Please note that I am not a financial advisor. The following article is for the sole purpose of providing educational information on the topic discussed.
Crypto disruption has arrived in the world of entertainment and sport. This has come in the form of fan tokens which have allowed fans of sports teams and other entertainment organizations to support them directly as well as to essentially become ‘super fans’.
Fan tokens can unlock key perks such as attending special events as well as having the ability to have a limited say in the direction of the team. So, maybe you could choose the transfer target for a sports team or the next design of a team’s kit and this brings us to Chiliz.
So, what is Chiliz blockchain? It is an Ethereum-powered ledger used by the Chiliz Coin and the Socios platform. The Chiliz Coin uses the ticker of CHZ and employs this blockchain technology by allowing sports fans to purchase fan tokens of their favorite teams on the Socios platform, thus strengthen the relationship between fans and other entertainment franchises.
Let’s dig a little further into this…
What is Chiliz Coin?
According to the official ‘About Us’ page of Chiliz. The idea for the Chiliz blockchain project came about and was created in 2018. During its launch, a total of 8.8 billion Chiliz coins were created. A year later in 2019, the same team that was responsible for the Chiliz blockchain project also launched Socios which is the world’s dominant fan token exchange that is used by many of the world’s biggest entertainment brands.
Socios and Chiliz have benefited from great mutual synergy. Socios’ strategy of landing exclusive deals with world-renowned sports teams has, in turn, promoted the use of the Chiliz coin which is then used to buy fan tokens.
Currently, the main way to buy fan tokens is by using the Chiliz coin. The Chiliz coin acts as an intermediary, you can exchange other cryptocurrencies or fiat currencies for Chiliz coins, then you are able to easily purchase your fan tokens from other fans or from the fan token issuers themselves.
Basic Tokenomics
Chiliz coin is actually an Ethereum token, meaning that it is powered by the Ethereum blockchain. To be more specific, Chiliz is an ERC20 token and an ERC20 token is a token created to format and facilitate smart contracts. For more information on what a smart contract is and does, please see the article below.
In addition to being an ERC20 token, Chiliz also comes in the form of a BEP2 token. BEP2 is part of the Binance Chain, which is part of the Binance crypto exchange. Which as of writing this article happens to be the world’s largest exchange.
To expand on this, thanks to the fact that Chiliz uses the Ethereum and Binance Chain blockchains, this will benefit the buyers and existing holders of Chiliz due to factors such as a large ecosystem of users and better performance.
Currently, BEP2 is highly preferred due to its lower transaction fees also known as ‘gas fees’ by people in the crypto community. Ethereum for quite a number of years has been struggling with exorbitant gas fees due to the Proof of Work (POW) mining system that the Ethereum blockchain uses although it is scheduled to be replaced in June 2022 with a Proof of Stake (POS) system.
Furthermore, the accessibility of the Chiliz coin is advanced further in another way. Apart from being able to buy it on the cryptocurrencies official site, Chiliz.net. You can also buy it from established crypto exchanges such as Kraken, Binance, and Coinbase (affiliate link).
This accessibility benefits the user, which in turn, helps to increase the affordability of the Chiliz cryptocurrency.
What can you do with Chiliz?
One of the selling points of fan tokens is that you can buy them with the Chiliz coin and that fans and the entertainment establishment can have a much closer relationship. In a way, it gives fans a say and some influence without the entertainment company having to share ownership.
Also, when you buy a fan token using Chiliz you are contributing to the success of a sports team or an entertainment brand.
On some platforms, you are also able to trade Chiliz coin for Bitcoin or Ethereum.
Is Chiliz Coin a good investment?
A positive that Chiliz has going for it is that it was designed to be the only coin used for purchasing fan tokens on the Socios platform and if the Socios platform continues to grow and acquire more teams that decide to have their own fan tokens, then this could ultimately result in the Chiliz token becoming more valuable.
In addition to this, Chiliz is also building strategic partnerships with American sports teams and is seeking to be the premiere coin that will allow fans to purchase fan tokens from the NFL, NBA, MLB, NHL, and MLS.
Also, Chiliz has already partnered with UFC and the Professional Fighters League so that CHZ will be used to purchase fan tokens of both organizations.
Another positive is the actual fan tokens that are associated with Chiliz. If these fan tokens become more and more popular, whether due to the fan token’s increase in price or that more fans are seeing fan tokens as a good way to spend their disposable income, then Chiliz is going to be used more widely; and with a maximum coin supply of just under 9 billion, this could have the effect of increasing its price.
And if Chiliz ends up becoming the default currency of fan tokens in general, then this also increases the possibility that you may experience profits from holding CHZ.
Now let’s talk about some possible downsides.
One of the big downsides of Chiliz is that you are not paid anything while you own it. With other crypto investments you can at least earn income from staking or with investment opportunities such as property and stocks, you are paid either a dividend or rent.
With the Chiliz coin, in order to financially benefit from it, you depend on someone buying the crypto coin from you. This can add extra stress to being a Chiliz investor as you will always be worrying about the price of your asset.
The volatile price history of the Chiliz coin is also something that you must consider. The price of Chiliz coin peaked at $0.7739 in mid-April 2021 and since then, it has not come anywhere near to this market price again.
At best it has reached around half the value of this peak. Additionally, there have also been a number of drops and bullish runs. This volatility shows how much of a dangerous investment Chiliz could be. There is nothing wrong with taking a risk. Islam permits this to a degree. The trouble is when you put in a lot of money that you cannot afford to lose. If you are going to put money in Chiliz, then only put in what you will not worry about.
Is Chiliz coin halal?
Yes, Chiliz coin is halal. The purpose and function of the Chiliz blockchain and Chiliz coin (CHZ) would be viewed as permissible by scholars who normally hold the opinion that cryptocurrency is permissible and even though CHZ is used as a currency on the Socios platform to purchase fan tokens, scholars would generally hold the opinion that CHZ is a utility coin and therefore classify CHZ as an asset and not a currency.
Final thoughts
Without a doubt, Chiliz has experienced a lot of success over some time. It has been criticized for allegedly promoting speculation by mostly unknowledgeable investors. At the same time, it has been praised for its positive impact of democratizing and revolutionizing what it means to be a fan.
To add to this, Chiliz has managed to help smaller sports teams and entertainment companies to survive during the difficult period that was caused by the pandemic.
No one can say for certain what will happen to Chiliz. Is it going to become the dominant currency that every fan needs to get a hold of or will it be replaced by something even better? All we can do is wait and see. What we can say for sure is that Chiliz is a safe and reliable way for you to purchase fan tokens. Its prospects as an investment are questionable at best.
And in the end, Allah knows best.
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