Authored by Mikaela Kantor and Iacovos Kouppas
As much as the last three months have been immensely informative and we have all developed new skills in our efforts to keep ourselves busy: be it banana-breads, gardening, dog-walking or hosting excellent “Houseparties”, there’s one thing that we have all, more or less been missing: live sports events. The rush of cheering for (or against!) your team in a stadium, indoor swimming pool, rugby field or basketball court lights a spark to the brain like no other.
With the virus bringing everything to a halt, sporting events were among the first ones to be paused, postponed or even cancelled with countries like the Netherlands calling it a day for the entire season in football and associations like England Handball Association “erasing” all matches played in handball courts between September 2019 to March 2020. International organisations like UEFA frivolously attempting to “keep things going” with matches commencing on national level as of June 01 while the 2020 Football European Championships and the Tokyo 2020 Olympic and Paralympic Games have been postponed (for the first time in history, albeit the cancellation of the Games during World War I and II) for 2021.
It can be safely argued that the football industry is one of many that make the “world go round” not only due to its huge global fan-base but also due to its constantly increasing financial value, with the European football market estimated to be worth over 30 billion Euros. Many are those who depend on the football sector, ranging from the clubs and players themselves down to your local pub hosting football viewing sessions with free Coronas (innuendo intended). It would therefore be inevitable for the football sector not to be influenced by the technology world and even more so, by blockchain.
The potential applications of blockchain technology into the most popular sport on the planet are numerous, ranging from utilizing blockchain and cryptocurrencies for faster and safer financial transactions between the clubs and supporters, to even ensuring compliance with GDPR regulations.
Smart Contracts
The utilization of smart contracts is ideal when it comes to self-executed transactions which would normally require human authorisation, intermediaries or “middle-men” which often may lead to disputes between the parties. Simple examples include contracts concluded between clubs and players for bonus payments when players reach a set amount of goals scored in the season or games played. Such clauses are common in player contracts triggering bonuses, renewals and other incentive-based remuneration incorporated in the contracts.
A smart contract is a computer code that sets out the basic terms of a contract and it is “self-enforcing”. It is pre-programmed to ensure that when certain conditions are met the contract is concluded and the promised performance is rendered. By automating the contractual process, smart contracts are designed as such so as to provide for a secure and efficient means for parties to transact with one another. In the cases where a smart contract is hosted on a blockchain, its terms will be publicly available, but often the parties remain anonymous.
By coding the transaction on the blockchain execution is automated via a smart contract, meaning that human interference and middle-men are removed from the equation. This makes transactions more transparent and easier to track between clubs and players as well as for tax and audit purposes, further enhancing legal compliance.
We have already seen a handful of clubs utilizing smart contracts and cryptocurrency in their business models. In early 2018 a Turkish club, Harunustaspor, became the first club in history to purchase a player using cryptos. Although a small amount (transfer price at the time was 0.0524 BTC) it marks the beginning of a trend of football teams using cryptocurrency for their transfer business and smart contracts to regulate their relationship with the players. Following on, a Gibraltar based club became global news when it announced that it would be utilizing cryptocurrency and smart contracts in paying all its players and staff in cryptocurrency.
PowerAgent, a smart contract ecosystem that was created on a private blockchain is aiming to make it possible for sports professionals to create and manage smart contracts by linking up all parties involved in the athlete contract negotiation and agreement procedure. Although maybe a bit ahead of its time, the concept demonstrates the way forward and the benefits of smart contracts on player-club contractual relationships.
Following from this humble start, seven Premier League teams in England (including Tottenham Hotspur, Leicester City, Newcastle United, Southampton and Crystal Palace) have all agreed to set up digital wallets with an online crypto trading platform and signed up to host their advertising campaign. Furthermore, we see clubs such as PSG, Juventus, Arsenal and Manchester City all becoming, albeit from small endeavours, active in the industry.
Over the last few years we have seen a number of firms investing and succeeding in analysing football games and providing fans, and most importantly team technical staff, with data on each individual player, the team, the opponent and so on (most notably Opta Sports — a British sports analytics company). Teams and players alike could now make use of this data in a smart contract allowing both parties to “set and forget” specific goals that would automatically allow players to receive their remuneration and teams to structure their incentive schemes not only on goals or games played but on any category of data.
Finally, with the importance of fans in the revenue generating part of the business, it wouldn’t be an exaggeration to consider that maybe in the foreseeable future we can have a fan tokenization system that would allow fans not only access to exclusive services but also to the actual assets of the club, thus monetizing their existing fan bases.
Performance & Transfer Record
Similarly, coding a player’s transfer record on the blockchain can enable clubs to trace back to when the player began its football career — from the youth academies all the way to world-class organisations.
Within the football governance sector, “blockchain can assist with implementing a tracking system for players for reliable monitoring, storing of data on payments, performance or injuries”, as mentioned above. In a similar implementation with the blockchain utilisation in the diamonds industry[1], blockchain in the football sector can be utilized to trace players from their starting point in a youth academy all the way to the Champions League stadiums. This would create a digital trail through a blockchain-based platform for players as they move “from mine to clutter and polish”, just like diamonds. It would therefore become impossible for clubs, managers or other third parties to either take advantage of youth talent or alter players’ transfer track record.
Medical Data Record
At the same time, players’ medical data could also be recorded on the blockchain, which would not only mean that a player’s full medical record will be recorded and remain unaltered on the blockchain but it will also further enhance transparency during transfer windows when a player’s transfer price fluctuates also depending on their medical record. Even more so, each club’s medical staff will be in a better position to heal, sustain or predict injuries which may occur to players on their football roster. By utilizing blockchain, data can be viewed and analysed in real time, a benefit which can have many uses[2]. Examples include tracking previously prescribed medication and its effects on the individual, surgeries performed, injuries, development of symptoms, updating of electronic health records; all highly relevant and influential purposes when it comes to determining the price to pay for a player or the price you will pay to the player.
Football Fans and Club Supporters
Clubs like Juventus FC and Paris St-Germain were some of the first clubs to embrace blockchain technology when in 2018 the clubs announced their partnership with Socios.com, a blockchain platform which allows football fans and club supporters worldwide to buy tokens from their favourite clubs, giving them specific perks and benefits for monetisation or exchange within the users of the platform. FC Barcelona, Athletico de Madrid, Galatasaray, AC Roma and West Ham followed their example and have also listed with Socios.
And while other clubs are catching up with their blockchain game, Juventus is going ahead with offering rare collectible “digital cards” of world-famous players using the Ethereum technology, representing players that fans can collect and trade. The cards are accessed via the Sorare platform and they represent non-fungible tokens based on Ethereum’s ERC-721 protocol. Sorare is a football team management game with digital cards; for each Juventus FC player Sorare has issued the “Unique”, “Super Rare” or “Rare” cards which users can purchase and trade.
Blockchain registration of ticket purchases ahead of games or season takes would also allow fans to exchange their tickets on a token-to-token basis, avoiding the illegal market of selling tickets or even purchasing fake tickets. It could also enable season ticket holders to rent out their seat for separate matches in a safe manner in terms of tracking individual attendance and payment.
Player Tokenisation
As we mentioned earlier, the importance of fans in the revenue generation process for football clubs is unquestionable. A fan tokenization system could give fans across the globe an enhanced “ownership” feeling towards their favourite clubs, granting them access to either actual assets of the club (i.e. trophies or even players!), monetizing each club’s fan base to an incalculable extend.
Tokenization of players is a very much disputed approach in the football sector as it essentially means that players would be owned by various investors (or even fans) and would not, in their entirety, belong to one investor or club. This would split the cost for purchase of one player, making transfers more accessible to all clubs but would also allow a return on investment to more than just one sole proprietor.
At a time when third-party ownership of players has been abolished by world-class football leagues, like Premier League following the Tevez and Mascherano transfer case, tokenization of players by utilising blockchain technology would mean that “the ledger entry for a single player could be divided into multiple shares, each capable of being sold individually to create a fractional ownership scheme”, as Lu Zurawksi writes in his article “Is tokenisation of players the future of football deals?”.
With such an arrangement in place, trust and transparency would be enhanced in player ownership with the rights conferred to the owners being clearly shown and verified on the blockchain, yet may give rise to challenges of ownership in cases of disputes, non-performance of even force majeure termination of contracts. Tokenisation has however already been adopted in other sectors like art, property and music.
Youth Support
In a more development support spectrum, BitAcademy.io is “a decentralised platform which offers high-tech football solutions”, enabling the use of blockchain in sports, the tokenization of players and the decentralisation of the market. The bitacademy platform allows investors to buy tokens in players in youth academies located in Africa, helping them to finance their development and achieve their dreams. The investors can monitor the performance of their players, and based on their performance they can establish contractual agreements with football clubs to transfer the tokens they own in a player through the platform’s marketplace. Transfers/sale prices of player tokens are based on the information and data shown on the player’s profile as these come through from wearables, artificial intelligence and by utilising big data. As such, the investors can support youth academies in Africa, sponsor individual players and make a profit from selling their player tokens.
In the end, blockchain technology with its immutability, decentralised and consensus features can revolutionize the football sector in tackling elements that have long been troubling world organisations. Issues such as tax evasion, payment misappropriation, financial disputes, middle-men interference, data manipulation or alteration, money laundering or even modern-day slavery of players could be resolved by utilizing blockchain technology.
However, is the football sector in a position to handle such a disruption? At a time when the football industry often thrives on opaqueness and lack of information (such as undisclosed information on transfer prices paid, player injuries and medical records etc.), can the football industry follow technological advancement and use it to move forward? Or will a refusal to become tech-savvy cause football clubs, organisations and players alike to slowly lose out?
[1] Also referred to in previous article on www.stepbeyondbanking.com – “Can blockchain really be social?”
[2] Reference to article “Is Blockchain the answer to preventing pandemics like COVID19?”