RWA Revolution: Investing in Tokenized Athlete Equity

The RWA revolution has hit a new pace as the introduction of tokenized athlete equity has the potential to upend the entire sport collectibles industry. This unique method of converting athletic prowess and career aspirations into shared rewards via a blockchain could push the industry into the trillions. Here’s what you need to know.

Sports Memorabilia

This sports memorabilia industry, which now sits at $33.6B yearly, is projected to grow to +$100B by 2030. This growth recently received a boost thanks to the introduction of digital collectibles like NFTs (Non-Fungible Tokens).

These tokens provide unique verification for digital assets, including video clips and images, and can even include real-world items. Recently, blockchain engineers have taken the bold step to tokenize athletes’ entire careers, effectively creating a direct way for fans to support and benefit from the athlete’s performance.

Evolution from Endorsements to Tokenization

The evolution of sports endorsements is a long and interesting tale that begins in the sandlots of 1907. It was at this time that the Louisville Slugger signed on to pay Honus Wagner to promote their bats while playing. Notably, he was paid $75 for his endorsement at the time.

In 1922, Gene Sarazen began what would end up being a 75-year-long endorsement deal with sports provider Wilson. Babe Ruth was another star who managed to secure one of the earliest endorsement deals for non-sport-related items. Ruth promoted tobacco products alongside baseball gear.

Of course, these endorsements were long before the TV era. It’s during this time that endorsement deals get boosted into the limelight. For example, Muhammad Ali was known to promote several products during his career.

Air Jordan

Perhaps no one embodies the endorsement deal more than Michael Jordan’s 1984 contract with Nike. This maneuver launched the Air Jordan sneaker line, which became a massive hit. The success of this project caused companies to reevaluate the power of endorsements, leading to bigger and more frequent deals in the coming decades.

Today, endorsement deals have hit dizzying heights with athletes like Tiger Woods securing $105M from Nike for sneaker rights. This revenue is alongside $6M, which he accrues annually in video game licensing fees.

Most recently, companies have begun to seek out lifetime endorsement contracts. These deals are often in the billions, with one example being Cristiano Ronaldo. Ronaldo currently has multiple endorsement deals spread across several industries, including sports apparel, tech, beverages, and more, valuing more than $1B.

SportFi

So, where does the industry go once it has reached such astronomical endorsement contract values? It appears the answer is tokenization. Tokenization enables athletes to offer their fans direct access to their career equity via athlete bonds, transforming human capital into a yield-bearing financial instrument.

The First Tokenized Athlete

The concept of tokenizing an athlete has matured significantly from Taijuan Walker launching his NFT in March 2021. The highly publicized incident secured 2.35 ETH for charity and led to further support for the practice, eventually leading to the tokenization of athletic equity directly as predicted by industry leaders.

Different than Collectibles

This strategy is different from that offered by leading collectible providers in the past. For example, Top Shot offers fans a host of memorabilia in the form of NFTs. These assets include unique moments, memories, and even experiences.

These are NFT tokens that prove ownership over collectibles like artwork or highlights. Unlike fan tokens, they don’t provide any additional utility in the form of voting rights or rewards. Their value comes directly from demand for the asset.

In contrast, fan tokens are fungible assets that enable ongoing fan interactions like voting on uniform changes. They also provide DeFi utility and access to unique merchandise and rewards. As such, hybrid tokens are seen as the natural evolution of the concept.
Swipe to scroll →

Athlete-as-an-Asset

The recent introduction of the Athlete-as-an-Asset business model leverages blockchain’s unique trackability and security to create a new way for fans to share in their favorite athletes’ careers. In this approach, sponsorship gets replaced by fractionalized equity in the form of fractional ownership tokens.

Functional ownership tokens have been used for years in other sectors like the real estate market. They have proven to be a great way to lower the financial entry barrier and provide more accessibility to larger assets. As such, it makes sense that they could be used to tokenize athletic careers and equity.

Chiliz (CHZ) Vision 2030

Blockchain-powered sport memorabilia platform Chiliz (CHZ +1.87%) just unveiled its Vision 2030 framework, which describes the company’s planned pivot into the Athlete-as-an-Asset approach. It describes a future where athletes can secure a revenue stream from their fans without the need for an additional product or company.

The main differences revolve around the structure of the tokens. In the past, Chiliz tokenized team tokens, rather than personal athlete assets. However, the company now seeks to surpass the concept of fan tokens and replace them with fully regulated permissioned securities.

Source – Chiliz

According to CEO Alexandre Dreyfus, this maneuver could push the industry into the trillions in value by the end of the decade. As such, this maneuver falls in line with the greater growth of the RWA market and the sports collectible sector.

Real World Asset Tokens

RWAs are tokens specifically designed to represent real-world items. These tokens can represent anything from real estate and art, all the way to equity and debt. RWA tokenization is seen as one of the fastest-growing sectors in the blockchain market for several reasons.

RWA tokens are purpose-built to serve the asset they are meant to represent. That means that RWA tokens designed for real estate in certain districts are built to include all regulatory requirements directly into their coding.

This strategy eliminates compliance concerns. It also ensures that the tokens are effective for the life of the investment, reducing third-party monitoring costs and opening the door for new markets to emerge.

RWAs Enter the Sports Sector

The expansion of RWA technology into the sporting market makes perfect sense. It enables fans to gain a new level of connectivity while offering never-before-seen transparency compared to traditional memorabilia.

Notably, reports place as much as 80% of the memorabilia market as fraudulent. The number increases even more when discussing classic sports memorabilia. Technologies like RWA tokenization will help eliminate this problem by offering direct blockchain verification to token holders.

How Chiliz Seeks to Evolve Fan Tokens

The shift from fan tokens to a regulated financial layer for securitizing human capital on-chain has already begun, according to company executives. Their Vision 2030 lays out the company’s progress and main goals to achieve this goal. Here are their three main objectives.

1. Omni-Chain Fan Tokens

According to the Vision 2030, Chiliz will expand its token reach across other networks via omni tokens. This maneuver will help improve liquidity and accessibility for collectors in the future. Notably, Chiliz tokens are ERC and BNB compatible currently.

2. Chiliz Chain Expansion

This expansion will coincide with further DeFi integration. This step is vital to the company’s vision of providing tokens powered by human equity that can seamlessly integrate into passive DeFi reward strategies, including lending, staking, and prediction markets.

The company intends to integrate fan token revenues to facilitate buybacks of the platform’s utility token CHZ. Buybacks help developers maintain token value by reducing the circulating supply and creating more market demand.

3. Sports RWAs

The final and most important part of the Chiliz report discusses the integration of Sports RWAs. These hybrid assets combine the familiarity of fan tokens and collectibles with advanced asset features like revenue sharing. This approach provides both utility and equity exposure from a single asset. It also opens the door for future innovation.

Meeting Regulatory Standards

Smart Contracts are one of the key technologies that make this strategy possible. These automated protocols ensure that regulatory factors are met. In this instance, Chiliz seeks to adhere to the ERC-3643 token standard.

This Ethereum token class was specifically built to support permissioned, investment-grade activities. As such, this token standard is commonly used for securities, funds, and real estate tokenization.

Compliance

There are several regulatory commitments that these tokens must meet before they can be transferred. For one, all token holders must submit and pass KYC/AML and investor eligibility requirements, including submitting to identity verification via ONCHAINID.

These predefined rules must be met for token transfers to occur. Additionally, the system cross-references identities and wallet addresses to ensure eligibility. There are also individual asset-based regulations, like holder and sales limitations.

What Does this Shift in Strategy Mean for Investors?

This recent market development has long-reaching implications for investors as it represents a prime example of the tokenization of illiquid, private contracts at a global scale. Notably, market demand is already proving that the industry is ready for expansion, leading some to estimate exponential growth in the coming years.

Investors will now gain the ability to become part of their favorite teams, funding more directly. These tokens are more than just memorabilia. They represent an investment in an athlete’s career, and in some instances, they will grant revenue sharing and voting rights. As such, this shift in strategy represents a monumental alteration of the course towards more profitable destinations.

Chiliz (CHZ)

Chili entered the market in 2018 via a private sale that secured $66M in funding. The platform launched to great success amid strong demand for digital collectibles and blockchain assets. Its founder, Alexandre Dreyfus, is regarded as a highly respected entrepreneur who has launched several platforms in the past, including France’s largest online poker room, Winamax, in 2006.

The goal of Chiliz is to gamify sport memorabilia and combine it with the excitement of gambling, crossed with the return potential of investing. This strategy has proven to be a major success. Additionally, the platform continues to grow thanks to several wise business maneuvers and partnerships.

By 2021, Chiliz had inked strategic partnerships with +70 teams across several high-ranking leagues such as the NBA. The company launched its Chiliz Chain Mainnet in the same year, enabling it to improve performance and offer more features.

These features include deeper integrations, faster performance, and an expansion into other sports like the UFC and F1 racing. Today, Chiliz is a leading blockchain sport memorabilia fan token provider.

Its Vision 2030 map will take the firm from a memorabilia provider to the primary sports RWA issuers in the market. This maneuver should position the company for success amongst the predicted $1T sport RWA economy.

Latest Chiliz (CHZ) News and Performance

RWA Revolution: Investing in Tokenized Athlete Equity | Conclusion

The evolution from simple endorsements and fan tokens to tokenized equity makes perfect sense. Organizations and athletes are constantly on the lookout for ways to connect with their fans and provide more benefits. This strategy embodies SportFi, enabling fans to secure memorabilia while also gaining access to future revenue potential.

Learn about other cool digital assets here.