This article explains my thesis on social tokens, and more specifically the evolving sports market. The pandemic has changed the world, and sports franchises need to adapt to continue to capture their target audience
Chiliz and Socios
This article elaborates on my thesis from December 31st, CHZ is part of our advanced portfolio for 2022 and beyond. We predicted that social tokens would continue to gain traction as their communities strengthen. CHZ is our main play on social tokens currently and I believe the current price is attractive for dollar-cost averaging. Chiliz has a user facing application called [Socios]. Socios is the application for getting your hands on fan tokens. All fan tokens initially require CHZ to convert to a preferred fan token on the platform. Socios has a token hunt feature that is similar to Pokemon Go where users can find CHZ tokens as they walk around with their mobile devices as well.
Teams can hold “Fan token offerings” or FTOs when they decide to get involved in the Chiliz ecosystem. These tokens can be sold directly to fans with their respective teams receiving the funds. These tokens are offered at a fixed price for fans before they reach the open market, this allows avid fans to support their favored teams, and to get in early. This concept unlocks an entirely new marketplace where traders can trade fan tokens based on news events, market hype, and technical analysis. Since the platform requires CHZ, this is bullish for the token price as small fees are required from each trade. Some CHZ is burned from the supply with each transaction.
Fan tokens allow users to vote for team related dynamics including jersey design, scrimmage team formations, and more. Tokens will allow priority access to Chiliz based NFTs. NFTs sometimes get a bad reputation since the early format involves JPEGs and generative similar looking images, many new to crypto cannot digest this concept. Chiliz NFTs would provide actual utility for participants, including sports collectables (which is a huge market), limited edition tickets, and or VIP experiences such as meet the player perks. Teams can hold events where tokens are burned for each goal during a game for example, reducing the maximum supply.
Chiliz 2.0
Chiliz recently launched their test net, a common strategy for swing trading is to buy a token around the test net launch and sell just before the main net is live. This simple concept is part of why the ADA token dropped so heavily in value after reaching the 3$ range, their token sold off on main net launch of smart contracts. Chiliz is marketing this upgrade as their biggest development since 2019. The upgrade will bring more Ethereum compatibility, proof of stake tokenomics, and a massive marketing campaign. A governance structure will be added allowing on chain decentralized voting for CHZ holders.
Most importantly this upgrade will take CHZ from an in-app currency to a more Ethereum like utility. This will make CHZ the network enabler of the Chiliz blockchain, CHZ will become the fuel of the only sports focused blockchain of today. Chiliz boasts over 130 partnerships, and has recently integrated the UFC, Formula One racing, and the NFL. Chiliz allows for enterprise level involvement, this will help integrate large and popular sports franchises.
The Thesis
So we know that exciting upgrades are coming but why are we looking at the CHZ token to potentially rise in price? Chiliz is an on ramp for newcomers to the crypto market. Both Socios and the Chiliz exchange allow for direct fiat onramps into the CHZ and social token marketplace. Anything that brings users who were not into crypto previously assists in mass adoption. Sports being such a large and popular market is a perfect avenue for users to get involved in the blockchain technology as well as NFTs.
Socios has a feature known as the locker room. When users participate, a set of potential future partnerships will be available. Users can lock their CHZ tokens into the locker room hoping the team to agree to the partnership. If the partnership is made users will get fan tokens on a 1:1 ratio to their CHZ locked. Chiliz will take the number of users expressing interest and present this to the potential team as a metric for launching a Fan token offering. If the team does not settle the deal within 120 days, users get their CHZ tokens back plus an additional 10%. This is essentially staking since the tokens are taken out of potential available supply and the user gets a reward APR over time. Since CHZ has been under 1$ for its history, and most fan tokens are several dollars, this is potentially very lucrative, swapping a 25-cent token for a 8$ token for example.
Tokenomics/Market Size
But what about the CHZ tokenomics? CHZ has a capped supply which is generally a positive thing. CHZ has a burning mechanism to reduce this supply as the blockchain sees more use. With the coming proof of stake authority upgrade, some inflation will be implemented to reward nodes and users. The initial seed round and pre-sale has likely seen a large sell off when the price of CHZ went parabolic last year. Initial investors saw nearly 200x gains, most of these investors are likely out of the market meaning we won’t see presale dumps. Chiliz reserves 20% of the maximum supply for userbase reserves, and another 30% for marketing and strategic acquisitions. The team and advisory board combined only received 8% of the total supply.
Since the global sports market forecast calls for a nearly 600 billion dollar market size by 2025, Chiliz has ample opportunity to take some of this market share [1]. Chiliz has also positioned itself uniquely to benefit during the pandemic since none of its services require actual fans to attend the sports games in person. As more markets switch to virtual experiences, Chiliz aims to benefit from this greatly. Sports fans have a very high level of passion and emotion for their respective teams, this market is very hard to evaluate because of this. Since CHZ today only sits at a 1.2-billion-dollar market, and it remains 70% off the all-time-high, the risk to reward ratio here favors the bold.
Please remember that none of this is financial advice, make sure to do your own research. I do like to be transparent; I began dollar-cost averaging CHZ ( on Coinbase PRO) yesterday and will continue to do so up to about 3% of my portfolio value. Stay safe out there!
[1] https://www.yahoo.com/now/global-sports-market-opportunities-strategies-080800261.html
