Several esports
companies have recently announced NFT collections and partnerships, piquing the
interest of investors and fans worldwide. Investing in a trend that is often
hard to understand can be risky. So, why do so many groups turn to NFTs as a
way to make money and get involved in the community?
Understanding NFTs
A non-fungible token,
or NFT, is a digital token that can only be used once and can't be copied. They
are coded to have unique IDs and metadata so that they can be found, checked,
and moved as the creator and owner sees fit. NFTs are kept track of on a
blockchain, which records all official transfers.
The news is full of
crazy stories about people minting and selling NFTs, like a 12-year-old who
made $60,000, but most people still don't know how these digital assets work or
why they should care. Ipsos says that only 13% of American adults know
"extremely well" or "very well" about NFTs.
On the other hand,
those who were sure of their knowledge were happy to invest, and 48% bought
sports NFTs. NBA games are summarized in short videos made by Dapper Labs, the
company that made the NFT marketplace NBA Top Shot. Because these NFTs were so
popular, the company was worth $7.5 billion.
An NFT can be
completely digital, like a piece of art, a song, or a clip from a big esports
tournament. They can also be used to hold an item that has been signed, a fan
experience, an event ticket, etc.
You can make, trade,
and sell these digital assets. When a token is sold, the person who made it
gets a money cut. This gives an esports team or organization a way to make
money in the long run. Even so, the value of an NFT can change depending on how
much people want it. This means that people who own tokens have a stake in how
well an esports organization does or how it looks to the public.
How esports groups use NFTs
In May, Virtus. Pro,
a Russian esports team, was the first esports team to sell collectible NFT
cards with pictures of its players. The CEO of Virtus. Sergey Glamazda said,
"People have been collecting player cards for a hundred years. The idea
was simple: make a card with a picture of a baseball player on it and sell it.
Years later, it became popular and spread to many different sports. People
started collecting, trading, and giving away the cards of their favorite
athletes, which led to a fully developed ecosystem. With the help of blockchain
technologies, this ecosystem is now part of the digital world.
A week later, the
team-owned CS: GO league Flashpoint worked with the available cryptocurrency
creator platform Rally.io to release its own collectible NFT cards along with
physical holo cards with pictures of the players in the league's current
season. Only 997 cards will be sold, half of the money will go to the
tournament, and the other half will go to the teams that Flashpoint has
partnered with.
As a result, several
organizations have expressed their desire to use NFTs as a way to raise money
and engage people. These include T1's DOTA2 team, EVOS Esports, Misfits,
Dignitas, G2 Esports, LDN UTD, WePlay Esports, Tim Singularity, and NRG
Esports, among others. Simplicity Esports President Roman Franklin stated,
"I see this as an opportunity for us to thank our associates for returning
to our gaming centers by providing them with unique events and items, such as
NFTs.
Challenges
Many countries and
private groups still keep an eye on the cryptocurrency market. Before your
esports organization can use NFTs, there are four big problems to solve or
things to think about:
●
Laws
and policies between organizations
●
IP
rights, including the likeness of a player,
●
There
isn't enough knowledge about NFTs and crypto.
●
There
are environmental worries about cryptocurrency.
Riot Games' strict
rule is that franchise spots can't sell advertising to cryptocurrency
marketplaces. The publisher didn't want TSM FTX to use its new FTX branding,
but it formed a partnership soon after.
Riot can work with a
cryptocurrency market because it controls how its League of Legends and
Valorant tournaments are shown on TV. Some countries don't let crypto be
advertised, so broadcasts can be changed to include or leave out on-screen
branding, depending on the situation. But it's much harder to remove the logo
of a crypto partner from a single-team jersey.
With NFTs, you should also consider whether you have
IP rights.
Lympo is a sports
NFTs ecosystem owned by Animoca Brands and has NFTs with the IP rights of
well-known athletes and organizations.
James Gatto is a
partner in the Intellectual Property Practice Group of the law firm Sheppard
Mullin's Washington, D.C. office.
Since more and more
NFTs aren't properly licensed, IP owners should consider changing how they
protect their IP. For example, teams, event organizers, leagues, sponsors, and
game companies should consider extending their trademark registrations to cover
trademark uses and classifications that include NFTs. They may also link their
brand to certain designs or "trade dress."
Of course, no one
will buy your NFT if they don't know what the heck it is. Please tell your
audience why it's important to your organization, goals, benefits, etc., so
they can join you. Last, people are more likely to think about how their
purchases affect the environment than they were in the past.
One estimate says
that the carbon footprint of an NFT transaction is likely to be more than 14
times that of sending an art print in the mail. When G2 Esports announced its
NFT project, the organization said that digital assets would be made using the
proof of stake system, which could be a more energy-efficient alternative to
Ethereum's proof of work system.
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