A detailed explanation of the current development status and future vision of the Chiliz sports ecosystem
Chiliz addresses two core issues: funding and user engagement. In addition to allowing fans to own a share of their favorite teams and participate in daily activities, the platform also provides access for sports and entertainment companies.Original Title: 《What Is Chiliz (CHZ)? A Detailed Guide》
Author: Josiah Makori, CoinGecko
Compiled by: Biscuit, Chain Catcher
Not every sports fan has the financial means to purchase a $250,000 Messi digital collectible card or a $120,000 NFT avatar of LeBron James. However, most fans can participate in the digital realm of their favorite teams or sports celebrities in the form of tokens. This is where Chiliz (CHZ) comes into play.
Chiliz is dedicated to providing blockchain-based tools for sports and entertainment companies, enabling them to seamlessly engage in marketing activities and profit from them. It is also known for its sports fan platform, Socios.
But what exactly is Chiliz, how does it work, and what are the recent developments and partnerships of Chiliz? This article will provide the answers.
What is Chiliz (CHZ)?
Chiliz is a cryptocurrency for sports tokenization and the first scalable sports token reward platform - Chiliz.net. At the same time, it is a sports-based cryptocurrency exchange where fans can trade fan tokens and participate in club-based surveys and reward pools. Thus, the tokens grant fans voting rights— the more tokens held, the more voting power. These tokens also allow fans to enjoy discounts, promotions, and exclusive content, participate in sports trivia, and win signed club merchandise, among other benefits.
Chiliz addresses two core issues: funding and user engagement. In addition to allowing fans to own a share of their favorite teams and participate in daily activities, the platform also provides access for sports and entertainment companies. This enables sports enterprises to expand their development plans and thrive in the global sports industry.
Chiliz was founded in 2018 by Alexandre Dreyful, the founder of the travel consulting company Webcity and co-founder of France's largest online poker site, Winamax. Dreyful aimed to use blockchain technology to provide fans with a seamless way to interact with their teams and to enable sports companies to profit from their global fan bases effectively.
This concept has evolved into a blockchain unicorn, with an expectation that by the end of 2022, 300 sports companies will lead revolutionary changes in the sports and entertainment industry through fan tokens and the Socios fan reward platform.
Before diving into how Chiliz works, let’s briefly discuss Socios.
What is Socios?
Socios is Chiliz's first consumer-facing product. It is a scalable application that allows fans to gain tokenized voting rights for their favorite clubs. The app enables fans to interact with their teams and offers unique rewards, including experiences of memorable moments from events, predicting game outcomes, and match day challenges.
Socios is powered by the Chiliz sidechain and allows sports teams to issue fan tokens. These tokens are exclusive blockchain assets that are strongly associated with the issuing team. Therefore, these tokens grant holders voting rights to participate in decisions and polls regarding team management.
Fans can directly participate in the decision-making process of their favorite teams through Socios. For example, Arsenal Football Club fans can vote on the design of team merchandise, in-game banners, naming of the pitch, or songs for goal celebrations using the Arsenal Fan Token (AFC), while also receiving rewards and unique experiences. The platform ensures that clubs fairly respect the voting results of fans through smart contracts.
In summary, the six key features of Socios include:
- Cryptocurrency entry: You can purchase CHZ using a credit card.
- Trading section: After purchasing CHZ tokens, you can use them to buy fan tokens for your favorite teams. Additionally, you can exchange one fan token for another or convert it back to CHZ.
- Voting section: After obtaining fan tokens, you can influence decisions related to the team.
- Rewards section: As a fan token holder, you can purchase club merchandise at discounted prices and enjoy other benefits.
- Pokémon Go-like feature: This is a virtual reality feature for free experiences in virtual scenarios and obtaining CHZ tokens.
- Locker feature: Allows teams to monitor the potential demand for their tokens from fans.
How Does Chiliz Work?
Chiliz's success stems from its customer-oriented products and services, making it easy for even cryptocurrency newcomers to use. Socios and the Chiliz exchange feature user-friendly interfaces and responsive customer support to guide users. Additionally, they have not experienced any hacking incidents.
Chiliz also places great importance on ensuring that the cryptocurrencies within its ecosystem (CHZ tokens and fan tokens) are easily traceable, verifiable, and tamper-proof.
In October 2018, Chiliz issued a fixed supply of approximately 8.8 billion CHZ tokens on Ethereum and distributed a portion of the tokens to stakeholders. The company did not conduct any public sales apart from products sold through cryptocurrency exchanges. Although CHZ was initially an ERC-20 token, it was redesigned to fit the BEP-2 token standard due to the support of its strategic partner, Binance, in issuing new fan tokens.
In contrast, fan tokens are issued on the Socios sidechain, which utilizes a Proof of Authority (PoA) mechanism to achieve consensus. Unlike Proof of Work (PoW) and Proof of Stake (PoS) mechanisms, PoA relies on pre-approved authoritative nodes to publish and confirm transactions.
As nodes play a crucial role in securing the Chiliz blockchain, Chiliz publicly discloses the entities and individuals behind it to increase trust. The Chiliz team operates most of the nodes, and recently, European retail giant Rakuten began operating authorized nodes on the Chiliz network. As the company continues to gain mainstream traction, Chiliz hopes to establish more strategic partnerships to further secure its network.
PoA blockchains, like Chiliz, are not as decentralized as other blockchains (like PoW chains). Nevertheless, PoA blockchains offer high scalability, security, and the ability to process more transactions per second. Therefore, this mechanism is an ideal choice for collaborative social engagement platforms like Socios.
Moreover, all activities on Socios (such as transactions and voting results) are securely stored on the Chiliz sidechain rather than on the Ethereum blockchain. This allows Chiliz to regulate gas fees, ensuring fast and low-cost transactions.
The sidechain also supports smart contracts, which can be used to host Socios polls and decisions. Thus, the Socios application serves as an oracle connecting the Chiliz sidechain and the Ethereum blockchain. Additionally, it is the only bridge facilitating the exchange of CHZ and fan tokens.
Chiliz Ecosystem Tokens
In addition to powering the Socios platform, CHZ also provides three different roles for tokens:
Fan Tokens
Chiliz fan tokens help users vote and provide benefits for clubs. Some popular football clubs with millions of fans have already issued fan tokens, including Arsenal Football Club's AFC token, Atlético Madrid's ATM token, FC Barcelona's BAR token, Manchester City's CITY token, Paris Saint-Germain's PSG token, and more.
Chiliz also has a Fan Token Offering (FTO) launchpad that enables clubs to easily issue and distribute fan tokens. Additionally, fan tokens have a burning function that can increase the scarcity of tokens for sports teams, thereby enhancing their value.
Locker Tokens
Sports teams need to send applications to join Chiliz, and once the request is approved, the team creates a "locker" where investors can hold their CHZ tokens for four months before exchanging them for locker tokens.
After the team successfully launches fan tokens, Chiliz will exchange locker tokens for fan tokens (plus a 10% CHZ cashback), which are generally valued higher than CHZ tokens. If the fan token launch fails, the platform will refund the CHZ tokens.
Chiliz ERC-1155 NFT
In February 2020, Chiliz announced a partnership with blockchain technology developer Enjin to develop branded digital collectibles for clubs. Chiliz utilizes Enjin tools to mint Ethereum-based non-fungible token (NFT) collectibles for its partners.
ERC-1155 is a multi-token standard used to create fungible and non-fungible tokens under the Enjin-supported protocol. This standard is designed to create a token that executes functions similar to ERC-20 and ERC-721, even allowing both to execute simultaneously. Users can purchase Chiliz collectibles on the Enjin Marketplace using ENJ or CHZ.
Recently, Chiliz also began collaborating with Chainlink to mint NFTs in real-time. This helps Chiliz respond promptly to live sports events (such as goals in the Champions League) and create limited edition NFTs to commemorate those goals.
Chiliz and Sports
As early as 2016, the product concept of Chiliz underwent multiple iterations, with actual work involving product and development teams beginning in early 2018. The company raised $66 million through private placements, with most of the funds allocated to building Socios.
Juventus was the first team to issue a fan token (JUV), conduct an FTO, and allow fans to vote on the blockchain. This was followed by Paris Saint-Germain, Atlético Madrid, Galatasaray, Roma, and Barcelona. To date, Chiliz has over 130 partners, with more teams preparing to join.
In the 2021/2022 season, Inter Milan and Valencia CF promoted their fan tokens on the front of their jerseys. Even national teams like Argentina and Portugal have joined Chiliz. Premier League teams such as Manchester City, Everton, Arsenal, Leeds United, and Aston Villa have also launched fan tokens on Socios.
Chiliz is not only popular among football teams. Formula 1 teams, major esports clubs, and the Ultimate Fighting Championship (UFC) have also joined Chiliz. After successfully collaborating with multiple teams from the National Hockey League (NHL) and the National Basketball Association (NBA) in 2021, Chiliz seems poised for growth in the application.
Chiliz's Scoville Blockchain
In April 2022, Chiliz launched the Scoville testnet, a blockchain that can facilitate fan tokens. Chiliz Chain 2.0 (CC2) will enable clubs and brands to quickly mint NFTs, issue fan tokens, and create other DeFi products such as Play2Earn games, Play2Win, and merchandise authentication.
CC2 will be powered by CHZ tokens, further enhancing the utility of the tokens. Currently, CHZ primarily serves as a medium of exchange, allowing entertainment and sports enthusiasts to purchase fan tokens for their favorite clubs. CC2 will transform CHZ from an in-app currency into an open, vertical driver of the Chiliz ecosystem, unlocking deeper value for CHZ.
Previously, CHZ was used to purchase fan tokens on Socios. Now, the token will be applicable to more verticals within the Chiliz ecosystem. Since Chiliz revolutionized fan engagement in the entertainment and sports industries by introducing fan tokens and establishing the Socios platform in 2019, the launch of the Scoville testnet will be a significant milestone.
Chiliz is developing CC2 in collaboration with blockchain technology developer Ankr. Additionally, CC2 is compatible with the Ethereum Virtual Machine (EVM), with transaction costs nearly 200 times cheaper than Ethereum. It will utilize a Proof of Stake Authority (PoSA) mechanism to incentivize CHZ investors to continue holding their token stakes.
Approved validating nodes may include organizations that are already official partners of Socios. They will ensure network security and benefit from its growth. CC2 will provide an open ecosystem that allows vetted third-party developers to build alongside Socios. This will create external applications for fan tokens and offer new experiences for users in new use cases, beyond just fan tokens.
The Future of Chiliz
Chiliz has established strategic partnerships with major sports clubs and brands worldwide. Their staff is almost distributed across all corners of the globe, with offices in Malta, Spain, France, Turkey, Brazil, and South Korea. Additionally, they plan to set up more offices in the United States and the United Kingdom to enhance their global network's hub capabilities.
Furthermore, Chiliz is optimistic that more teams and brands will soon join the network. The way CHZ drives fan interaction with clubs will lead to transformative changes. Socios is Chiliz's first revolutionary consumer-facing project aimed at increasing the adoption of global fan tokens and the visibility of CHZ.
