How tokenisation is transforming culture

What if there was a way, outside of the traditional stock market, to become a shareholder in your favourite luxury brand or superstar? How would that work – how could that even work? European football clubs have become the first brands to realise the potential of tokenising themselves, giving fans the opportunity to purchase club-specific crypto tokens that rise in value, while also giving them voting rights and exclusive content, essentially making fans shareholders. So far over 24 European clubs across the five major leagues, including PSG, FC Barcelona and Manchester City, have launched, or are considering tokenisation.

Over the past two years, the capabilities of the crypto revolution have moved in more dynamic ways than were previously imaginable. No sooner had a small percentage of the world’s population understood the concept of the store-of-value, the instant global payment cryptocurrency model and digital assets, than the industry boomed into thousands of new utility use cases, from medicine to telecommunications and identity.

The NFT (non fungible token) boom ushered in a radical new way for artists to buy and sell work, with the provenance and exclusive assets stored on the blockchain within the NFT metadata. The concept quickly grew outside the art world with digital land being bought and sold, before NFTs expanded the proof-of-ownership model across digital and physical assets in various verticals. Then came the next buzzword in the space: metaverse. Open digital worlds populated by avatars, creating entirely new ways for entrepreneurs to start businesses, students to access university education and gamers to simply earn while they play – all powered by crypto, NFTs and digital assets. Although in its relative infancy, the new world is being developed as we speak.

Brands such as Disney have seen the trend towards the metaverse, with the entertainment giant filing a patent for a ‘virtual-world simulator in a real-world venue’ to the US Patent and Trademark Office as early as July 2020. However, as we have seen, crypto doesn’t hang around. There is already another model on the horizon which brands are only just seeing the potential of – the advent of tokenisation, or fan tokens. Until now, whichever area of culture you find yourself most attracted to, from luxury brands to prominent personalities, bands and celebrities, you have always, essentially, been a bystander. Fans of culture are accustomed to buying into the world of that particular brand or artist through the purchase of goods, records, films or theme park tickets. That is all about to change with the new wave about to hit the crypto space – fan tokens, also known as social tokens.

We’ve seen the initial rise of the space with projects such as Chiliz, a sports orientated fan token project that has partnered with, and issued fan tokens for, premier teams spanning football, combat sports (including the UFC) and basketball among others. The Chiliz market cap already sits at over $1.5bn while the space is growing rapidly owing to the exponential adoption of crypto (currently growing at twice the speed of internet in 1997). “The music industry, brands, the media industry, sports teams – these people have communities that are gigantic,” explains ex-hedge fund manager and prominent crypto entrepreneur Raoul Pal, speaking recently on the topic. Pal goes on to explain that, as a fan, “Communities that you’re involved with, you (will) have a token in, and if the community is vibrant, then the value of that token rises over time. So, your cultural interest aligns with your investment interests, which align with your business activities.”

The opportunities this new phenomenon offers all aspects of culture will be seismic; it will help consumers turn investors, creating multiple revenue streams while increasing consumer engagement for brands, from fashion to music. The entire model is right at the very beginning and its success is dependent on community participation and engagement. What we will see from brands – as we’ve already seen from the initial sports tokens – is that consumers are rewarded with exclusive content, offers, NFTs and discounts in addition to holding the brand-specific token, which itself is an asset.

Two days before 2022 commenced, Walmart filed several new patents and trademarks with the US Patent and Trademark Office, including plans to create its own cryptocurrency, metaverse and range of NFTs. Walmart is the first major retail brand to state its intention to create its own tokens in such a way, the significance of which shouldn’t be downplayed. Nike filed a range of trademark applications in November 2021 and further brands are lining up to explore the space. 2021 was the year of NFTs and the birth of the metaverse. 2022 will go down as the year social tokens reinvented the relationship between consumers and culture via blockchain technology.

Vernon Ward is the editor-in-chief of Evai.io at the DMCC Crypto Centre

Taken from GB Invest February 2022 edition