Fan Tokens on the Blockchain: A Research Insight

Fan tokens have emerged as a cutting-edge digital asset class, creating a unique intersection between cryptocurrencies, blockchain technology, and the sports industry. They offer a new way for fans to engage with their favorite teams while providing exclusive benefits such as voting rights on club decisions, access to special rewards, and participation in games [1]. These blockchain-based assets, already issued by over 80 sports organizations—including major clubs like FC Barcelona and Manchester City—span various sports, from martial arts and motorsports to tennis and rugby, offering much more than mere speculative value [2], [3]. Fan tokens are transforming fan experiences, with the potential to deepen the connection between fans and their teams.

In essence, fan tokens are fungible utility tokens issued on public blockchain platforms [4]. A utility token, in this context, is a digital value container on a blockchain that comes with predefined rights and features. Besides standard functions like token transfers, fan tokens might allow holders to participate in club-specific votes. Conceptually, fan tokens are built on a three-part framework [3]: (1) a trust and efficiency layer via blockchain, (2) non-monetary utility for fans, and (3) financial properties, including the ability to trade tokens on secondary markets. On the trust and efficiency front, fan tokens benefit from the core attributes of blockchain technology, such as instant data integrity checks. By leveraging smart contracts, previously manual processes can be automated, improving overall efficiency [3].

The utility aspect—or “token utility”—includes fan participation in decision-making processes, allowing them to vote on matters like club design (e.g., banners, bus designs, captain’s armband), in-game anthems, events, and social media presence. While these votes are often non-binding for clubs (see Figure 2), they contribute to increased fan engagement and interaction. On the financial side, fan tokens offer both token holders and issuers economic opportunities. Holders can trade tokens on secondary markets, while sports organizations can explore new revenue streams through initial token offerings [3].

This framework showcases the fundamental constructs of fan token systems, highlighting how fan engagement in sports can be democratized and enhanced. Platforms like Socios [5] and Binance [6] allow fans to buy and trade tokens for various sports teams, providing a direct line of interaction with their favorite sports brands. Combining technology, speculative trading, and voting rights, fan tokens have become an exciting field of interest, drawing attention from industry leaders, researchers, and investors worldwide.

Fan Token Participation and Engagement

Ongoing academic research into fan tokens is increasingly shedding light on their applications and impact in the worlds of sports and eSports [7], [8], [9], [10]. Through extensive analysis, researchers are uncovering how these digital assets influence fan engagement and market behavior during major sporting events. One study revealed that an average of 4,003 people participate in fan token polls, representing roughly 50% of all token holders [10]. This high turnout underscores the power of fan tokens to foster active communities and social networks. The analysis also shows that factors like approval levels, poll types, and sport-specific or demographic variables impact participation. These insights are valuable for organizations aiming to boost fan token adoption and engagement, suggesting that fan tokens may extend their influence beyond the sports world [10].

Market Reactions to Major Sporting Events

An analysis of fan token market reactions during the 2022 FIFA World Cup shows that token prices for participating national teams surged significantly before the event, driven by public anticipation [11]. However, these gains quickly reversed once the tournament began, especially following major losses. This indicates how closely fan token prices are tied to the real-world performance of teams, with the market reacting more sharply to negative outcomes than positive ones. The phenomenon of “buy the rumor, sell the news” appears to play a significant role here, as investors act on expectations and adjust to actual results [11].

Implications for Practice

The findings from fan token research provide valuable insights into the functional and market dynamics of these digital assets. Fan tokens not only enhance fan engagement through direct interaction [3], [10], but they also show a strong sensitivity to external events [11]. For stakeholders—be it sports organizations, investors, or token platforms—this research offers critical information for optimizing the design and marketing of fan tokens. Empirical data reveal the extensive potential of fan tokens as both engagement tools and speculative investments, closely tied to real-world sports events [10], [11].

Conclusion

Fan tokens represent an innovative digital asset class, forging a new connection between sports teams and their fanbases. Through blockchain-based platforms, fans are given the opportunity to participate actively in club activities and enjoy exclusive content. Academic studies demonstrate that fan tokens go far beyond mere speculative assets, proving to be an effective method for enhancing fan engagement—with an average voter turnout of 50% in token-based polls [10]. At the same time, fan tokens show pronounced reactions to sporting outcomes. While defeats tend to lead to sharp price drops, victories primarily boost trading volume [11]. These market reactions offer intriguing perspectives for both research and practice, particularly regarding the long-term impact on fan engagement and market behavior.

In summary, fan tokens are creating a new form of value in sports, surpassing traditional fan merchandise. They offer new opportunities for fans, clubs, and investors to reshape their relationships with sports and one another. However, we are still at the early stages of exploring the vast potential of these digital assets. The coming years will reveal whether fan tokens will extend beyond sports to other industries, such as brand engagement tokens. For researchers and practitioners, fan tokens represent a fertile ground for studying the complex interactions between financial markets, technology, psychology, and fan behavior. The blend of emotional attachment and market logic makes fan tokens one of the most exciting phenomena in the digital economy.

References

[1]        Socios, „Games and Fan Engagement Features“. Accessed: 13. September 2024. [Online]. https://socios.zendesk.com/hc/en-001/categories/360000378997-Games-and-Fan-Engagement-Features

[2]        Rocketfan, „Web3 Football Market “. Accessed: 13. September 2024. [Online]. https://rocketfan.com/market

[3]        L. Ante, B. Schellinger, und F.-P. Wazinski, „Enhancing Trust, Efficiency, and Empowerment in Sports: Developing a Blockchain-Based Fan Token Framework“, ECIS 2023 Research Papers, Mai 2023, Zugegriffen: 13. September 2024. [Online]. https://aisel.aisnet.org/ecis2023_rp/234

[4]        Socios, „Fan Tokens“. Accessed: 13. September 2024. [Online]. https://socios.zendesk.com/hc/en-001/articles/6929113398033-Fan-Tokens

[5]        Socios, „Sport Teams“. Accessed: 13. September 2024. [Online]. https://www.socios.com/fan-tokens/

[6]        Binance, „Fan-Token-Plattform“. Accessed: 13. September 2024. [Online]. https://www.binance.com/de/fan-token?utm_source=fan-token

[7]        O. Ersan, E. Demir, und A. Assaf, „Connectedness among fan tokens and stocks of football clubs“, Res Int Bus Finance, Bd. 63, S. 101780, Dez. 2022, doi: 10.1016/J.RIBAF.2022.101780.

[8]        E. Demir, O. Ersan, und B. Popesko, „Are Fan Tokens Fan Tokens?“, Financ Res Lett, Bd. 47, S. 102736, Juni 2022, doi: 10.1016/J.FRL.2022.102736.

[9]        M. Scharnowski, S. Scharnowski, und L. Zimmermann, „Fan tokens: Sports and speculation on the blockchain“, Journal of International Financial Markets, Institutions and Money, Bd. 89, S. 101880, Dez. 2023, doi: 10.1016/J.INTFIN.2023.101880.

[10]     L. Ante, A. Saggu, B. Schellinger, und F. P. Wazinski, „Voting participation and engagement in blockchain-based fan tokens“, Electronic Markets, Bd. 34, Nr. 1, S. 1–23, Dez. 2024, doi: 10.1007/S12525-024-00709-Z/METRICS.

[11]     A. Saggu, L. Ante, und E. Demir, „Anticipatory gains and event-driven losses in blockchain-based fan tokens: Evidence from the FIFA World Cup“, Res Int Bus Finance, Bd. 70, S. 102333, Juni 2024, doi: 10.1016/J.RIBAF.2024.102333.