Despite fan tokens having taken off nowhere more than in the world of soccer, with giants of the game like FC Barcelona, Manchester City, and Paris Saint-German jumping on the bandwagon, it may be a little-known karate promotion that really ends up showing their worth.

Fan tokens, which are cryptocurrencies of sorts, offer membership-like perks to buyers and an additional stream of revenue for those that offer them, but teams and other organizations in soccer and beyond have been accused by some of using them to make a quick buck without offering anything of real value to buyers.

Typical benefits include the opportunity to vote in polls (with varying degrees of significance), exclusive content, and the opportunity to win fan experiences, but there’s no reason the blockchain-based mode of authentication fan tokens offer can’t be used to grant fans more of a stake in an organization.

Fan token providers, like market leader Socios, have been quick to argue that they only really provide the technology and that the onus must be on the sporting properties themselves to offer real value via their tokens.

They’ve also sought to distinguish the utility tokens typically offered by sports teams that grant buyers some sort of function from security tokens, which are a type of investment like other cryptocurrencies.

For many, that distinction will mean little, with crypto simply being synonymous with a techy way to lose money quickly. But now, there is the chance to see what can happen when a sports organization dives in at the deep end and offers real engagement with fans through a utility token.

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In September last year, Karate Combat, which is positioned as the first professional full-contact karate league, announced that it was transitioning to a ‘decentralized autonomous organization (DAO)’ model of operation and that a newly launched $KARATE token would be used to grant fans a say on how it is run.

Provided to fans for free, the tokens will also allow them to play the league’s ‘Up Only Gaming’ concept, a web3 game via which players make predictions about fight results and earn tokens if they’re correct without losing tokens if they’re wrong. The purpose of this is to drive engagement in the league, with players able to earn more tokens and increase their voting power at no risk.

In Karate Combat’s words: “The $KARATE token both governs the league and gamifies the live viewing experience.”

All of this is to be administered through newly launched 'smart contract' apps, via which fans can collect their tokens, grow their collection, make fight picks, climb the leaderboard against other fans, participate in votes to help govern the league, and collect rewards.

“Over time,” its whitepaper posits, this mixed approach of distributed governance and gamification should see the league “controlled by the most active, informed fans, and the best fighters.”

The roll-out of these initiatives is being financed by an $18-million round of funding announced in April, with the organization’s co-founder Rob Bryan saying then: “The DAO will continue to supercharge our ongoing success and create a new category of entertainment within web3.”

Elaborating on this to GlobalData Sport, Bryan leaves little doubt that he feels this sort of model – or at least this approach to fan engagement – can be revolutionary for sports organizations.

“We really feel that this is the future of sports,” he says. “It provides a fan experience that, honestly, people demand today, and they really can't get anywhere else.”

The community

Karate Combat’s new structure will still see the league remain privately owned and its day-to-day operations will continue to be run by professionals but with input from fans into key decisions.

“The different areas of the company have different suppliers, and the fans will be able to vote and have input on those suppliers – in a very constrained way – over time,” Bryan explains.

Perhaps of most interest to fans, though, will be the ability to vote on what fights are made and which fighters the league recruits.

“Who's gonna fight who is a very important thing to the fans, and they should have that input,” says Bryan. “That's a simple thing for them.”

Fight rules are another area in which input can be taken. A decision about whether to add knees and elbows into the league’s rules has already been put to the Karate Combat community via Discord, the platform where community members interact. Based on the feedback, it was decided that knees would be introduced but not elbows, showing in a very real sense how the new model can allow fans to shape the league.

Decisions on the areas in which fans can have input won’t just come from Karate Combat either, with suggestions taken from community members too.

“We've had some incredibly good ideas come from the community that we've actually enacted,” says Bryan. “Everyone's really been excited about the way the transition has occurred and found a significant amount of value from the community.

“At the end of the day, sports leagues are about the viewers, and it really helps if you give them what they want, which is what we're trying to do.”

Up Only Gaming

For Bryan, web3 offers a ledgered means by which for sporting properties to offer incentives and give fans involvement, with tokens providing the mechanism to do that. While he acknowledges that the tools are very new, he believes their impact on sports could be huge.

“A lot of the tools that we're using didn't even exist two years ago,” he says. “Around that period when they came to be available, we had this idea for Up Only Gaming, and, of course, it seems simple, but I think it's really a game changer in terms of customer experience and customer acquisition. I think that's the killer app.”

Indeed, Bryan believes the Up Only Gaming concept will play a bigger role in terms of driving engagement for the promotion than any other aspect of the new approach.

“The way that works is the fans vote for the group of fighters they think are going to win and if those fighters win they get more tokens, and, if they lose, they don't lose anything. It's not regulated gambling – it's not gambling at all – but we think it provides similar excitement to the fans.

“We're sort of taking the fantasy sports model but turning it on its head, where we're giving to the fans for their interest and their fandom rather than taking away from them.”

Web3 in sports

Bryan notes that combat sports are perhaps better placed than many others to offer the type of fan engagement that Karate Combat is pursuing, such as matchup-deciding votes, describing them as “almost a real-life example of a protocol.” However, he argues that there’s been very little innovation in this area elsewhere in sports.

“When you look at traditional sports now, it's a very one-way conversation,” he says. “The consumer provides money for tickets. The consumer gives you eyeballs for free by looking at ads. Everything is a one-way street. And sports are such an exciting part of people – it's part of their psyche, it's part of who they are – that they're willing to do that.

“But, when you think about the future, we think that it's all about interaction, having input, being a part of it. And web3 is a perfect tool to do that. I think, when you think of sports 20 years from now, it's not going to be someone sitting watching their favorite team on TV, it's going to be someone who has a view and say in a community of the sport about every aspect of it. I think our setup allows us to get there over time.

“When you look at other fan tokens, the utility and the choice are quite limited. With us, we think the level of utility is much higher, even outside of Up Only Gaming. The amount of items that the fans have input into is much more extensive and we think much more engaging and provides much more utility.”

Bryan concludes: “We're this first crypto league, the first league that that's going all the way here. We think it provides a huge advantage in terms of brand growth and supercharging your brand growth. We think, if we're successful, it'll be a new area in crypto, and there'll be a number of people following us.”