Chiliz (CHZ), the Cryptocurrency Powering Socios.com Fan Tokens

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Chiliz (CHZ), the Cryptocurrency Powering Socios.com Fan Tokens
Chiliz (CHZ), the Cryptocurrency Powering Socios.com Fan Tokens

The Chiliz project was born in 2018 from a simple idea: to provide sports entities with blockchain-based tools to help them better engage and monetize their fans. To realize this ambition, the company has launched the Socios.com mobile application, which is based on the Chiliz (CHZ) token. It allows partner clubs to sell their supporters fan tokens, fungible tokens offering them many privileges. But Chiliz does not intend to stop there. Introducing one of the most popular projects in the cryptocurrency ecosystem.

What is Chiliz (CHZ)?

The Chiliz company was created in 2018 by French entrepreneur Alexandre Dreyfus, following a fundraising of $66 million from major players in the cryptocurrency ecosystem such as Binance, OK Blockchain Capital and Ceyuan Ventures. Through the possibilities offered by the blockchain and cryptocurrencies, it seeks to bring sports entities closer to their fans.

The birth of Chiliz starts from an observation. In the absence of an adequate solution, sports or eSports fans are not involved enough in the life of their favourite teams. Admittedly, they can buy tickets for the matches, afford derivative products, or exchange with their club on social networks, but that doesn’t go any further. They have no say in decisions concerning their team, even secondary ones.

Chiliz wants to improve fan engagement and monetization through blockchain technology. For this, she created the Socios.com mobile application. Fans can go there to buy fan tokens issued by their favourite teams. These fungible tokens give them a number of advantages :

  • they offer the right to vote on secondary decisions in the life of their club, such as the design of the bus, the music for entering the players on the pitch or the choice of the 3rd jersey:
  • they make it possible to benefit from privileges, exclusivities or rewards linked to their club.

For their part, sports entities are finding a new way to communicate with their fans. They also take advantage of the sale of their fan tokens to record new cash inflows. This is a real boon in the current context, marked by big losses caused by the Covid-19 pandemic.

Alexandre Dreyfus (right), with Josep Pont, member of the Management Committee and Commercial Manager of FC Barcelona, ​​at the signing of the partnership between the Catalan club and Chiliz

The Chiliz (CHZ) token serves as fuel for the Socios.com platform, where it is the exclusive currency for buying and selling fan tokens. It functions both as an ERC-20 token on the Ethereum blockchain and as a BEP-2 token on the BNB Chain.

Note that the company has also launched an exchange for only those interested in trading fan tokens for speculative purposes. Indeed, to benefit from the advantages they provide (right to vote, rewards, etc.), they must be held on the Socios.com application.

The exchange offers all of the company’s issued fan tokens for sale against CHZ, along with a few other popular cryptocurrency pairs.

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Chiliz (CHZ) logo

The Chiliz Ecosystem

As of this writing, the Chiliz ecosystem is largely based on the Socios.com app.

Presentation of the Socios.com Platform

Designed to improve fan engagement, the Socios.com app allows fans to purchase fan tokens issued by their favourite teams. For this, they must use the Chiliz (CHZ) token, which serves as an exchange currency in all transactions carried out on the platform.

As its name suggests, the Socios.com platform is largely inspired by the functioning of “socios”, passionate supporters found in particular at FC Barcelona. These football supporters owning shares of their club participate in the election of its president and give their opinion in all the important polls on their team’s life.

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An overview of the Socios.com app

Holding a single fan token is enough to enjoy most of the benefits associated with these tokens. But some prefer to accumulate as many as possible in order to give more weight to their votes influencing certain club decisions.

Indeed, 1 CHZ token is equivalent to 1 vote, with generally a cap set at 200 tokens to prevent abuse. Of course, fan tokens are not spent during a vote, and they can be used again during a future poll.

We also note that some rewards are conditional on holding a minimum number of fan tokens, usually ten units.

There are two ways to acquire fan tokens on Socios.com:

  • Fan Token Offerings (FTO): When a club or team first lands on the Socios.com platform, it proceeds with what is called an FTO. Concretely, this consists of putting a limited quantity of tokens up for sale at a given time and at a fixed price;
  • Fan token trading: once the FTO has passed, fan tokens can be purchased on the platform at the rate set by the law of supply and demand.
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Here is an example to better understand the progress of an FTO, here carried out for the Brazilian football club Flamengo

Currently, the most represented sport on Socios.com is football, with over 50 clubs available. But over the course of new partnerships, the offer has been extended to other disciplines: combat sports (MMA), basketball, tennis, motorsports (Formula 1, NASCAR), American football, eSports, ice hockey and cricket.

Ultimately, Chiliz’s goal is to win overall sports entities on the planet and expand into the world of entertainment.

To give you a clearer idea of ​​the decisions fans can influence, here are some examples of votes made on Socios.com :

  • Elect the player of the month;
  • Choose the design of the team bus, the 3rd jersey, or other derivative products;
  • Vote for different messages displayed in the stadium, the dressing room, on the captain’s armband, etc. ;
  • Designate the music for entering the arena, the one celebrating a goal, or even vote for the playlist broadcast during warm-up, training, etc. ;
  • Choose a fun challenge that players will do in practice.

The choice of each ballot is decided by the sports entities. The only limit is their imagination and the extent of the powers they want to grant to their supporters.

The Socios.com platform rewards its most engaged users with its own fan tokens, the Socios United (SSU). Not available for sale, they accumulate with each operation carried out on the application or almost. They can also be collected as part of the token hunt, a feature of the app allowing you to earn free tokens daily.

At the time of writing, the SSUs are used to take part in surveys concerning the application or several partner clubs or to participate in games or quizzes to try to win rewards. But ultimately, Chiliz has big ambitions for this token. In the future, it could notably allow to give birth to initiatives driven entirely by fans, such as the management of organizations belonging to Socios.com or the organization of award ceremonies.

In early 2022, as part of a partnership with UEFA, the platform introduced a new type of token called “Add On” . Distributed free of charge to the holders of fan tokens of football clubs participating in the knockout stages of European cups, they bring new advantages. Among them, we note the possibility of winning souvenirs from competitions organized by UEFA, such as match balls, goal nets or corner flags used during matches.

The Technical Operation of the Socios.com Application

To operate, Socios.com relies on two different blockchains: a “permissioned sidechain” called Chiliz Chain and the Ethereum blockchain.

  • The Chiliz Chain: This is actually a copy of Ethereum, but modified to be dedicated only to Chiliz. Everything that happens on the platform in terms of voting and buying/selling is stored on this channel. This significantly reduces transaction fees by using a Proof of Authority (PoA) system to add a new block to the chain. If necessary, this chain is also scalable. It can easily accommodate an increased number of transactions, for example, during a vote where several million fans are asked to give their opinion.
  • The Ethereum blockchain: Everything that happens on the platform in terms of ERC20 transactions is recorded on this blockchain. This will mainly involve the exchange of tokens issued from FTO against CHZ tokens.

To briefly summarize, CHZ tokens are issued on the Ethereum blockchain, while tokens from FTOs are issued on the sidechain. Note that it is possible to convert your CHZ ERC-20 tokens (Ethereum blockchain) for BEP-2 tokens (BNB Chain) in order to be able to trade them on Binance DEX.

Importantly, the company is, at the time of this writing (June 2022), launching the Chiliz Chain 2.0, which aims to open up the Chiliz ecosystem to other players. This new solution has been in the test phase since March 31, 2022, and should be available to everyone by the end of the year.

The Chiliz Chain 2.0 meets three main objectives :

  1. Create an open ecosystem allowing third-party developers to build products that work alongside Socios.com. This may concern uses of fan tokens external to the application, but it can go even further, with, for example, the creation of new verticals going beyond fan tokens. We are thinking in particular of non-fungible tokens (NFTs), recently available in the Chiliz ecosystem;
  2. Evolve the CHZ token so that it becomes much more than the exchange currency used in the Socios.com application;
  3. Adopt the Proof of Stake Authority (PoSA) model in which all approved stakeholders (Socios.com partners, partner sponsors or others) will become node operators and benefit from the growing adoption of the network.

Concretely, this evolution of the Chiliz Chain will allow the project to fully embrace the Web3 revolution. Chiliz has already identified several fields of application on which external developers will be able to work:

  • Decentralized finance (DeFi) products;
  • Non-fungible tokens (NFTs);
  • The metaverses;
  • Play-to-Earn (P2E) games;
  • Ticket offices for events;
  • Loyalty programs;
  • Certifications for derived products.

In April 2022, Socios.com signed a partnership with digital development agency Wave. This alliance will allow fan token holders to access sports games directly on the application.

The Chiliz Business Model

Thanks to fan tokens, Socios.com partner clubs benefit from providential cash inflows in a complicated economic context. Indeed, they have suffered greatly from the measures taken to curb the Covid-19 pandemic. In October 2021, the company said it had generated nearly $200 million for its partners in early 2021 alone.

Chiliz has also benefited from the success of fan tokens sold on the Socios.com application, on which it receives transaction fees. Indeed, according to Alexandre Dreyfus, the platform charges an average commission of 30% on all revenue generated by clubs. Its earnings, therefore, amount to several tens of millions of euros since its launch at the end of 2019.

To increase its profits, Chiliz has every interest in multiplying partnerships and encouraging clubs to make maximum use of the platform. But it can also count on the Chiliz Exchange to earn revenue.

We must also not forget that it has a large sum of CHZ tokens in its treasury. Thus, the more the company will develop the uses of its token, the more it will take in value, and the more it will grow rich.

Chiliz Fan Tokens Face Competition

Chiliz and Socios.com invented the concept of fan tokens, but they now face competitors, and not just any competitors:

  • Binance: the largest exchange on the planet may be one of the first investors to bet on Chiliz and list all the fan tokens issued on Socios.com, but that does not prevent it from walking on its partner’s toes. The platform launched its first fan tokens last year in partnership with the Lazio Rome football club. She has since signed with French Formula 1 outfit BWT Alpine F1 Team, as well as two other football teams (FC Porto and Santos FC).
  • Bitci.com: much less known than Chiliz or Binance, the Turkish exchange bitci.com has also entered the race for fan tokens. Admittedly, it does not count any first-tier teams among its partners, but it plays with its own weapons by concentrating its forces on less famous sports organizations. And it works because at the time of writing these lines, it offers 26 fan tokens and is about to issue many more.

For the moment, Chiliz remains a good step ahead of the competition, but its success is attracting envy.

What are the roles of the CHZ token?

The uses of the CHZ token

At the time of writing this article, the Chiliz (CHZ) token has three clearly identifiable uses:

  • Its main function is to act as a currency for all purchases/sales of fan tokens on Socios.com;
  • The Chiliz (CHZ) token is used to pay all transaction fees on the Chiliz Chain;
  • Like all cryptocurrencies, the Chiliz (CHZ) token is also used for speculative purposes. Indeed, it is listed on the largest exchanges such as Binance, Coinbase, FTX, Kraken, Gemini and KuCoin. Some take advantage of its high volatility to trade in the short term. Others, who believe in the long-term potential of the project, prefer to hodl their CHZs for as long as possible in order to realize good capital gains.

When Chiliz Chain 2.0 launches, Chiliz (CHZ) holders will have the ability to stake their tokens to generate passive income. And it shouldn’t stop there because, on this open sidechain, developers will be able to build new solutions based on Chiliz, and thus invent new uses for the CHZ token.

The Distribution of CHZ Tokens

From a tokenomics perspective, the maximum supply of CHZ tokens has been set at 8,888,888,888 units. As of May 2022, the supply of tokens in circulation amounts to just over 6 billion CHZ.

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Overview of CHZ tokenomics

As you can see, the initial distribution of CHZ tokens was carried out as follows:

  • 34.5% was sold to investors who participated in the presale and the initial sale;
  • 20% serves as a reserve;
  • 15% are used for marketing operations;
  • 15% is allocated to strategic acquisitions;
  • 7.5% belong to the very first investors (seed investors);
  • 5% was donated to the team;
  • 3% was used to remunerate the advisors (advisory board).

The release of tokens that were not released at launch has been scheduled as follows:

  • The 5% of tokens allocated to the team have been released at the rate of 3% per month since January 2020. They will, therefore, all be released by the end of 2022;
  • The 3% of tokens reserved for advisors and the 7.5% belonging to initial investors have all been unlocked since July 2020;
  • Reserve, marketing and strategic acquisitions tokens, which represent 50% of total CHZ, were first released at 7.7% every 3 months between July 2019 and January 2021. Since then, they are always released at 7.7%, but this time every 6 months.

The destruction of tokens and the blocking mechanism

Chiliz (CHZ) was imagined as a deflationary token. To do this, the company uses a burning mechanism, the rules of which may change over time. As of this writing, it works like this:

  • 20% of transaction fees generated by trading fan tokens on the Chiliz Exchange are burned;
  • 10% of net proceeds from Fan Token Offerings (FTOs) collected in $CHZ are burned, with the rest locked for three months.

Since the Chiliz smart contract was not designed with an integrated destruction mechanism, the company sends the tokens to a destruction address (available via this link ). In May 2022, it can be seen that more than 65 million CHZ have already been permanently withdrawn from circulation.

Chiliz Team and Partners

The Chiliz Team

Chiliz can count on a team of nearly 250 people, which should approach 300 members by the end of 2022.

Here is a summary of the background of the 4 most important people for the project:

  • Alexandre Dreyfus – Founder and CEO: He has 22 years of experience as an entrepreneur in the digital world. He co-founded Winamax (poker room) and Chilipoker. He also founded the Mediarex group, the parent company of Chiliz and Socios.com.
  • Thibaut Pelletier – Chief Technology Officer: 13 years of experience in the development of applications and platforms for online gaming and internet media. He has also developed gambling and payment solutions for online casinos.
  • Max Rabinovitch – CSO: He has been a consultant in new technologies for 10 years. He is able to design a product from A to Z for his customers, which he has already done for brands like McDonald’s, Nestlé and Sony.
  • Magnus Linder – Head of Partnerships: He was responsible for sponsorship at Betsson (sports betting site) for 3 years. He was also responsible for sales and marketing in the Swedish football league.

Chiliz Partners

Chiliz has many partners that can be separated into several categories:

  • Investors: Binance, Ok Blockchain Capital, FBG Capital, Ceyuan Ventures, Bancor, John Gleasure (co-founder and executive vice-president of DAZN), Xavier Niel (founder and main shareholder of Iliad, the parent company of Free, co-owner of the newspaper Le Monde); Steven Nerayoff (CEO and founder of Alchemist, co-founder of Ethereum);
  • Advisors: Nicolas Maurer (CEO of Team Vitality), Sam Li (former NBA President), Dr DisRespect (video game streaming superstar);
  • Strategic partners: Rakuten Europe, Ballon d’Or, Ankr, Cobo Custody, Enjin, Bluehelix Cloud, Lagardère Sports, Paratica, BNB Chain;
  • Sports and Entertainment Entities: At the time of writing, Socios.com has partnered with over 125 organizations in 25 countries, primarily in the sports world. To consult the complete list of partner teams for the application, it is here.

How to Buy CHZ Tokens?

There are different ways to buy Chiliz (CHZ) tokens:

  • By credit card via the Socios.com application;
  • In cryptocurrencies on the most popular exchanges in the world like Binance, Kraken, Coinbase, OKX, FTX, Bitfinex, Kucoin, etc.;
  • In cryptocurrencies on the Chiliz Exchange;

Explanations for Buying CHZ on Binance

  • Register on Binance;
  • You will receive an email and need to click on a link to verify your account;
  • Deposit funds on the platform;
  • Click on the Market menu and look for the pair CHZ/USDT;
  • All you have to do is buy CHZ for the amount of your choice;
  • Congratulations, you are now in possession of CHZ tokens.

Our Opinion on Chiliz and its CHZ Token

The idea behind Chiliz is interesting and allows sports teams to monetize their fanbase while allowing the latter to benefit from many advantages. In particular, fan token holders can participate in certain decisions made by clubs.

It’s an innovative concept that allows both sports associations to have additional income, and fans to feel more involved in the management of their team. And the least we can say is that this model has found its audience: the Socios.com application already had 1.5 million users in 167 countries in April 2022.

Today, Chiliz stands as one of the few examples of the successful application of blockchain technology in the real world. Beyond its growing revenues, its success is consolidated through partnerships. It now has more than 125 partner sports entities in disciplines as varied as football, eSports, basketball, American football, ice hockey and cricket. The company intends to expand beyond the sports world, as CEO Alexandre Dreyfus said in October 2021.

As of this writing, the Chiliz (CHZ) token serves primarily as fuel for the Socios.com platform. It is used as an exchange currency for all transactions carried out on the application and is used to pay the fees necessary for the operation of the Chiliz Chain.

But in the future, with the highly anticipated rollout of the Chiliz Chain 2.0, it should see its usefulness explode. Indeed, developers will be able to take advantage of the opening of the Chiliz ecosystem to imagine new products and new functionalities using the CHZ.

Going forward, the growing use of the Chiliz token coupled with its deflationary aspect has the potential to drive up the price of CHZ. To achieve this, Alexandre Dreyfus and his teams can count on their dozens of prestigious and complementary partners. But above all, they will have to convince the fans in the long term.