Blockchain and football – The next frontier?

Blockchain and football – The next frontier?

Blockchain and football – The next frontier? 1440 564 World Football Summit

AUTHOR: NEIL JENSEN

During the 2018 World Cup, TV advertisements started appearing talking about a financial services company using “Blockchain”. Most people scratched their head in bemusement, for the concept of Blockchain has yet to reach the broader general public.

This was a classic case of advertisers of a little-known product taking advantage of TV’s huge captive audience watching the world’s biggest broadcasting event in order to spread a message. It wasn’t exactly effective, for the majority of viewers were probably still no wiser about Blockchain.

Blockchain – the great disruptor

Yet Blockchain has been around for a while and was, initially, seen as a systemic threat to the financial industry. Banks, for example, have been confronted by the rise of financial technology for some years and are only now coming to terms with the way their industry will change, thanks to dynamic and nimble young fintech companies that offer an alternative to traditional banking methods. Blockchain and Distributed Ledger Technology are at the forefront of change, and they’re not confined to financial services – they can also influence the future of football and other spectator sports.

In a nutshell, blockchain is a growing and highly scalable list of records, called blocks, which are linked using cryptography. These blockchains are widely used by another new technology that promises to transform global commerce, cryptocurrencies. Blockchain is considered to be secure by design, and in an age when cybercrime and corporate security are becoming very real and increasing concerns, this is often seen as a big selling point for the technology. Given the sport’s broad appeal, it is only a matter of time before Blockchain and football become linked.

Furthermore, as big data and directives like the recent Global Data Protection Regulation (GDPR) become firmly embedded in the global economy –  including football – Blockchain is very much representative of the new, fast-moving post-financial crisis world. GDPR compels companies within the European Union to better manage records and maintain greater levels of transparency. It also allows consumers the chance to make preferences around their personal data. Anything which produces records and customer information, such as football clubs, can use Blockchain as a method of storage.

Blockchain, a new game

Football, in recent years, has become more and more technical and football data has become a sub-industry of its own. VAR, as used in the World Cup, is a good example of how technology can improve decision-making. Naturally, and as we saw in Russia, fine-tuning needs to be carried out, but VAR is here to stay and in a sport that generates so much money and worldwide spectator interest, surely this is the logical way ahead? Not everyone would agree with that sentiment, but fans will undoubtedly wish for an easier and more seamless user experience at stadiums. Cash, to some extent, can be a hindrance for people.

Industry experts believe the marriage of Blockchain and football can manifest itself in a number of ways, not least in the form of stadium ticketing processes. The use of Blockchain can enable big clubs like Real Madrid and Bayern Munich to keep track of records related to ticket purchases, enabling clubs to better market and target their offerings. At the same time, it will enable consumers to control their data, as promoted by GDPR.

The time when all football stadiums become cashless is probably not so far away. In Austria, FK Austria Wien, who have recently refurbished their home, have eradicated the use of hard currency, from ticketing to vending within the stadium. The question is, will new forms of money also become commonplace as part of the game?

Blockchain is the technology that underpins cryptocurrencies and football clubs and big-name players have more than dipped their toes into this emerging asset class. Indeed, the crypto sector appears to have targeted footballers to win their endorsements.

Blockchain, clubs and players

In January 2018, Arsenal signed a sponsorship deal with CashBet, a US cryptocurrency firm. Arsenal were promoting the company’s Initial Coin Offering. Similarly, the London Football Exchange, which has become Global Partner of the international event of the football industry, World Football Summit, will lead a session about the blockhain technology at this event during the next 24th and 25th September in Madrid. They have launched its own cryptocurrency, aimed at building an innovative “fan-driven football community” that permits members to take part in various club and fan experiences that will include ticketing, merchandise, hospitality and retail services.

Top players have identified the opportunity in these new instruments. Lionel Messi signed an endorsement deal to represent SIRIN LABS, a company creating Blockchain-based hardware for the crypto currency. Colombia’s James Rodriguez has also launched his own version, JR10, that can be used to buy James souvenirs.

And as the World Cup was drawing to a close, former Brazilian international Ronaldinho announced he was launching his own crypto-coin, the RSC, built on a Blockchain platform. These examples arguably represent an alternative investment scenario for clubs and players with plenty of liquidity, rather than a passion for new technology, but they do underline that the tech world is eyeing football as a mass market with great potential.

It has, tentatively, now extended to the transfer market. Earlier this year, a small Turkish club, Harunustaspor, became the first to sign a player using Bitcoin. The fee itself wasn’t paid in the cryptocurrency, but a portion of the player’s signing-on fee was delivered in Bitcoin.

Away from cryptocurrency, Blockchain has a significant appeal to the football betting industry. Market watchers see the technology providing a more secure, tamper-proof, betting system that also provides evidence of bet legitimacy. It can also remove monopolies, create peer-to-peer networks, retain anonymity and move free of government involvement. It’s not all simple, however, for the latter does raise issues over regulation and there have been many concerns over, for instance, cryptocurrency’s lack of regulatory control.

Regulatory questions

Currently, regulators are not totally comfortable with either Blockchain or cryptocurrencies. Hackers have exposed some shortcomings – an illegal crypto gambling ring was uncovered during the World Cup –  and governments and regulatory organisations are still uncertain of the best path to follow. A recent G20 meeting failed to reach consensus but later this year, there should be more guidance on the subject. The football industry and the companies that sit on the periphery will be well advised to keep a close eye on developments.

Nevertheless, Blockchain and cryptocurrency are here to stay and will continue to reshape the way business is conducted, the way personal data is managed and how the customer experience evolves. Football, as they say, is nothing without the fans, and it is the game’s future clientbase that will be most affected by new technologies. The key will be to avoid becoming over-fascinated by the technology and to ensure it is harnessed appropriately for the good of football and its customers.

 

Neil Jensen is a freelance business and football writer based in the UK. His clients include major financial institutions, football business consultancies and various newspapers and magazines. He is also the editor of the popular website, Game of the People, rated one of the top 100 football sites in the world.