What are DAOs? Why might they revolutionize sports?
The term DAO is an acronym that stands for Decentralized Autonomous Organization. DAOs are systems used for the governance of Dapps, or applications that, instead of relying on centralized servers, are decentralized, meaning they leverage on blockchain platforms and on their distributed network.
What could be the role of DAOs in the world of sports? Over time, the figure of the fan has changed and undergone a revolution dictated by the new possibilities made available by technological development. To this day, fans no longer want to passively watch a game – whether it is on TV or live – today fans want to actively participate in the match, expressing their opinion, voting and being taken into account in the decisions of the club and athlete for whom they sympathize. Famous was the format Champions – The Dream, which soccer fans are still nostalgic about today, many years after it was aired on Mediaset networks. As of today, the fan figure is exponentially more devoted to interaction, and this cultural evolution can have positive implications for revenues but also for club management.
The wisdom of the crowd
DAOs are based on the sociological and statistical theory of the wisdom of the crowd. According to this theory, by harnessing collective intelligence, the average of evaluations given by inexperienced individuals, under certain conditions, could prove to be more accurate than the opinion of an expert. This theory is often applied on the Internet: one of the most famous examples is Wikipedia.
Through DAOs, holders of certain tokens can vote or, in some cases, make suggestions.
This would result in increased fan engagement and fan loyalty in the sports world.
Having the opportunity to determine certain corporate choices, see the effects they produce, and sometimes receive rewards for the right choices that were voted for, results in a virtuous environment orchestrated by Game Theory. Game Theory, which, precisely, is also behind the emergence of blockchain technology and the bitcoin whitepaper.
This scheme ends up incentivizing those who employ benign and winning choices, while disincentivizing through maluses those who implement other malicious ones. Through this mechanism, it avoids the risk of incurring situations in which any “malicious parties,” such as fans of opposing clubs may be, maliciously interact with the DAO and put their capital at risk.
DAO: gamification in the service of equity crowdfunding
Very often in the sports world we hear about popular share ownership.
DAOs could give a significant boost to this phenomenon by giving a decision-making tool that is always available and easy to use.
To date, popular shareholder initiatives in Italy have often been based on reward systems that are outdated and no longer suitable for today’s fan, let alone those of tomorrow. The main limitations of shareholdings are the inability to take substantial part in decision-making processes, the lack of economic-financial transparency, and the complexity of profit redistribution.
The use of a DAO would allow the creation of a kind of gamification where fans are rewarded by accessing higher-ranking decision-making processes based on the quality of their votes and participation. All of this could create an atmosphere of collaboration between corporate management and fans who would have a greater understanding of what the corporate dynamics are and the responsibilities that come with them, moving away from the simplistic view often held by “non-fans.” These new scenarios make the famous Fan Tokens almost obsolete, although their widespread use was necessary for an increase in the notoriety of the phenomenon.
We can consider tokenization of the corporate asset as an update of Fan Tokens that leaves the value inside the company and is expendable in tangible goods and services through dedicated promotions.
Early cases: from SailGP to CO ’92
DAOs are not a futuristic governance system; they are already being used in a great many projects related to the world of blockchain and cryptocurrency, and the first cases related to the world of sports are beginning to emerge. To date they are widely used in the world of E-sports and with excellent economic and engagement results. The personalities that to date are linked to the launch of what we can call “SportsDAOs” bode well.
In the world of racing, the co-founder of the giant Oracle and owner of SailGP launched a DAO in late March. The launch of the DAO was made possible through a technology partnership with one of the leading blockchain protocols, NEAR Protocol.
Just over a month earlier, the Red Devils’ champions Class of ’92 also launched a “soccer-centric” DAO. Class of ’92 is composed of Gary Neville, Ryan Giggs, Paul Scholes, Nicky Butt and receives support from Singaporean billionaires Peter and Kiat Lim. This is not the governance platform of a sports club-or at least not yet-but an investment fund governed by a DAO.
Even the NBA world has been touched by a DAO-based project: James Shamenski already calls himself on his Twitter “future owner of Pelicans in NBA.” Shamenski is precisely the founder of Krause House DAO, whose goal is to buy all or part of an NBA team, the New Orleans Pelicans. The deal would be financed through the sale of NFT conferring membership, an ambitious goal considering that the average price to buy an NBA team is $2.2 billion.
In the motorsport world, the project to date is that of MotorDAO. This project was also unveiled at the end of March by Chris Lencheski founder of Phoenicia, a former stable owner in NASCAR and CEO of IRG Sport +. Lechenski claims that all profits from the investments will be put into the DAO treasury and that 85 percent of the funds raised will be used for the acquisition of commercial rights of racing teams and drivers.
DAOs succeed in providing answers to many of today’s fan demands. The barrier to entry is the use of blockchain technology with which few are familiar, while others are skeptical.
Whether this phenomenon succeeds in achieving mass adoption depends greatly on the government regulations that will be enacted. Much will depend on the taxation on tokens and their status (are governance tokens utilities or security tokens?). U.S. Senators Lummis and Gillibrand have submitted a proposal in recent days within which DAOs will also be discussed. European legislation will have to look overseas to regulate a global phenomenon and one that needs international technological relationships.