Blockchain and Crypto in Sports: Slam Dunk or Hail Mary?
With the upcoming Super Bowl, I’ve been thinking about the millions of people who watch sports broadcasts on television and livestreamed events on their smartphones, tablets and laptops. Despite lower ratings during the last decade, 98.2 million people watched the 2019 Super Bowl. Baseball rankings came in second, followed by basketball.
Overall, sports fans spend more than $1 billion dollars supporting their favorite teams through ticket sales, sports memorabilia, such as jerseys, hats, sneakers, t-shirts, posters, signatures and more. Then, there’s fantasy leagues, sports and prop betting and gambling. Roughly 60 million people play fantasy sports, and of those, 80% play fantasy football, according to the Fantasy Sports & Gaming Association.
In our fast-paced digital world, consumer demands and habits have changed. First, people prefer to watch sports in their homes rather than go to live games which are expensive, inconvenient and weather-dependent. They also come with the uncertainty of who your seat neighbors may be. Will this be the day when you get doused with someone else’s 32-ounce beverage? Or worse? With Direct TV and NFL Red Zone, there are hundreds of channels and live coverage across the country, all of which has significantly improved the customer experience.
Where Does Blockchain Fit into Sports?
Like most industries, the sports business is a target for scammers, fraud and counterfeit goods. With mobile ticketing, distributors and consumers want to verify ownership and authenticity of their tickets in real-time. Other trust issues include the authenticity of team merchandise, sports memorabilia, online gambling, money laundering and corrupt practices by some players and coaches.
As a result, some sports teams and leagues are adopting blockchain and cryptocurrencies to tackle these problems. Blockchain’s core features are:
- Both tangible and intangible assets can be recorded, encrypted and distributed across thousands of computers worldwide to ensure the data is secure.
- The network verifies transactions through cryptography and digital signatures.
- There are no intermediaries, such as a banks or governments.
- Bitcoin (BTC) is the most widely known cryptocurrency. Other highly ranked cryptocurrencies are EOS, Ether (ETH), XRP and Litecoin (LTC).
- Data stored in the blockchain is made secure and immutable using cryptography. Every block is referenced by a unique string of characters, generated by a cryptographic hash function.
- Data recorded in blockchain is further made secure by using private/public pairs of digital keys to maintain relative anonymity.
In 2014, The NBA’s Sacramento Kings became the first franchise to accept Bitcoin as a method of payment. At that time, the owners wanted to improve the customer experience by making it easier for them to purchase products and season tickets.
On January 15, 2020, the Kings launched the first-ever blockchain auction platform for authentic memorabilia with ConsenSys, a blockchain software development firm, for live bidding on in-game sports gear using Treum, a ConsenSys-backed supply chain product. Now, fans can securely purchase authentic game-worn merchandise with greater confidence than previously possible.
The digital era has drastically increased access and optionality for many consumers, but it has also decreased verifiable provenance. How can you be sure that the physical goods delivered to your door are legitimate and as real as advertised? How can you trust the authenticity and ownership history of something you bought online? As the Ethereum blockchain continues to gain traction as a new foundation for global collaboration by providing trust and transparency, we’re unlocking more profound ways to provide visibility into complex global supply chains and empower consumer behaviors.
– Bradley Feinstein, Head of Business Development, ConsenSys.
The Dallas Mavericks announced they would accept Bitcoin for tickets and merchandise in August 2019. Despite team owner Mark Cuban’s negative view of Bitcoin, he’s invested in blockchain applications for betting and gambling. Mavericks CTO David Herr said the team is interested in blockchain possibilities. “It’s crypto as a whole, that’s where we’re focused, not so much Bitcoin,” Herr said. “We want to make sure we have a platform that can engage with fans whatever currency they’re using.”
Before the current NFL season, the Miami Dolphins announced they would accept cryptocurrency payments in partnership with Aliant Payments and the Litecoin Foundation. Litecoin is the team’s official cryptocurrency. Attendees can buy 50/50 raffle tickets; half of which go to the Miami Dolphins Foundation and charitable causes.
In May 2019, NFL quarterback Matt Barkley of the Buffalo Bills revealed that he tried to get at least two of his previous teams, the San Francisco 49ers and the Cincinnati Bengals, to pay him in Bitcoin to no avail. Barkley posted on Twitter, that he’s mining crypto and he’s “all about @Ledger”.
Russell Okung, the Los Angeles Chargers left tackle and Vice President of the NFL Players Association is a huge Bitcoin supporter. After visiting his parents in Nigeria, he requested a bank transfer from his account in the U.S. When the bank refused, Okung began his journey into Bitcoin, tweeting that he wanted to be paid in the cryptocurrency. While the Chargers declined, Trezor. a hardware wallet distributor, got into the game by offering Okung a free wallet.
Okung explained:
Whether it’s been my own personal journey understanding my finances for representing myself, writing contract negotiations in the NFL or even my role in understanding labor and the average person and the issues that they run into the underlying premise of all of these interactions compound one another, because it all comes down to individuality and one’s own sovereignty and the ability to be in control of one’s own life. I always thought about that, but I never knew what it would mean when it comes to my money.
– Bitcoin Magazine, September 2019.
Why Should Sports Fans Bet on Bitcoin?
- Users can control their own money without being linked to a bank or government with fully traceable transactions
- There are no banking fees and low transaction fees to send and receive money from anywhere in the world with a wider range of payment options
- Purchases are made using a digital identity rather than a personal one to mitigate fraud, provide profiles of fans and create targeted digital content
- Fans can vote for their favorite players (voting is open for the 2020 NBA All-Star game) and trade digital collectibles
- Users can send and receive bitcoins using a smartphone or computer. By some accounts, there are two billion people on the planet without access to traditional banking systems
- Bitcoin sports betting is on the rise with low fees, fast transactions and a wide array of games available using Bitcoin and other altcoins.
Crypto Contracts for Pro Sports Players
A prominent advocate of cryptocurrency is Brooklyn Nets guard Spencer Dinwiddie who has been negotiating with the NBA to have his contract turned into a digital bond called an SD8 security token. The goal is to engage with his fans by enabling them to participate and share in the potential upside and for him to get money upfront. It’s a way to decentralize personal loans through bonds backed by contracts as collateral.
The SD8 coin will be a three-year bond expected to pay out 4.95% base interest on a monthly basis—much better than you’d be able to get at a bank—with the full principal paid out at the end of the period upon maturity in a bullet payment. The investment period will begin on Monday and end on February 10, with the bond notes maturing and paying out in full on February 10, 2023. According to a chart provided by Dinwiddie’s representatives, if all 90 coins were purchased, it would net investors just over $2 million over the course of the three years.
– Forbes, January 2020.
Dinwiddie’s DREAM Fan Shares website has not updated, but the NBA expressed concerns about gambling and other issues related to the third year of his contract so it was revised. I contacted the NBA on January 21, 2020 for an update. NBA Spokesperson Mike Bass said, “Spencer Dinwiddie’s advisors provided us with new information regarding a modified version of their digital token idea, which we are reviewing to determine whether the updated idea is permissible under league rules.
Dinwiddie and other athletes are advocating for the adoption of cryptocurrency in sports. Blockchain, crypto assets and smart contract technology can tokenize athletes brands and offer more access to their fans. The athletes say it’s all about removing the intermediaries, and there are many who believe that teams and leagues would reap benefits also.
Brian Finkel, Deloitte Sports Research, Deloitte & Touche LLP said, “The fewer barriers there are between athletes and fans, the more commercial opportunities that will materialize. The value in having fans relate to their favorite players is immeasurable.”
What’s your game plan?
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Wendy Glavin is founder and CEO of Wendy Glavin Agency. Find out more at www.wendyglavin.com.
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Equities Contributor: Wendy Glavin
Source: Equities News
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