How can blockchain be used by the sports industry?

August 28, 2018
Chris Wheal

Sport has come a long way since the 1970s when sponsors were few and far between and the idea of local teams having global fans was pretty much unheard of. Blockchain could kick-off the next phase in the commercialization of sport.

Now, not only are shirts emblazoned with sponsor names but sports grounds and even the competitions teams play in are named after corporate giants. Sport is big business and it is global.

And if the game and players were not enough, the world is currently witnessing the phenomena that is in-play betting. From handball and ice hockey to football and tennis, there is the chance to make money while an event is happening and while the odds are repeatedly changing.

Finger-tip control

Online gamblers can lay bets, search the best odds and cash-out early – 24/7 and at the touch of a screen.

It is a far cry from the betting slip and the golden goal ticket purchased before the game. Technology has been the game changer. Online gamblers can lay bets, search the best odds and cash-out early. They can do this any time of day at home or on the move at the touch of a mobile phone screen.

The secure nature of online betting (no need for wads of cash) has its appeal – though some would argue it is far from perfect in terms of settlement let alone potential debt accumulation. What is unquestionable is that technology allows people to conduct their own research and to draw on vast swathes of up-to-the-second data to inform decision making.  This is where blockchain comes in.

Betting and gaming

There are developments such as Bet on Chart, a platform combining in-play sports betting with the dynamics of a live match. Modern technologies allow the recreation a football match in the form of a chart that moves up or down depending on the current situation on the field of play. Every single match event such as a pass, tackle, fouls or a kick drives the chart up or down in line with the team responsible for the action. Bet on Chart are issuing an ERC-20 utility token called CHART, which will serve as an in-game currency. The blockchain involvement initially will be limited to account replenishments and token withdrawals

In the same space, FansUnite has been created. It aims to use the power of blockchain technology to provide cheaper, more secure, verifiable and transparent betting.

Co-founder Darius Eghdami set up FansUnite because he viewed the traditional establishments that set odds and take bets as being less than transparent. Disputes over settlement of wagers are not uncommon, and businesses sometimes renege on a bet after the fact or fail to pay out on time or in full.

FansUnite converts currency into tokens that have financial value – essentially creating their own cryptocurrency. To spend the tokens, individuals log in to the app and place their bets online. These selections are locked into a ‘smart contract’ on the Ethereum blockchain, so the money exchange has no middleman.

Written onto the blockchain, this database is transparent. The smart contract cannot be tampered with but can be viewed any time and everyone can be sure that it is correct. Consequently, the contract can execute itself automatically and pay out wins instantly, without needing a central party to validate it.

The current e-sports market is seen by many as being insecure.

Another recent arrival on the scene is DreamTeam, an infrastructure platform and payment gateway for e-sports and gaming. According to DreamTeam the current e-sports market is insecure. Even the top-tier teams are facing fraud and non-payments of prize money. The same goes for sponsors and advertisers that face non-delivery.

Using Ethereum blockchain technology, DreamTeam’s role is to act as a secure transactional point for e-sports, in a similar manner to PayPal. It encompasses prize-money payouts, players’ salaries and transfers, sponsorship and advertising deals or media rights sales.

New players

Blockchain in sport remains in its infancy – most of the developments we highlight in this piece did not even exist a year or two ago. There is also a coming together of minds with fans and even sports stars combining their knowledge of sport with the technological potential that blockchain offers.

For instance, West Bromwich Albion footballer Robson-Kanu recently launched the Ethereum blockchain-based sports application Sports Ledger. A data-sharing and interaction platform, it is designed to aggregate sporting data from across the world and allow users to make comparisons and help to make predictions. In theory it makes predictions more of a science and less of a ‘gut’ feel.

In an interview earlier this year in The Independent, Robson-Kanu pointed to how blockchain provides the ability to de-centralise and dis-intermediate every form of communication around the world…in a peer-to-peer manner, with no central authority – this he said, was “ground-breaking.”

Robson Kanu’s Sports Ledger has designed in a social sharing content platform however blockchain’s peer-to-peer nature means users will retain ownership of their own data, rather than giving it all up (as they have to do with the likes of Facebook).

Further down the line, the Premier League footballer hopes his ledger will improve connections between clubs and fans and to even hold biometric data from athletes’ training sessions from all over the world, information that has never been public before.

Drugs in sport

Blockchain could help improve data collection with regard to drugs in sport

The transparency, openness and availability of data that blockchain offers could serve plenty of other uses in sport. Lack of clear data regarding a medical package in a jiffy bag delivered to the cycling superstar Sir Bradley Wiggins at the 2011 Critérium du Dauphiné road race, created no end of questions and controversy. Team Sky were slated for their lack of clarity and data detailing who, what, where and how.

It is perfectly conceivable that the use of blockchain by British Cycling’s record keeping department might have cleared up, quickly and authoritatively, the question of what was in the ‘package’ given to Sir Bradley and an exact trail of how it got there.

Data issues relating to drug use and anti-doping go far beyond the confines of cycling. During the 2016 Rio Olympics Russian hackers leaked several medical files of US athletes which suggested they had used performance enhancing drugs.

The fact that this data could be hacked in the first place – and possibly doctored – is worrying for sport administration.

Blockchain technology offers something significant. It can safeguard these files from being leaked to the public but also guarantee transparency by ensuring federations across the sporting world do not manipulate data to cover up doping cases.

What blockchain provides is a structured procedure for recording test results. Once the results are in the system, they will be checked for accuracy before being logged into the blockchain where they will be secure and impossible to manipulate.

Fan engagement

Blockchain offers far greater engagement between fans and their teams and sport than ever before

Being close to your fanbase not only has a ‘feel good’ factor, it is also good for business and brand building. Blockchain plays a role here too.

For instance, Fan360 allows fans to follow their favourite sports star, club or brand and be rewarded for every action on the platform. Every share or content contribution is rewarded with FAN tokens. These tokens are collected through a Ethereum bIockchain system, and can be exchanged for merchandise, tickets or cash.

SportCo, like Fan360 enables fans who contribute to content creation, knowledge share and building of communities to be rewarded. SPORTCO coin uses the Ethereum blockchain to decentralise and provide specific tools for analytic overlays, and gaming.

Then there is Jetcoin which aims to establish new channels of interaction between fans and athletes. Using the cryptocurrency, Jetcoin, fans invest in their heroes and stand to gain from any future success.

Sport fans can choose promising talents from the pool of ‘Jetcoin Champions’. They can buy a portion of the rising star’s image rights. When the talents mature in their career, the value of their image rights increase. This translates into rewards for the fans that backed the talents in the first place.

Of course, there are no guarantees that the ‘Champions’ will realise their full potential – injury or loss of form might prevent this – but fans have the opportunity to be more actively engaged in the sport they love.

On a slightly different track, TokenStars is a celebrity management platform on the Ethereum blockchain, providing incentives to fans and external agents for finding promising talent. Essentially, fans can earn rewards for their work as scouts. Scouts look for promising young talent around the world, submit applications, help assess the talents and help negotiate the terms of the deals. The rewards are paid in tokens.

Financial support

Whether it is talent spotting or raising finance for teams and professional sports people, evidently there are no shortage of opportunities that provide mutual benefits for both fans and the sports industry.

As a further example, Globatalent is an Ethereum blockchain decentralization platform which allows clubs and players to attain funding by selling future revenue rights to fans worldwide.

The investment process is automated with the help of smart contracts that use blockchain technology. This ensures token trading in a fast, secure way.

Another development is The London Football Exchange (LFE), a fully-integrated football club stock exchange and fan marketplace harnessing the power of the blockchain. (The platform will use the Ripple and Stellar networks to support token issuance, trades, and transfers).

LFE’s new form of financing will help clubs raise new capital and allow fans to own equity in clubs. While raising capital may not be such an issue for the giant clubs who command the lion’s share of TV and sponsorship money, for those clubs not part of the elite, it is much harder.

The LFE will also enable fans to contribute to The LFE’s charitable foundations supporting football development projects worldwide

The LFE’s technology aims to create a tokenised marketplace that will remove friction costs and increase transparency in transactions in the fan marketplace such as merchandise, hospitality, broadcast services and ticketing.

For instance, LFE can help clubs to eliminate the antiquated ticketing technology from legacy operators that mean they pay fees ranging from 5% to 8% in commission based on the notional value of tickets sold.

Individuals as well as teams

The superstars of tomorrow may well benefit from financial support that blockchain offers

SportyCo has similarities to LFE but is more about the individual than the team. It is essentially micro-financing proving funding for the sports stars of tomorrow.  SportyCo enables a direct financial link between the participants and the supporters providing funds. SportyCo is low in transaction costs and utilises smart contracts into the world of sport.

A spokesperson for SportyCo gives an example of how the process works. Claire is a 19-year old tennis player with great potential. However, over the next three years, she needs approximately $80,000 annually for an optimum training regime.

In return for this crucial funding, Claire will give away 25% of her entire income for the next 10 years. Claire is able to reach her investment goal as a result of $270,000 in financial support from the SportyCo platform.

At the age of 23, Claire manages to reach the Wimbledon semi-finals and is then ranked Number seven in the WTA rankings. Claire is entitled to $1.5m annually for a period of 5 years in relationship to her sponsorship contracts.

At this point investors get $375,000 each year, which means their initial investment is repaid within the first year.

Olympian effort

In an ideal world, financial support for rising sports stars would be easy to access. In the run up to the London 2012 Olympics, British athletes found financial backing (from both government and private sources) easier to find.

But post-games many budgets for sports where cut significantly and this is where schemes like SportyCo fill a gap.  While giving 25% of earnings away might not be what every athlete wants; it may make the difference between entering the sport professionally and not.

It is providing liquidity when in many instances it is difficult to find and SportyCo has benefited from high-profile endorsements such as ex-Brazillian football star Ronaldinho. Of course, given the number of recent financial scandals involving sportsmen (Lionel Messi and Luca Modric being obvious examples), companies such as SportyCo will have to be careful who they choose as brand ‘ambassadors’!

It is no doubt stretching things to say that blockchain will solve all funding issues in sport or that it will entirely eradicate corruption and drug cheating. But what it can do is provide a level of transparency in sport and an opportunity for fan engagement that has never existed before.

Post written by Chris Wheal
Chris Wheal is editor of OpenLedger's news and features service. An award-wining business journalists himself, he runs a team of freelance journalists from across the UK and north America.

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