Bitcoin is easily the best-known and most valuable cryptocurrency, but there’s more to cryptocurrency than just Bitcoin – and much more to the technology behind it than just digital money.
All cryptocurrencies are based on blockchain technology: an immutable, decentralised ledger system that’s like a robust, trustless database. Copies of the blockchain for each currency or project are scattered across the computers of all participants in the network, ensuring that there is always a backup and drastically reducing the possibility of bad actors successfully changing records.
Bitcoin’s rapid rise and fall in value in late 2017 has led some to denounce the digital asset and others, labelling as a bubble that popped, but the wider cryptocurrency market keeps growing: it sits at a market cap of about $570bln as of this writing, with other currencies such as Ethereum, Tether, and Ripple each well above the $10bln mark respectively.
Blockchain technology started with Bitcoin, but it has proven to be a valuable technology for purposes other than money. While there are a wealth of startups developing tools around blockchain, it’s also being adopted by major corporate giants and governments to help with food safety, welfare benefits, and data analytics. It’s also fueling a new industry of digital collectibles, in which digital artwork, in-game items, and other creations are individually “tokenised” on a blockchain to prove rarity and authenticity.
Now those digital collectibles have hit the esports market. As of this writing, we have seen four major esports teams announce crypto fan tokens, which fans can purchase to gain access to exclusive features. For example, owning fan tokens may allow someone to vote on team-related matters – such as which in-game banner it should use in competitions – as well as have early or exclusive access to purchasing merchandise, or potentially be able to meet or compete against their favourite players at an event.
OG, the back-to-back The International champions for Dota 2 in 2018 and 2019, was the first esports team to offer a fan token in conjunction with crypto startup Chiliz and its Socios.com platform. Chiliz has also signed up a range of traditional sporting brands such as FC Barcelona, Juventus, and the Ultimate Fighting Championship, Moreover, fellow esports organisations Team Heretics, Natus Vincere, and Team Alliance recently began offering their own respective coins via the platform as well.
“We are honoured to work closely with Socios.com so that our fans have the opportunity to participate in building OG’s story,” wrote OG CEO Johan Sundstein in a release. “Socios.com gives fans a voice, so the link with OG was quite natural. Enhancing the connection with our community has always been part of OG’s DNA. With Socios.com, we will be able to take it to the next level. We want to push the experience further, by offering them the opportunity to have a real impact in some of OG’s decisions.”
Recently, Gen.G Esports launched its own crypto fan token for its Counter-Strike: Global Offensive team, called the GG Strike Coin. That particular venture was established in partnership with a startup called Rally, which has shared leadership with the org: Gen.G co-founder and Chairman Kevin Chou is also the founder and CEO of Rally. The soon-to-release GG Strike Coin earns owners access to private Discord chats with Gen.G’s players and coaches, among other perks.
In addition to the myriad functional benefits of ownership, the digital tokens themselves may rise in value over time, especially with a fixed number of each minted. OG’s Fan Token was initially offered for about $1 apiece at the start, but as of this writing, CoinMarketCap reports that the market price is just over $2 each. Look, it’s probably not going to challenge Bitcoin on that front, given its current price over $19,000, but it could still be a valuable investment.
It’s early days still for fan tokens, but the initial examples showcase the potential for esports organisations to generate additional revenue while providing more in-depth and exclusive engagement opportunities for those who buy into the system.
However, the wider market has its challenges when it comes to mainstream adoption, and perception is one of the largest. Simply put, many people still do not understand what cryptocurrency is or why it’s valuable. Some believe that crypto technology is purely used for nefarious and illegal means when in fact there is significant legitimate usage and potential.
Esports teams considering a crypto-backed fan token must avoid fueling that negative perception by simply viewing the move as a trend-chasing revenue play. If crypto fan tokens are truly here to stay, esports organisations must provide clear and sustained benefits to buyers. The more value that teams create around the tokens, the more valuable they will become – and perhaps it’ll be more than a handful of teams offering them this time next year.
This article first appeared in Edition 7 of The Esports Journal.