Member Insights: Blockchain 101
August 12, 2022
Sandy Case is the Chief Strategy Officer of iSportConnect, he opened the Web3 Summit at the Emirates stadium last month and in this article he explains some of the basic fundamentals of Web3.
What is Blockchain?
Firstly – many people believe that blockchain is somehow the same as cryptocurrency but it is merely the technology which underpins cryptocurrency. This advanced yet young technology is already transforming a multitude of sectors including finance, insurance, health care, shipping, logistics, and energy sectors. Blockchain technology is being integrated into business processes to bring another level of trust and transparency across industries globally but only recently have blockchain companies started to bring this disruptive technology to the sports industry
In simple terms, blockchain is a digital, decentralised public ledger that records transactions. It is like a giant digital textbook, where an invisible person infinitely records every single transaction that ever takes place. When fresh transactional data is added to the network, a new “block” is created and attached to the existing “chain” of blocks, hence the name.
Security: This is one of the original principles on which blockchain is based as all transactions are immutable and irreversible. Attempts to hack the information can be easily spotted and, all records are encrypted and the identity of participants is anonymous to the network, meaning that anonymity of transactions is also a feature.
Speed and efficiency: Transactions can be validated and information added almost instantly, from anywhere in the world, 24/7. This of course depends on which kind of blockchain you use, but for some it’s a particularly exciting feature with the potential to disrupt a lot of industry.
Control: blockchain has the potential to empower people, whether athletes or other individuals, with greater control and privacy over their personal information and the ability to create and trade digital assets.
Sectors that blockchain technology is already disrupting
Aside from cryptocurrencies, blockchain is set to disrupt several industries as it becomes more accepted by the global economic system – remember the basic user cases of security, speed and control we discussed previously
Finance: An early adopter as there is huge potential to unlock efficiencies and eliminate intermediaries and middlemen. For example, blockchain can be used for instant, cross-border payment settlement and remittance, whilst also improving verification and security of transactions.
Governments and organisations: Are looking at blockchain to help them secure identity information and other personal credentials for citizens (allowing citizens far greater control and privacy over their personal information).
Logistics and supply chain-tracking: Blockchain allows transactions to be recorded and monitored on a digital ledger. This concept can be used to track the provenance of goods in a supply chain. In 2019, UPS invested in and launched a blockchain platform aimed at improving merchant supply chains.
Cybersecurity: A huge problem for the global economy and expected to cost the world $10.5 trillion annually by 2025. Blockchain could alleviate this issue, by decentralising assets, data and security infrastructure, thereby putting it all out of reach of hackers. IBM has already incorporated blockchain into its business and created its own blockchain-based system described as the “leading open-source blockchain for business platform.” In other words, it allows businesses to digitise transactions through a secured ledger system.
How big is Blockchain?
In the grand scheme of thing blockchain isn’t that big compared to other areas of the technology world, however, what really matters is the direction in which it is heading.
In terms of the hard numbers, Statista estimates the market size was $6.92 billion in 2021. By 2027, the industry is estimated to be worth $162.8 billion, a near 24- fold increase.
If we compare blockchain to the Internet whose development started in the 1960s. But it wasn’t really until the late 1990s and the turn of the century that it really exploded. Today, the internet is a foundational technology. That means it’s a core part of the fabric of society providing a portal into the digital world. We have digital lives, and organisations now are all online. This is a radical shift from, say, 25 years ago. This transformation has led to the market for internet service providers being worth around $1.1 trillion in 2021.
So, for blockchain to get close to the internet there’s a long way to go and blockchain is not yet a staple part of society. It is still not widely accepted or understood by everyone. However, the potential is there to be bigger than the internet but it is a few decades behind meaning blockchain is currently now where the internet was in the early 1990’s and we can see how much has changed since then.
Some use cases in sport
Sport will be no different than other organisations in how they can adapt blockchain technology into their business model. Let’s go back to the basic user cases of security, speed, control.
Rewarding fans: Blockchain-based reward programs can create higher levels of engagement and provide real-time rewards and redemptions. Blockchain enhances loyalty rewards by creating a user identity across all digital touchpoints. Additionally it allows for the trading of digital assets that allow loyalty rewards to be used with partnered brands.
Memorabilia: The 5bn dollar sports memorabilia industry is built on a system of trust to verify the authenticity of each item. This dependency will end as human specialists will be no match for blockchain technology and immutable information. Blockchain technology can create individual authenticity for every piece of memorabilia to ensure perfect identification.
NFT: The word NFT is confusing, and many organisations are sensibly renaming them ‘digital assets’ or ‘digital collectibles” They will come into their own when combining rewards in both the digital world and the physical world.
A confusion for many is that 1) there are many bad examples of NFT’s that are little more than a digital jpeg and 2) there are so many different platforms where people are launching their NFTs meaning that it’s hard to trust which platform is best.
LightCycle, Glorious, RealFevr, Sorare, OpenSea, Fayre, Rarible, Enjin, Nifty, Dibbs etc etc. Again, when we look back to the development of the internet many big names fell by the wayside as we learned and understood what works and what doesn’t – anyone remember Beenz, AltaVista, Lycos, Geocities, Boo.com, Netscape, Go
Betting: Blockchain can be used in sports betting by using smart contracts on a decentralised platform for payment of automated odds. Blockchain will create more trust and ensure fair betting. It offers increased security and reduces human error.
Athletes: Athletes can tokenise themselves and raise funds through the sale of tokens allowing fans to crowdfund players in return for pre specified financial benefits
Ticketing: Blockchain will make control and distribution of tickets easier and faster enabling immediate refunds and insurance claims. Organisers can control the re-sale in any secondary market ensuring authenticity and reducing fraud and ticket touts. Precise knowledge of each ticket holder can help with problem fans.
Broadcast: Added security will ensure illegal streaming can be virtually eradicated and only those with agreed permissions can gain access. Bandwidth requirements and costs should be reduced.
It’s an interesting time in blockchain and we are still trying to figure out what business models could work in this new space, and what companies will look like. It is likely we will see the continued growth of new markets for NFTs and digital collectibles, and new business and funding models that we may not have thought up yet. Remember the internet analogy and the fact that so many early business models fell by the wayside. We need to be patient although it is likely that the pace of adoption will be considerably faster than the internet adoption as society understands how technology can improve our lives. Blockchain will be another cornerstone of our daily lives specifically with security, increased speed and control are obvious advantages.