August 25, 2023

Fan Tokens: What Are They And Why Do They Matter?

by Soham Panchamiya and Pankhuri Malhotra

in Articles

Fan Tokens and Their Role in Engagement:

Fan tokens are digital assets that allow fans to own and derive value from their favourite teams, clubs, or players. Unlike traditional engagement, which was limited to purchasing tickets and merchandise, fan tokens enable fans to participate actively in a new ecosystem. These tokens create a fan-based reward system, offering opportunities to buy, sell, and exchange collectibles, merchandise, and exclusive experiences related to the object of fandom. While fan tokens are not generally used as a traditional currency, they can provide access to exclusive content and voting rights within specific fan token ecosystems.

Fan Tokens vs. NFTs:

Fan tokens differ from non-fungible tokens (NFTs) in terms of fungibility. Fan tokens are fungible, meaning they can be easily exchanged with identical tokens, while NFTs are unique and non-interchangeable. Fan tokens are team-specific and tradable within the secondary market, whereas NFTs represent unique digital assets and hold value based on their individual characteristics.

Fan Tokens as Utility Assets:

Fan tokens are primarily utility tokens rather than security tokens. They offer benefits and engagement opportunities, similar to a rewards system. Fan tokens play a vital role in monetising the fan ecosystem by providing teams with a new revenue stream. They also allow fans to participate in non-critical voting and other engagement activities, enabling them to influence the team or club.

How Fan Tokens Work:

Fan tokens are minted on a blockchain through collaborations between teams and blockchain platforms. Fans can participate in fan token offerings (FTOs), where they can purchase tokens at a set price. The value of fan tokens may fluctuate based on factors such as team performance, demand, and project execution. Fan tokens act as automated membership keys, granting holders access to exclusive content, merchandise, interactive sessions, and voting rights. Holding a certain number of tokens may offer fans increased influence and eligibility for specific perks within the fan ecosystem.

Issuing Fan Tokens in the UAE:

As a starting point, such issuance could potentially come under the rules of the Virtual Asset Issuance rulebook of the Virtual Asset Regulatory Authority (VARA) if issued from within the Emirate of Dubai. A robust legal analysis and, if necessary, exemption from the regulator would allow anyone to issue and benefit from fan tokens for their individualised projects and IP.

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