What is fan token investment and how does it work?

As technology advances, new types of investments emerge and attract the attention of many investors. In this sense, it is important to understand what a fan token is — a crypto asset that has been used by teams and brands to engage the public.

Developed from blockchain technology, these tokens provide practical benefits to their holders. In addition, they can be traded on the secondary market and have their price appreciated, generating profit from trading.

Interested? So read on to understand what a fan token is and how you can make money with these digital assets!

What is a fan token and how does it work?

Fan tokens are a type of crypto-asset used with the aim of generating engagement with fans or consumers of a particular team, artist or brand. The aim is to approach and generate a connection with this audience by offering exclusive benefits.

To better understand, consider, for example, that a football team issued a fan token to its fans. In this example, each fan who purchases the crypto asset may be impacted in different ways by the club’s campaigns.

In the case of sport, participants may be entitled to advantages such as:

  • exclusive discounts on official products;
  • participation in marketing actions;
  • voting on commemorative uniforms or banner phrases;
  • between others.

It is worth noting that the benefits may vary depending on the characteristics chosen by the token issuer. Therefore, fan tokens differ from cryptocurrencies — such as bitcoin — as they are not intended to be used in financial transactions.

The focus of these cryptoassets is on the benefits and actions of engagement with the brand. Therefore, they are part of the category of utility token (or utility tokens). However, this does not mean that it is not possible to make money with the fan token. After all, they are also a type of digital asset that can be traded on the market.

What are the main characteristics of a fan token?

As you have seen, fan tokens work as utility crypto assets, with the aim of generating engagement in a given community. Thus, they are instruments of interaction with the public, whose operating parameters are defined by the issuer.

However, the main characteristics of these assets are authenticity and exclusivity. That’s because they are related to NFTs (non-fungible tokens) , or non-fungible tokens. NFTs work as a type of digital certificate that guarantees the authenticity of a physical or virtual item, such as photos and videos.

In this way, it is common for companies to develop digital strategies with fan tokens and NFTs. One possibility is to present the public with non-fungible tokens of remarkable moments of the team or brand.

How can fan tokens be used?

Regarding usage, fan tokens can be used in different ways. Discover some possibilities:

Contractual incentives

It is possible to use fan tokens to encourage the signing of players. That’s what happened with Paris Saint-Germain (PSG). In 2021, the team used this digital asset as a way to obtain resources from fans to sign forward Lionel Messi.

In addition, the use of the token allowed to generate engagement among the participants. After all, whoever acquired the tokens felt a direct part of this negotiation.

Polls and visits

Another use of fan tokens is to give fans the possibility to vote in certain commemorative events. Juventus, for example, allows cryptocurrency owners to participate in voting on the songs that will play in the stadium after the club scores goals.

In addition, the team allows token holders to compete for guided tours in the team’s arena. This is a way to engage fans, bringing them closer to the team and expanding the brand’s reach.

What are the advantages and risks of fan tokens?

Now that you understand what a fan token is and what its characteristics are, you need to assess its advantages and risks. As this crypto asset can be traded on the market, it is worth knowing these aspects to make proper investment decisions.

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Benefits

One of the advantages is that fan tokens offer several benefits guaranteed by their issuers, be they clubs, athletes or brands. Thus, they have become a more modern and customizable alternative to supporter programs, for example, which are standardized.

Another important aspect is related to its valuation. Although they are not intended for investment directly, it is possible to sell them on the secondary market using other cryptocurrencies .

In this market, you can trade assets with other interested individuals or legal entities, without contacting the issuer. Within this environment, the price of coins and tokens is determined by the law of supply and demand.

Thus, if interest in a specific fan token increases, the price of the digital asset may increase. For this reason, it is common for investors and speculators to see in these cryptoassets a possibility of earning income.

Scratchs

Regarding the risks, it is necessary to consider that the main one refers to the frequent fluctuations in the prices of crypto-assets. While there is a possibility of appreciation, there is also a chance of depreciation, which could result in a loss of capital.

In addition, another relevant risk is the possibility of loss of validity of tokens. This can happen if the club ends its partnership with the broadcaster, for example. In these cases, whoever has the tokens in the system and does not use them will have the assets withheld and worthless.

Is it worth investing in fan tokens?

After analyzing the main information about the fan token and knowing its risks and advantages, it is necessary to assess whether it is worth investing in this alternative. However, this is an individual issue, and it is up to each investor to decide what is most interesting for their strategy.

In this sense, to know more precisely if the investment is worth it for you, you need to consider:

  • your investor profile : understanding your profile is essential to assess the level of risk you are willing to take;
  • your financial goals: only by being clear about your financial goals will you be able to identify whether a particular alternative is suitable or not for your interests;
  • your level of knowledge: to invest correctly, you need to carefully study the market to understand which investments make sense for your needs and when it is worth making them.

Did you understand what a fan token is? As you can see, these alternatives can be interesting to get closer to a club or brand that you like. Also, it is possible to make money from these assets as long as they align with your strategy.

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