Chiliz Explained: Leveraging Fan Tokens to Convert Passive Spectators Into Sports Influencers
Are you a fan of sports or e-sports?
Whether you answer this question with a "yes" or a "no," we have an exciting topic for you.
For a long time, being a fan of (e)sports only meant watching your favorite team on TV or a stream as they compete with others. In addition to that, you could also purchase some licensed products to show your dedication and support for your favorite team.
However, while watching an exciting match between two opponents can provide quite some entertainment, it is still a passive activity from the fans' perspective as they don't have any influence over the decisions of their favorite players or teams.
The crypto project Chiliz is meant to change that by leveraging blockchain and cryptocurrencies to kickstart fan engagement in the sports and e-sports industries to turn passive spectators into influencers.
What Is Chiliz?
Featuring a fan engagement platform, Chiliz is a cryptocurrency project that offers blockchain-powered products and services targeting mainstream consumers.
Focusing mainly on the sports, e-sports, and entertainment industries, Chiliz allows participants to incentivize and monetize fan engagement while offering unique experiences.
In other terms, Chiliz can convert passive fans into active participants. This means that fans can vote on the design of merchandise, the song to play when the club scores a goal, or even select the players for a team's lineup for certain games.
Chiliz achieves increased engagement between fans and their favorite teams with fan tokens as well as a crowd-control engine running on top of the Ethereum blockchain as a permissioned sidechain called Socios.
In practice, this means that users can buy fan tokens from sports and e-sports clubs, which allows them to participate in the voting process and influence the decisions of their favorite teams on the Socios platform.
Interestingly, while the Chiliz team only started working actively on the project in early 2018, its platform has become quite popular among mainstream users.
Headquartered in Malta, the project now has a team of over 80 members. Most importantly, Chiliz features numerous official partners (mostly among prominent sports teams and associations), such as FC Barcelona, Juventus F.C., Paris Saint-Germain F.C., and the Ultimate Fighting Championship (UFC).
How Does Chiliz Work?
Let's examine the ecosystem's main components and functionalities to better understand how Chiliz works.
Chiliz utilizes an exciting architecture for its blockchain-powered platform.
As mentioned earlier, the cryptocurrency project leverages a combination of Ethereum and the Socios permissioned sidechain to operate its fan engagement platform.
The main Ethereum chain serves as the platform for ERC-20 transfers of the project's native CHZ token. Such transactions include fans' deposits and withdrawals, as well as the aggregation of service and exchange fees.
Furthermore, the CHZ Vault, which represents the public ledger of CHZ transactions as well as the place where all non-burned CHZ-backed fan tokens are stored securely, also resides on the Ethereum mainnet.
On the other hand, the Socios permissioned sidechain serves as the bridge between CHZ and fan token transactions.
Here, users can purchase fan tokens from clubs and teams via Fan Token Offerings (FTOs). Network participants can also utilize the Chiliz Exchange to trade fan tokens for CHZ and other cryptocurrencies.
Instead of Ethereum's energy-intensive Proof-of-Work (PoW) mechanism, the Socios sidechain uses the Proof-of-Authority (PoA) consensus algorithm for operating the permissioned chain.
As a result of this blockchain architecture, Chiliz can achieve high scalability with rapid and cost-efficient transactions while allowing users to audit every record in the ecosystem to retain Ethereum's high level of transparency.
On the other hand, we should note that the PoA algorithm comes with increased centralization, especially if we compare it with highly decentralized consensus mechanisms like PoW and Proof-of-Stake (PoS).
Interestingly, each partner organization's crowd voting mechanism runs as a semi-autonomous organization on the Socios permissioned sidechain.
Fan tokens are maybe the most important components of the Chiliz ecosystem.
Offered via Fan Token Offerings (FTOs) by clubs and teams, fan tokens represent voting rights for holders as well as the ability to unlock VIP rewards and access exclusive promotions, events, and communities.
Interestingly, fan tokens on Chiliz must feature an initial CHZ-pegged value. This is a fixed, base price in CHZ, determined by the teams selling the coins during FTOs. Fan tokens are available in limited quantities and are sold to users on a first-come-first-served basis in FTOs.
After a successful FTO, holders can trade their fan tokens on the Chiliz Exchange, the Socios Marketplace, and third-party trading platforms that have partnered with the crypto project.
It's important to note that users don't have to spend any fan tokens to participate in the decision-making process of teams. Instead, it's enough to hold the coins (the more fan tokens you own, the more you can influence a club's decisions) to vote on a poll.
On the other hand, holders must spend fan tokens to purchase merchandise from teams or unlock VIP rewards.
As discussed earlier, the Socios platform is a permissioned PoA-based sidechain on top of Ethereum that plays a key role in the Chiliz ecosystem.
At the same time, Socios is also where all fan activity and interactions between teams and their users occur within the Chiliz ecosystem.
For that reason, it's the flagship fan engagement solution of the project.
On Socios, each team features its own semi-autonomous organization where they post different polls fans can vote on using the official fan tokens issued by clubs.
To date, fans on Socios have decided on club-related matters, such as Juventus' new celebration song, the message written on the captain's armband at PSG, and the type of challenge Apollon FC's players have to take part in.
What makes a Socios poll unique from a traditional survey is that the prior utilizes smart contracts throughout the voting process.
At the same time, the results of each poll are publicly auditable on the blockchain to achieve increased transparency, eliminate manipulation, and ensure that teams would fulfill the crowd-sourced decisions of fans.
It's also important to mention the Socios Marketplace, a platform where users can directly trade fan tokens and CHZ with each other.
The Chiliz Exchange serves as a trading platform for buying and selling CHZ, fan tokens, as well as a few other cryptocurrencies (e.g., BTC, ETH).
While they serve the same purpose – to trade CHZ and fan tokens –, the Chiliz Exchange is not the same platform as the Socios Marketplace.
The main difference between the two is that the Chiliz Exchange is a centralized trading platform while the Socios Marketplace facilitates peer-to-peer (P2P) trades between users.
That said, both platforms charge trading fees for buying and selling tokens as part of Chiliz's business model.
Chiliz Blockchain Campus
In terms of Chiliz, it's also important to mention the Chiliz Blockchain Campus, a crypto startup accelerator and industry hub that connects the sector's stakeholders with emerging blockchain projects across Europe and Asia.
Located in Malta, the Chiliz Blockchain Campus is privately held by Chiliz.
What Is the Chiliz Token (CHZ)?
The Chiliz Token (CHZ) is the native utility token of the Chiliz platform.
The main functionalities of CHZ include:
- Backing fan tokens issued by teams and clubs with a value peg based on the issuers' preferences.
- Medium of exchange on the Chiliz Exchange and the Socios Marketplace, allowing traders to buy and sell fan tokens for CHZ.
- Facilitating smart contract deployment and transactions on the Socios sidechain (all these fees are paid in CHZ).
While CHZ started as an ERC-20 token on Ethereum, it is also designed to be compatible with the Binance Chain's BEP-2 standard.
In 2018, Chiliz raised $65 million in a private placement CHZ token sale from investors, such as FBG Capital, Binance, and OKEx.
CHZ's maximum supply is capped at approximately 8.88 billion coins, with its circulating standing at 5.8 billion CHZ (as of May 22).
Now that we have taken a look at the essentials about CHZ let's see how the blockchain-powered fan engagement platform's native token has performed since its launch.
Between July 2019 and December 2020, the CHZ price didn't go through too many significant changes. However, this year has been going well for the cryptocurrency.
While CHZ traded at $0.02 on January 1, it entered into a major bull run in February, which drove up its price to as high as $0.774 by April 16.
Since then, it has been going through a period of correction, standing at $0.263 at the time of writing this article. That said, even after the major crash of the crypto market this week, CHZ features a year-to-date (YTD) ROI of 1,215%.
Chiliz: a Fan Engagement Platform Connecting Crypto With Mainstream Audiences
With fan tokens and a blockchain-powered crowd-managed decision engine, Chiliz can turn passive spectators into influencers.
As a result, fans can leverage their tokens to participate in the decision-making process of their favorite teams and clubs.
This facilitates active engagement between fans and teams as well as allows clubs to boost the loyalty of their followers while earning extra revenue via FTOs.
Throughout its roughly 3 years of history, Chiliz has found quite some success, featuring partnerships with numerous prominent sports and esports teams and organizations.
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