Upon first glance, the crypto world and organized sports have little in common. One domain consists of elite athletes who earn a living from their physical prowess, while the other consists of techies who – to put it mildly – don’t. But a closer look reveals that being a sports fan and being a part of a Web3 community are in many ways alike.
One can even argue that being a diehard sports fan is the closest “old world” analog to being a passionate degen.
This piece is part of CoinDesk's "Sports Week." Omid Malekan is the author of several books, including "Re-Architecting Trust, the Curse of History and the Crypto Cure for Money, Markets and Platforms" and "The Story of the Blockchain, a Beginner's Guide to the Technology That Nobody Understands" and an associate professor in finance at Columbia Business School.
After all, both domains revolve around individuals who look past traditional social constructs to form a community based on a shared passion. Just as a popular team like the Golden State Warriors or Manchester United might attract millions of fans with unique backgrounds from all over the world, so can a crypto community like Bitcoin or Ethereum.
Both domains celebrate tribalism (up to a point), and the most rabid fans can be hostile toward members of a different tribe.
Sports and crypto also share a belief in meritocracy. Just as sports fans love the familiar story of an underdog who rises to the top on sheer talent and hustle, crypto embraces the entrepreneur without traditional credentials who creates something worthwhile.
See also: How New Technology is Impacting Sports
Last but certainly not least, money is an important factor in both worlds – for better and for worse.
These similarities help explain the convergence between pro sports and Web3. Prominent athletes like pro basketball player Spencer Dinwiddie and football star Tom Brady were among the earliest celebrities to publicly declare their support for Bitcoin, and a number of professional athletes now get some of their salary in crypto.
Blue-chip crypto companies like trading platform FTX have plowed millions into stadium naming rights, and the industry as a whole is a big spender on ads during major sporting events like the Super Bowl.
NFTs represent a leap forward for things like baseball cards. They are easier to store and buy and sell than a piece of cardboard, can represent other kinds of media and can be programmed to include special rights, such as access to VIP events.
On-chain provenance allows anyone to airdrop other assets to the current owner, introducing a new type of composability to fandom. The leagues and athletes who issue the digital memorabilia can in turn program them to collect a royalty whenever they change hands. Everything can interoperate with DeFi (decentralized finance).
Best of all, NFTs are instantly verifiable in ways that pieces of cardboard are not. Counterfeits are a major problem for physical collectibles, but now there’s a blockchain for that. Less sexy but potentially more transformative is the adoption of NFTs for ticketing.
Blockchain platforms are all about trust, and few domains are more lacking in trust than event ticketing. For proof, check out the exorbitant fees that secondary markets like StubHub charge to help fans avoid being cheated. Such fees will go away once ticketing is moved on chain, and may instead be replaced by a recurring royalty that helps cut down on scalping going back to the venue.
Like with most Web3 applications, the ultimate promise lies in new engagement models between teams, athletes and their fans. Sports teams can issue fungible fan tokens with embedded rights like discounted tickets or access to exclusive events. They can even promise to buy and burn those tokens with a portion of their revenue, turning them into a form of equity.
Tokenization introduces new sources of financing for teams and a new way for individual athletes to monetize future earnings. They also enable a more engaged fan base.
The tantalizing possibility of fan ownership brings us to the one area where sports and crypto differ. Whereas Web3 projects are community owned, sports teams are often owned by wealthy individuals, leading to bad incentives. Some owners see their team only as a status symbol or cash machine and don’t care about nonfinancial results.
Tokenization represents a different model, one where fans own and operate teams. Governance will be challenging (as it always is), but gone will be the days of negligent owners who don’t care about winning.
This model is already being tried in lower leagues and there is even a DAO (decentralized autonomous organization) trying to buy a National Football League team.
The leagues will resist such democratization, but saying no to their own fans will become increasingly difficult once things like NFT ticketing, digital memorabilia and fan tokens go mainstream. And besides, as every fan knows, sometimes you just gotta believe.
Some other stories for Sports Week
NFL All Day is a digital collectible marketplace that lets football fans collect video highlights in the form of NFTs and connect with other like-minded fans from around the world. This piece is part of CoinDesk's Sports Week.
Experiments with decentralized autonomous organizations promise greater fan participation in sports teams. Is this the future?
Non-fungible tokens have become a hot new revenue stream for sports leagues and their millions of fans.