Contract Auctions
The first article was about Spencer Dinwiddie, a point guard for the Brooklyn Nets, who had been working with Securitize to take his $34 million 3-year contract and tokenize it, allowing him to raise $13.5 million, just shy of 40% of the total value of his contract, in one go. The benefit for Dinwiddie is obvious; if he is as sensible with this money as the (currently) niche financial path that he has decided to carve out for himself would suggest, then money now is going to be better than money later.

I’m going to assume for a paragraph that you have no real understanding of why that is, so skip on through this paragraph and the next if you’re not looking for someone to teach you to suck financial eggs. The time value of money posits that a dollar now is worth more than a dollar in the future because of interest rates and inflation. Inflation is the process by which money loses value. Over time, the prices of goods and services tend to increase, and so, consequently, the amount of goods and services that you can buy with the notes you have hidden under your mattress decreases. Interest rates are the amount of money that you make, or that an entity makes off of you, for investing/saving or borrowing money respectively.

Accepting that everything else remains normal(ish) - there is a decrease in the value of money over time, and there is an interest rate above 0 - Spencer Dinwiddie’s $34 million is worth a lot more to him now than it is in the future. Every year that goods and services increase in value the deal looks less impressive than it does now. Dinwiddie will likely take that $13.5 million from the token sale, knock off of it whatever he needs in terms of living costs (or maybe even just live off of the money he can make through sponsorships etc.) and then put the remainder into stocks, shares, bonds, investments, cryptocurrency, or whatever other things he believes will grow it above the value-reducing effect of inflation, and past the rate that he would just get from chucking it into a bank account.

To see how this could revolutionize things for people who aren’t in line for $34 million contracts with complementary sponsorship deals, it  is necessary to burrow down a bit from the giddying heights of the NBA.

Athletes also have a tighter window to make their money, at least from the main thing that they got into sports to do: play. If you look at my nation’s favorite sport, football, available information sources say that the average age of retirement is about 35, meaning these people need to stretch earnings from about ⅓ of the normal time a person would spend working to last a lifetime (ignoring for the sake of simplicity other jobs post-football). For the sake of this analysis, let’s dodge the top football league in the world, the English Premier League, and do a very low-research thought experiment on what tokenization, like Dinwiddie’s, could do for players without such a large contract.

The salary for the average player in the Championship, the second tier of English football, works out at about £400,000 a year. This is a sizeable quantity of money, but here we are saying that this is the only period in which the player is working, so we need to take (roughly, because this is not going to be their salary for the whole of the time they play) a third of that, £133,000. We’re still in the upper, upper tiers of salary in the UK, but also remember that there are two leagues below the Championship, and those flash-in-the-pan salaries are a lot closer to the average salary in the UK, and (not even guaranteed) for a fraction of the working years. A Championship player, by tokenizing their contract, could grab a large slice of the next x years’ of wage now, take that money, and invest it into something that would allow them to smooth out the income that they experience across the course of their lifetime.

According to a 2009 Sports Illustrated article, 35% of National Football League (NFL) players are either bankrupt or are under financial stress within two years of retirement and an estimated 60% of National Basketball Association (NBA) players go bankrupt within five years after leaving their sport.
— Wikipedia

Often, young players see large figures and they adjust accordingly to a standard of living that eats into this. Having the option to take a big block of that future income now and reallocate it so that it accumulates for a rainy day can only be a good thing; for the fans and individuals who are willing to look at a player’s career as an asset, this also chucks in another interesting avenue.

Investors who buy Dinwiddie’s token will receive a slow-release stream of income, nice. If Dinwiddie decides that the Nets are behind him, and takes a bigger contract with the Lakers (don’t hate me, I do not know basketball) then those same individuals will see their investment grow, even better. Also, as this is on the Ethereum World blog, remember that this is all being done using Ethereum, and so it brings all the people involved into the ecosystem.

You’ve seen shares in sports teams, now check out shares in individual players. Given further adoption you could see assets that actually combine parts of contracts from multiple players. Think a recently-promoted team could end up selling players to bigger teams? Well, here’s a mixed-player Sheffield United contract token, I joke, but maybe someday.

Updating this on the 22nd of July 2020: that would've been an extremely safe bet given the league position that Sheffield have found themselves in for a recently-promoted club.

In-game Auctions
So, onto the second article; on January 15th the Sacramento Kings announced that they would be partnering with ConsenSys to implement in-game auctions on Ethereum. As explained in this theblockcrypto article:

[T]he new system utilizes the Consensys-backed supply chain platform, Treum, to authenticate every auctioned item and establish a transparent audit trail recording the gear’s entire transaction history as well as any future sale, loan, or showroom exhibition of the gear

As recent reporting has shown, sportswear fakes are commonly bought and sold on large, well-trusted platforms. The proof of authority system that’s being implemented for the Kings does two interesting things; firstly, for the match-worn kit market it ensures the viability of these things as investments, with this blockchain-backed proof allowing buyers to prove that what they have is what they’re claiming it is. Secondly, it serves as a way of penetrating and serving new knowledge to a large and variegated bunch of individuals, sports fans. The conversation goes like this:

Q: So I can buy a jersey and then prove that it was worn by [player x] in [match y]?
A: Yes
Q: Okay, how can I prove that?
A: You also receive a digital token containing the item’s historical record, which is updated as the item changes hands
Q: So how does that work…?

Having Ethereum introduced here as a technology that can be used to verify the authenticity of a physical item allows someone who does not necessarily share our ETH-thusiasm to at least get a part of the picture of how this new technology can exist in real-world situations. Moves like the Bitcoin sponsorship of Watford Football Club, or (my team) Brighton and Hove Albion Football Club’s partnership with eToro - which claims to be the first-ever major sponsorship arrangement paid for in cryptocurrency - bring the ideas or symbols of crypto into the sporting world; this move by the Kings actually gets fans to use the technology during games. This is the kind of adoption shift that is so critical when it comes to getting regular people using and understanding crypto.

Fan “currencies” are something which has been explored by a whole host of different teams; recently Atlético Madrid, Juventus, Paris Saint-Germain, AS Roma, and West Ham United have all looked to platforms that provide tokens to fans in return for filling out surveys, engaging in treasure hunts, or in auctions. These tokens are used by fans to vote on things like shirt designs and in-game entertainment, amongst other things. Having your own or a borrowed form of programmable money could serve to allow clubs to raise income in new, novel ways, as well as proving authority and fans’ levels of support.

When coming back to this article to do some editing on February 13th 2020, I stumbled across yet more developments on the intersection between sports and Ethereum - this time from FC Barcelona. Barca are set to issue tokens for use on a fan-engagement platform:

The tokens, expected in the second quarter, will let holders vote on a variety of decisions about the team such as what music to play in the stadium when the team scores a goal. The idea is to let supporters around the world participate in the club.


The Future?
These initial applications have very obvious financial benefits to those who engage with them, but how could moves like these also change the face of sports like basketball and football? How could this new technology be applied to governance, to help club finances, or to create a greater sense of ownership amongst fans?

One example of innovative tech applications in sports comes from AG Caen, who play in the sixth tier of French football. Caen have created an app which allows their 1,200 supporters, called “Umans”, to decide everything for their team. This radical approach to sports team governance is something which could only really now conceivably be applied in the lower tiers of sports, with bigger clubs not needing to defer to fans for tactics, or needing to create a sense of ownership because of the quantity of money sat in the bank.

Still, the idea of playing your favorite sport like a massive multiplayer online video game with real people on either side of the controller is pretty radical. Emergent tools for governance such as DAOs could serve as models for interesting forms of management that could be trialled by smaller clubs to see how this changes their ability to win, attract new talent, and attract new fans.

In 1906, 800 people participated in a contest to estimate the weight of an ox; this led to Francis Galton, a statistician, demonstrating that the median guess was accurate within 1% of the true weight. If the wisdom of crowds, the sum of our experiences, can produce a better result than any one individual produces on their own, then maybe there is some way to leverage this on the horizon. The future could see us transforming that archetype of a sports fan sat with a can of beer yelling at the television into an armchair tactician in name only...