🤔 What is Chiliz ?
Chiliz is a digital currency used to buy fan tokens on socios.com market. Fans holding these fan tokens get voting rights and exculsive rewards offered by their teams.
💡 What role does Chiliz token play ?
Chiliz is an ERC-20 token. It is the native currency that powers Socios.com platform. It has following utilities:
- Fan tokens are prised in Chiliz. Fans have to acquire Chiliz and exchange them for fan tokens.
- Users holding Chiliz get to vote on proposals relating Socios.com platform.
- Chiliz can also be used to purchase NFTs and merch from Socios.com market.
📝 Origin of Chiliz
- Chiliz is a subsidiary of Mediarex group, which is a global sports and entertainment company founded in 2006.
- The project was founded by Alexander Dreyfusc in 2016.
- Chiliz project raised $66 million in a private token sale in 2018.
- Juventus became the first sports team to list on Socios.com and issue fan tokens in 2019.
- Alexandre Dreyfus:
- Dreyfus is the CEO and Owner of the Mediarex Sports & Entertainment Group.
- He also owns GlobalPokerIndex(largest poker database in the world),TheHendonMob.com, Webcity, and WINAMAX.
- He also runs Global Poker League (GPL) a sports property with 400 hours of broadcast distributed by Twitch.tv, USA Today, Sina.com.cn.
- He is the founder and CEO of Chiliz.
😌 What problems does it solve ?
- We should not forget that sports teams are businesses at the end of the day. They have costs and try to maximize profits. They sell merchandise, advertisements, tickets etc to generate profits. Chiliz project gives them the option to monetize their fan base by selling fan tokens.
- Earlier teams had to raise money from media companies, wealthy clients and corporations, which might not have their best interest at heart. Selling fan tokens to fans that grant voting rights and perks is a mutual win-win for both.
- There are many poor countries that cannot support their athletes financially and provide world-class training facilities. Teams and athletes can list their fan tokens on Socios.com and raise money by selling fan tokens worldwide.
- Fans do not have a say in how the teams are managed. All they could do till now was: to watch their teams play and express their opinions among their friends. Fan tokens grant them voting rights which can be exercised to decide on important decisions for the team.
- Teams did not have any means of communication with millions of fans even if they wanted to take their opinion. Teams can use Socios.com platform to understand what their most valuable fans feel about a certain issue.
🤖 How does it work ?
- Initial fan offering(IFO): Sports teams raise money by listing and selling their fan tokens on Socios.com.
- These fan tokens have following utility:
- Fans tokens give voting rights to fans. Each fan token is equal to 1 vote. Teams post proposals on the platforms. Fan token holders vote on the proposals. Teams abide by the voting consensus otherwise the team risks annoying their most loyal fans and their fan tokens losing value.
- Teams can also decide to give additional rewards to fans holding a certain amount of fan tokens like meeting players, merchandise or VIP seats during the match.
- Socios.com platform hosts:
- Fan tokens marketplace
- Fan voting platform
- Locker room(will be discussed)
- Team forums etc.
Socios.com platform is available on mobiles as well as web app.
- Locker rooms are a way for the fans to signal their teams to list on Socios.com platform.
- Fans lock their Chiliz tokens in locker room of their favorite team. Teams get a good idea of the demand of their fan tokens based on how many fans have locked their Chiliz tokens.
- Fans who have locked their Chiliz tokens in the locker room are the first to get fan tokens in case the team decides to list on Socios.com. The fans who had locked their Chiliz also get 10% cash back in case fan tokens are released.
- In case the team does not release their fan tokens the fans get their deposited Chiliz token back after 120 days.
Locking Chiliz tokens is a bet that the team will release their fan tokens in the next 120 days.
Chiliz project uses of 2 blockchains:
- Etherium: Chiliz is an ERC-20 token. All transactions with respect to Chiliz are recorded on Etherium:
- Sending/receiving Chiliz
- Chiliz account balances
- Buying fan token
- Chiliz sidechain:
- It is a private Etherium sidechain run by Chiliz team.
- All transactions recorded on this sidechain are public: anyone can see these transactions. However, Socios.com team runs all the nodes.
- Using a private sidechain makes Socios.com platform fast and free.
- Transactions stored on sidechain:
- Fan token transactions
- Voting by fans
- How to buy fan tokens:
- How to vote:
🤑 How much money does Chiliz project have for future development ?
- Chiliz project raised $66 million in private token sales in 2018.
- They have reserved 30% of total Chiliz tokens for operations and acquisitions.
- Chiliz project is a subsidiary of Mediarex group, which is a for-profit company. The project monetizes its platform by:
- Charging a small transaction fee on Socios.com marketplace.
- The project takes a small share of money raised by teams during initial fan token offerings.
- Selling merch and rewards.
Chiliz team will keep finding innovative means to make money till the time their platform is attracting a large audience of passionate fans.
The project plans to utilize their funds as follows:
- Sports fans are young, well-educated, relatively affluent and digitally savvy. Their profile matches that of early cryptocurrency adopters. Chiliz team has made the UI very easy to use. Most of the fans will not face any difficulty while starting to use Socios.com.
- Fans are passionate about their teams. They travel thousands of miles to see their teams play and spend hundreds of dollars purchasing overpriced merch. They will bid crazy prices for limited fan tokens of their teams.
- Fans are among the most irrational people when it comes to their teams. Each fan will try to buy maximum fan tokens to show off to his friends. Friends will feel peer pressure to buy fan tokens to show that they also support the team. Fan tokens will be like diamonds – bigger shows more love.
- Fans spend countless hours managing virtual teams in games like football manager, tennis manager etc. Imagine their passion and level of commitment when they will get a chance to buy fan tokens and manage their favorite team in real.
- Chiliz is partnering with teams all over the world. They onboard millions of fans every time a new team is added.
- Chiliz project is a subsidiary of Mediarex which is in sports and fintech industry since 2006. Mediarex is a large company with talented developers and a large balance sheet.
- Chiliz project was first in the market and does not have any major competitors.
- Teams will list their fan tokens on multiple platforms because that will make voting process a mess. Teams will also find it difficult to migrate their fans to a new platform without giving a very strong reason.
- Unlike computer nerds, fans talk a lot and love to show off their support for their teams. Fans will post on their social media handles and tell all friends once they buy fan tokens. Teams will also feel pressure to list on Socios.com when they see all their competitors releasing their fan tokens. This positive feedback loop will result in explosive growth in a very short time period.
😨 Risks and challenges
- Centralized project: Chiliz project is a subsidiary of Mediarex group which is a for-profit company. It is a centralized project, building on a private blockchain which is against the ethos of blockchain. Centralization exposes the project to the following risks:
- Government crackdown
- Differences among the team on how to run the project
- Team can update the code without being answerable to anyone: they can increase the max supply etc.
- Fans cannot submit the proposals, only the teams can submit proposals. Fans can only vote on the proposals submitted by the teams. Teams will only crowdsource pitty decisions like design of entrance, armband etc.
Chiliz tokens have max supply of 8.8 billion. They have been distributed as follows:
Chiliz is designed to be deflationary:
- It has fix max supply of 8.8 billion tokens.
- Token burn:
- 20% of the net trading fees collected on Socios.com exchange are burnt.
- 10% of the net proceed from fan token offering (FTOs) collected in Chiliz are burnt.
- Chiliz raised by teams during the initial fan token offering has 3-month lock-up period.
- 20% of the net proceed from selling NFTs & Collectibles by Chiliz project will be burned.
- Fans lock up their fan tokens in locker room for 120 days to be the first ones to get fan tokens of their favorite team.
Amount of tokens burned and locked up is directly related to platform use. Chiliz will become more deflationary as more teams and fans start using the platform.
Token’s price increases due to demand pressure.
Demand pressure on Chiliz token will come from:
- They will acquire Chiliz and exchange it for fan token of their favorite teams on Socios.com exchange.
- They will acquire and lock Chiliz tokens in locker rooms to be the first ones to receive fan tokens of their favorite teams.
- They will use Chiliz tokens to buy merchandise and NFTs sold by the Chiliz project.
- Speculators: There will buy Chiliz for future price appreciation.
Supply pressure on a token decreases its price.
Supply pressure on Chiliz token will come from:
- Teams: They will receive Chiliz tokens by selling their fan tokens. They will sell these Chiliz tokens for fiat.
💰 Market opportunity
Buying sports team cost billions of dollars:
Fan tokens that give voting rights to manage these teams will have a significant value. Chiliz tokens are used to buy these fan tokens.
Chiliz token has tremendous room to grow even if it is able to capture a small share of this multi-trillion-dollar sports industry.
🧐 Indicators to watch out for
- Their instagram following is growing:
- Their Twitter account is growing:
- Chiliz token on chain activity on Etherium is increasing:
- It is possible that teams are built from the ground up using Chiliz. These teams would have a similar governance structure as DAOs. Fans will decide on all the issues like:
- Drafting players
- Setting strategies and line up etc.
- Leagues and stadiums can also sell fan tokens on Socios. These fan tokens can be used to decide:
- Songs played
- Access to VIP seats for token holders
- Titles etc.
- Socios.com has the potential to disrupt any industry which has fans:
- Pornstars can list their fan tokens. Fans can vote on how their next porn movie is produced.
- Film production houses can raise money by selling fan tokens to fund production of movies.
👋 Final remarks
Fan tokens give fans an opportunity to be involved in functioning of their favorite teams. However, fan tokens are difficult to value:
- Some teams will ask their fans to vote on real management issues like deciding the team lineup for the next match, whereas other teams will only ask their fans to vote on petty issues like color of team bus.
- Most fan tokens have a small circulating supply and large max supply – huge inflation.
- Fans can be irrational.
Whereas, analyzing Chiliz is quite easy:
- Fixed max supply
- Deflationary tokenomics
- No competitors in a multi-trillion dollar market
- Partnerships with popular teams
- Live product
The only risk being that it is a centralized project being run on a private sidechain. However, the compromise on decentralization is acceptable because:
- People are not using sidechains to store their lifesavings like Bitcoin.
- Sidechain is public.
- It increases speed and lowers transactions costs.
😊 Do further research
You can continue your research by using following resources: