remain quite niche, with only an incredibly small percentage of creators and sports teams launching their own social tokens. Future growth will be fueled by an increasing demand from off-chain organizations like NFL franchises to continue to integrate web3 technologies to improve fan experiences and opportunities.

The most substantial demand thus far has come from international football clubs. S.S. Lazio currently holds the largest fan token by market cap in the world with the tag LAZIO. The coin holds a $42 million market value spread across 8.6 million tokens. 

In 2022, social/fan tokens are increasingly being issued as NFTs rather than ERC-20s, as was the case for Steve Aoki, AJ Vaynerchuk, Cristiano Ronaldo, and others.  Social tokens as NFTs make intuitive sense due to the enhanced utility of an NFT as opposed to a simple ERC-20 token. NFTs garner more cultural and memetic value (e.g., Bored Apes) as a collectible. This is perfect for teams and creators as they try and increase their “connection” with their fans. NFTs enable mega-fans to outwardly project and share their fanhood with high-dollar, rare items akin to purchasing an expensive but rare handbag or car.