Sports and Crypto - The Inevitable Connection Is Coming
How crypto could change the future of sport as we know it.
As I was watching the Tokyo Olympics unfold, I wanted to write about how ‘crypto’, which has achieved significant adoption in just the past few years when it is being termed as an inflation hedge, enabling decentralized finance, stable coins, staking to earn interest and digital collectibles. It has kind of seen as an alternate economy in itself, not just a niche risk-off asset class. What if a part of the crypto ecosystem finds its way into sports as an emerging use case ?
We know that though almost every country on the planet sends athletes to the Olympic Games, few countries end up on the medal table and to be more precise, it is totally dominated by select few ‘Sporting Powers’ who spare no effort in making sure that they are recognized as a strong force in empowering human capability reach new heights and therefore use it as a display & assertion of power and progress of their state to the world.
If you take a deeper look at how countries fair in sports across the globe, you will notice certain patterns in the approach different countries take when it comes to achieving milestones in the field of sports. I have briefly described them as follows.
1. Investment Approach
This is the most commonly used technique by the US and most developed countries in Europe, North America and Australia. These nations are what I previously referred as 'Sporting nations' where they invest huge sums of money into building sports infrastructure, conducting big tournaments, create world class standards in training, coaching, diet, psychology and often hiring consultants from countries where a sport is popular in order to train their own athletes until they eventually deliver superb results. Also, attractive incentives and prizes are offered for those who bring medals home and that acts like a major driving force. Over time, it becomes more like a tradition within its populace that its their 'right' to win Olympic medals every time in certain categories of sports.
What I mean by that the US has been consistent in dominating Basketball, Baseball, certain Track and Field events and Gymnastics for multiple Olympic games. Take Japan in Judo, South Koreans in Archery, Aussies in Swimming/Aquatics , Cuba in Boxing and many other nations on similar lines, one too many to cite here.
Here is a good article to know about which countries dominate certain sports at the Olympics by the Washington Post.
Also some of these countries offer to train foreign athletes on their soil as well, but with a hefty price tag of course.
2. Authoritarian Approach
As the name suggests, this is a state assertion of domination by authority. Best example is China. Although it may not be alone which follows this approach.
In 2016, China’s General Administration of Sports received $651 million (4.5 billion yuan) in state funding to boost their chances of medals for upcoming Olympics. The scale of China’s sports sector is set to reach nearly 3 trillion yuan ($427 billion) by the end of 2019. From what I have researched online, students are handpicked by coaches & local sports officials in schools at an early age and are moved to special residential facilities that mainly focus on sports and they get basic education. This comes at a heavy price of having to live in dormitories with very limited freedom, in most cases being away from their families for years on end. The athlete has little to no say in the choice of sports assigned to them (unless being a child from a sporting family at least).
From an outsider's point of view, these athletes are treated like robots who are designed to deliver medals to the country. If and when they achieve their goals later on however, they are given some fixed benefits for their service and quite frequently many struggle to find work post their sporting careers, as they do not have any skills outside of their sport and whatever degree they possess is more like an on-paper certificate but without the required employable qualities or expertise.
Nevertheless this strategy has worked out very well for the PRC and it is pretty evident they are have had phenomenal success in MOST of the Olympic sports now apart from their culturally popular sports like Table Tennis, Badminton etc.
3. Selective Approach
This is commonly used by countries with a limited budget to sports. The method involves focused funding ONLY on those particular sports which has a legacy or emotional attachment with the country or a reason with a very high probability of success for its athletes. Almost all other sports with unknown chances of success are ignored unless proven otherwise.
Best example would be African nations like Ethiopia and Kenya provide top priority to Middle to Long distance runners and have achieved considerable success. Same goes with Jamaica on sprinters and specific South East Asian nations in weightlifting. We hardly see any other sports from these countries making it big on a world stage.
4. Import Approach
This is typically used by countries with a very high budget to sports however sadly for them, no domestic athletes seem to meet the high standards of performance to attain Olympic glory. The method involves providing citizenship to a foreign athlete who despite being a high performer has not been able to make it in their native country for whatever reason. Then these athletes are provided with the most elite training and support to deliver top notch results.
Best example of this approach is followed by wealthy Arab nations like Bahrain and Qatar who support several African athletes via this program to increase their chances of medal wins.
5. A combo of the above, random probabilities based approach
This is where it involves a combination of the above mentioned approaches, and also in cases where there is no clear goal or long-term strategy on where the nation wants to be when it comes to sports. It is observed that any success here is mostly due to the individual effort by the talented athletes backed by their family or employer support rather than the official domestic sports federation. Many developing countries start off with this approach and over time end up in one of the 4 mentioned buckets. It needs to be noted that a lot of inconsistent performances are possible here due to the lack of proper incentive structure or an encouraging environment for sports and development. For e.g. the reward for the athlete post victory is mediocre or even laughable (a 2012 silver medalist runner from Botswana was given 6 grown cows).
Also some nations are ill-equipped to conduct any big competitions hence their people are not exposed to the environment required to pursue a sport, while the athletes are left with little choice but to train abroad which isn't quite affordable.
Also many developing countries when it comes to Olympic performance, commonly face a 'chicken and egg' problem like the government expects key athletes to bring medals fist and then we'll reward you, whereas the athletes demand that the govt/federation invest big into their training first and then they would pay back with medals to their name. Deadlock.
Okay. Now where does Crypto fit into all this ?
So far the initial use cases are the sports team tokens, for example popular clubs in football (Soccer in US) like FC Barcelona, AC Milan, PSG etc. have a corresponding token listed on different exchanges. The token holders have a say in some of the decisions of the team (Maybe color of the jersey, T-shirt design or so) by on-chain voting. Voting power is proportional to the number of tokens one holds. As you probably guessed, die-hard fans would love to hold tokens of the teams they support. As of now, users are included in minor decisions and initiatives via governance based voting, but as the adoption grows we could see much improvised applications of this. The voting, interaction, technical capabilities and functionality like earn/trade these tokens is enabled by a platform named Socios which has partnerships with several high profile sports clubs. Hence a fanbase is able to reach never before seen levels of engagement powered by blockchain based tokens.
It also has its own native token called Chiliz (CHZ) with enables sport teams and other organizations to create their fan token that can be used as a mediums of exchange within their respective communities.
Click here if you are interested to look a list of Sports/Fan tokens available on market.
Just because its crypto, does it mean any sports token is essentially 'decentralized' or 'censorship resistant' ?
Absolutely NOT. As of 2021, this is a very niche space within the broader crypto ecosystem and you need to do your due diligence thoroughly and not go by the marketing driven hype.
Despite a ton of crypto assets out there, only a handful could qualify as being truly decentralized for all practical purposes. Users and especially noobs need to be really aware of this fact.
So yes, it still requires a great deal of trust and counterparty risk for this to work efficiently and become mainstream. People need to understand that crypto is more than just one coin or a digital asset. Hence instead of resorting to Maximalism and calling everything else as fake, its important to realize that crypto based tokens provide a way of value exchange over the internet without the need of middlemen we see in our present day lives, like banks / custodians / federations / brokers etc.
Let me give you a scenario.
Think of a future where anyone is being able to fund the training and development of a young talented athlete who is located where there is no available infra and support, and they give you some of their own tokens in return. Let's say by your help if he/she can achieve their goals and attain their full potential and become famous globally (E.g. Olympic Gold, or NBA draft). Now if any brand wanting to endorse this person would require each token holder to be 'airdropped' X amount of $$. Wouldn't that be interesting ?
Now, IMAGINE if you could do something like this for LeBron James back in 2004. How much would you have earned by holding the said LeBron tokens all these years ? What would be the demand for this token on the secondary market ??
‘The possibility of tokenizing a productive individual's future earning potential as a means of rewarding the donors/patrons who supported them during hard times is very real, thanks to crypto. This is akin to turning an achiever into a yield generating cashflow asset for a set period of time.’
Internet has democratized information without needing a media house to publish it. Following are just modern examples of how some startups with their incredible innovations have changed the way people do things globally.
Twitter, Facebook & Substack democratized opinions, statements, stories and reactions.
Skype, Whatsapp etc. bought people closer beyond borders
Clubhouse has democratized group discussions + participation
Zoom and other platforms democratized interviews and remote work.
Youtube, Instagram, Tiktok democratized content creation and direct promotion with mass audience. Till then people needed private TV/radio stations to showcase their talent or product.
Kickstarter and Patreon have democratized fundraising and continued support via communities without needing Angels/VCs
Bitcoin and Monero, among others have democratized money by enabling Peer to peer assets & cash transfer respectively around the world, without needing banks and SWIFT based settlement process.
Smart contract platforms and NFT's could democratize investment opportunities and supporting budding talent. These are the next level of technological evolution.
These are just some amongst a long list of use cases which are still being discovered.
We are still quite early, enjoy the ride and keep learning & discovering new possibilities and ideas in crypto !!
Could the extension of crypto to sports be the beginning of the next stage of global crypto adoption, or does it seem like snake oil ? Let me know in the comments.
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Disclaimer: The information in the article is for educational purposes only. None of this content must be considered financial advice, instead as personal opinions of the author.
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