Dialogue Sports Entertainment Public Chain Chiliz CEO: An In-Depth Explanation of the Overlooked Fan Token

Original: Alex Dreyfus & Luke Martin, STACKS, "Best Performing Coins That Crypto Investors Don't Know About (fan tokens explained!)"

Compiled by: Kxp, BlockBeats

Alex, it's great that you're willing to accept our interview. Recently, despite the overall downturn, why have fan tokens, Chiliz, and Socios received so much attention and achieved good growth?

Alex Dreyfus: Although we have received a lot of attention, I still feel somewhat frustrated. The main reason our platform has gained discussion is due to the surge in Chiliz prices, but this does not reflect the value of the work we have done over the past two and a half years.

Do you think this is influenced by the return of the Premier League? I mean, what do you think is causing this situation?

Alex Dreyfus: Currently, we have 1.5 million users, and this number is growing every day. At the same time, we are also accelerating the launch of Chiliz Chain 2.0, which is more like a proof of authority rather than a proof of stake specifically for sports and entertainment. By the end of this year or early next year, many of the teams we collaborate with will become validators on this chain, such as Barcelona, Arsenal, Manchester City, and so on. So, in my view, the price increase is just one aspect; what is truly important is that we have 270 employees who are diligently developing our business.

I recently followed a crypto trader who has also been paying attention to Chiliz and fan tokens. However, personally, while I have been observing your project, I have not made any investments. In the past two weeks, Chiliz has performed very well, but I also think that besides me, there are many people who do not understand the Chiliz and Socios platforms, as well as the fan tokens that many people are currently chasing. So, could you please give us a brief introduction?

Alex Dreyfus: The current situation is that 99% of sports funds are not in the cities where the teams they support are located. So our idea is simple: we want to create something valuable for fans and teams around the world. Unlike NFTs, fan tokens are fungible tokens aimed at maintaining fan loyalty. If you are a holder of fan tokens, you can participate in club decision-making votes and enjoy discounts of 7-9% when purchasing merchandise. As a fan token holder, you can vote on club decisions, receive discounts of 10-30% on merchandise, and gain a certain status in the team you support.

To achieve these goals, we built a blockchain called Chiliz, responsible for the minting and issuance of fan tokens, and it is becoming increasingly open. Our exposure in the US and Asia is relatively low, so many people may not be familiar with our project, but this allows us to focus on what we really want to do.

Yes, having less attention in the early stages can sometimes be a good thing, as it allows you to lay a solid foundation. Now that your project has been developing for four years and attention is flooding in, this is quite a successful outcome.

Alex Dreyfus: Indeed, we are also pleased to see such success. In 2020, we experienced the summer of DeFi, and in 2021, it was the turn of NFTs, but there was also a lot of hype. Many companies were raising funds to invest in the NFT market, but we did not do that, and now our user base has surpassed those NFT companies. The entire market has cooled down now, and there is naturally much less noise and distraction, which is undoubtedly a good thing for the teams, as they used to receive calls every week to help create NFTs for their teams.

As you mentioned, NFTs are currently booming, and many companies have launched their own NFT series, with people buying these unique NFTs for their favorite athletes or artists. Given this, why did you choose to abandon this model in favor of fungible tokens? Why do you think this is a better way and has greater potential than those well-known NFT companies?

Alex Dreyfus: For me, I have always had a love-hate relationship with NFTs: I love the technology but hate the hype model. We adopted fungible tokens because we believe they are more scalable. Sports NFTs are currently mainly concentrated in North America, rather than in Eurasia, so I wanted to create a native crypto product. NFTs are primarily based on non-native brands, making monetization more difficult.

Additionally, suppose Barcelona has 300-400 million fans; if you only issue 10,000 NFTs, what about the other fans? So, from the very beginning of our project four years ago, I firmly believed that we adopted a better model, and we also have our own NFTs. For example, if you hold a Paris Saint-Germain fan token and the team is playing tonight, if they score a goal, you will receive an NFT as a reward, and those who collect all the NFTs for the season will gain access to a VIP box. Except in very special circumstances, we do not sell NFTs because we focus more on user engagement than on the game itself.

Are there any other uses for fan tokens? You just mentioned that if I collect all the season's goal NFTs, I can enter the VIP box. What else can I do? Can I win more fan tokens? How is all this achieved?

Alex Dreyfus: Our main goal is to enhance fan engagement. In the past, while you could follow the team's Twitter account, it was a one-way relationship. But if you own our fan tokens, you can gain a certain status and participate in club voting, thus forming a two-way relationship. Of course, you cannot decide who plays in which match; that is the coach's job, but you can decide on the music played when the team enters the field or participate in designing the next season's jersey. This way, you have a sense of participation in every match, whether watching live or online. We have been committed to bridging the gap between teams and fans and have invested significantly in this area.

Besides the VIP box you just mentioned, do users have other opportunities to interact with stars? For example, I heard that if you purchase an NFT of a certain star or athlete, you can participate in fan meet-and-greets or have a chance to meet them after the game and ask a few questions. If I hold enough fan tokens for Ronaldo's team, is it possible for me to meet Ronaldo himself?

Alex Dreyfus: This year, we will be giving away a total of 17,000 real tickets worldwide, which is quite significant. You can download our app on your phone and purchase tokens for one or several teams. As long as you log in daily and participate in various activities on the app, you can earn loyalty points. You can use these points to redeem tickets in the store.

While everyone wants to enter the VIP box, this is difficult to scale globally, and only a small number of people can experience it. However, we also want users from other countries to participate, so our focus is not on that small group of people inside the venue but on the larger audience outside the venue. We want to establish a connection between teams and fans worldwide.

Other blockchain founders are still discussing consensus mechanisms, DeFi, and liquidity contributor pools, while you are already able to watch football matches from the VIP box, which shows you are a smart person.

Alex Dreyfus: That’s not the case; our daily work is also very intense. We are creating a consumer-oriented product based on blockchain technology that is neither a wallet nor a cryptocurrency trading platform. Today's fans are no longer just fans of one team or one sport; they are fans of multiple teams or sports, which is why we have over 160 sports brands worldwide. So our work is somewhat similar to Facebook or other large social networks, bringing all these teams into the same ecosystem to create large-scale network effects.

When I think about other consumer-oriented blockchain applications, I also think of Stepn, which has accumulated a lot of users over the past year, although it did catch many people off guard in the end. The commonality between your two applications is that users can use your applications without understanding blockchain-related knowledge. This is something most cryptocurrency companies have not been able to achieve, but you have done it easily, and I think this is one of the reasons for your rapid growth. On your platform, as long as people love a team, they can buy the corresponding tokens to support it without needing to understand Bitcoin and related knowledge. However, will most people eventually know that they are using a blockchain application?

Alex Dreyfus: No, they won't, because we avoid using terms like cryptocurrency, NFT, etc., in our promotions and instead use terms like tokens and digital assets. When you download the app, our payment processor will automatically charge $5 from your credit card, and this processor is also developed by us, as our team mainly comes from the tech field rather than finance.

Moreover, our goal is simple; we do not aspire to change the world but just want to use a small portion of the billions of sports funds worldwide to enhance user experience and increase their interaction with teams. Therefore, we designed our own fan tokens to achieve this. However, we may need to spend more time on promotion because our ideas are relatively novel and differ from the concepts of previous products.

How many fans does your platform currently have, and what is the market penetration rate?

Alex Dreyfus: I think it is at most 0.1%. Any innovative product in the market is like this. Last year, Inter Milan's jerseys featured our logo, and we have been collaborating with Paris Saint-Germain for the past four years, even inviting Messi as our brand ambassador. This year, we also partnered with the Lakers, and their official Twitter account has relevant information.

However, in my view, even with the support of these strong teams, even if we can get publicity from all major brands in the world, we still find it difficult to truly connect with the community—this is the key issue. Teams are not professional media and do not have their own funds, so our responsibility is to help them connect with fans worldwide, which is also our goal for the next 10-20 years. In the future, we will build a large community where everyone can participate in digital asset trading.

You mentioned earlier that you are collaborating with the Lakers, and last week you also talked about working with NFL and NBA teams. However, the US market may not be very familiar with your platform yet, as you may have focused more on football teams before, but I believe this situation will change soon. With the arrival of the NFL season, will I be able to support my favorite team?

Alex Dreyfus: We have adopted a different strategy for the US market because its regulatory framework is more complex than that of Europe. Therefore, we launched a dedicated app for US users, but so far, we have not launched any fan tokens for NBA or NFL teams. We are patiently waiting for regulatory approval and guidance from the relevant authorities, which may take weeks, months, or even years.

Meanwhile, we are also looking at other regions of the world and have already obtained licenses in Italy and many other countries. The regulatory frameworks in these countries are more lenient, and the relevant regulatory bodies have contacted us to express their support for our work. But in the US, we still need to proceed with caution. Nevertheless, we have reached agreements with over 20 NBA teams and more than 13 NFL teams. Once we obtain the necessary approvals, we will immediately start collaborating with these teams.

Indeed, the US has very strict regulations on cryptocurrencies, with millions of tokens unable to be traded in the US, and even Bitcoin and Ethereum are restricted. Why is the US so tough on these matters, even restricting projects related to sports events?

Alex Dreyfus: First of all, the way teams are managed in the US is fundamentally different from other countries. In Europe, leagues have more autonomy, which is why there are fewer sports-related innovation projects in the US. Although we face regulatory pressure, we believe that even if Bitcoin goes to zero, sports events will continue to exist in the long term. This means that no matter how strict the regulations are, there will always be enthusiasts for every sport, and our job is to bring them new experiences and build connections between them and the teams.

This idea is indeed very unique; I had never thought of it before. Many projects might say that even if Bitcoin goes to zero, their tokens can still perform well. But in my view, these large cryptocurrencies must continue to exist; otherwise, many smaller projects will not attract attention. People will always pay attention to sports, but this is different for the crypto market.

Alex Dreyfus: To be honest, we still rely on cryptocurrencies today because the first batch of users coming to our platform are crypto natives who can quickly understand the work we are doing. For other users, we still need to spend time introducing our products, which is a necessary process for every innovative product. Take Nintendo or Sega game consoles from 20 or 30 years ago as an example; those who bought these consoles first might have been seen as oddballs by others, who thought you had no life because not every household had a game console, phone, or computer at that time.

So, the situation in cryptocurrency is very similar. Our first batch of users only accounts for a small portion, and in the next five to ten years, we need to promote and market to more people and launch better products. Therefore, even if we have some brilliant ideas, we must learn to adapt to the market rhythm, invest a lot of time in the early stages, and then develop higher-quality products at the right time in the later stages.

I have great confidence in you and believe you can create better products. I hope the US can grant you permission soon, and you must come to California to watch a game.

Alex Dreyfus: Everyone is welcome to follow our official account for the latest information. We will launch relevant activities next week, and specific details will be posted there.