DAOs can revolutionize Brazilian football with a new club-company model, says expert

Last week, the biggest cryptocurrency exchange in Brasil, Mercado Bitcoin, announced the termination of a sponsorship contract in force with Corinthians and presented plans for the founding of a new football team, whose administration will be in charge of an Decentralized Autonomous Organization (DAO).

By exchanging the direct association with one of the most traditional and most popular clubs in the country for its own team, Mercado Bitcoin surprised the market. It’s a bold move, but the exchange executives behind the idea are confident in the potential of decentralization provided by blockchain technology and cryptocurrencies to engage a fan-administrator community while increasing brand exposure.

With its debut scheduled for the end of this year and its name still undefined, the Mercado Bitcoin team will have the management shared by the holders of the 100 million tokens that will be issued in the initial offering to finance the start of the project. The exchange’s active customers will be distributed 3.5 million tokens through an airdrop which will automatically make them members of the new club.

According to Bruno Maia, sports innovation executive and CEO of Feel The Match, Mercado Bitcoin’s attitude could usher in a new era for company clubs in Brazil, as he explained in an article published in Exame on Monday, 30th:

“Mercado Bitcoin sheds light on a format that can attract dozens of other institutions and for which it can serve as a platform. It is a game of financial and cultural education.”

Next, Maia presents the main advantages that this new type of corporate structure of decentralized autonomous organizations has over the old and semi-amateur models that still prevail today in the administration of the main Brazilian football clubs:

“DAOs are organizations that represent the interest of a group of people who come together for a specific purpose and constitute a legal structure in the form of code, with specific rules of governance, in a blockchain network, eliminating the need for centralized leadership of the decision making. This code would, in a way, replace the obsolete club statutes and allow open interaction of all members according to what is foreseen and with the power of each of the members. This can be defined by the amount of investment of each or by any rule that is provided for in the code.”

Maia explains that the introduction of blockchain technology to the day-to-day management of football would ensure greater transparency, immutability and security in the decision-making processes of the clubs. Ultimately, smart contracts could do away with the centralized figure of the top hat, giving DAO members decision-making power according to rules determined by programming codes:

“This code would, in a way, replace the obsolete club statutes and allow open interaction of all members according to what is foreseen and with the power of each of the members. This can be defined by the amount of investment of each one or by any rule that is provided for in the code.”

According to Maia, DAOs could deepen a type of experience that is already being tested in Brazil through the launch and sale of fan tokens. This class of digital assets has become quite popular in Brazil over the past year, when the most clubs that play in the first division of the Brazilian championship launched their own cryptocurrency.

The fundamental difference is that in the fan token model, the managers and the company that issues the tokens determine how far fan involvement can go. In general, the choices and benefits granted to fan token holders are restricted to marginal issues, such as choosing alternative uniform designs or encouraging messages to be shared with players on match days.

With decentralized autonomous organizations, engagement can be taken to another level. In practice, the DAO member of a particular club becomes a kind of shareholder in a company:

“The exercise of these rights and responsibilities of each member on the DAO, takes place through tokens, which start to function as a kind of common shares in the financial market. The amounts collected from their sale enter the company/club’s cash, available to further develop the entity’s projects. Each of these tokens has its attributions previously defined in that organization’s code, as well as the rules that define conditions for their acquisition and transfer.”

DAOs and sport

In the USA, proposals that DAOs take control of sports entities, giving a collegiate decision-making power over administrative matters, began to emerge last year.

In May of last year, a DAO titled Krause House was formed with the aim of collectively raising funds to acquire a NBA franchise – the US Professional Basketball League. A collection of NFTs with values ​​ranging from 10 ETH (approximately BRL 90,300 at today’s exchange rate), 1 ETH (BRL 9,300) and 0.1 ETH (BRL 930) were launched to finance the DAO, establishing three different levels of association to their respective holders.

As one of the Krause House members stated in a report from Decrypt published in November last year, the purpose of the initiative was “to show that when fans become team owners, they become much more active and engaged, which can lead to better results for both the team and the businesses associated with the brand.

And in February of this year, a group of fans from the Denver Broncos, a team that plays in the Professional American Football League (NFL), formed the BuyTheBroncosDAO to try to raise $4 billion and take control of the team.

Neither of the two initiatives came to fruition and there is still no news of concrete experiences of DAOs associated with professional sports associations. Thus, Mercado Bitcoin can put Brazil at the forefront of this new management modality in football, popularizing initiatives of the same type here, also in other areas of society.

As Maia points out in her article, this is a still incipient model that has not actually been tested to prove its effectiveness:

“There are still weaknesses in the DAO model that have been increasingly corrected, such as improvements in issues such as privacy, smart contract limitations and even fraud resistance. It is too early to assess whether there is already maturity, especially in the Brazilian market for such an initiative, even though it is evident that it is a long-term project.”

However, just as cryptocurrencies have become increasingly popular as an alternative to traditional finance, decentralized autonomous organizations may also become increasingly common in the context of managing sports or cultural entities and even companies.

“New technologies allow us to transform the way we relate to each other and create the world around us. DAOs will be increasingly common in society in the coming decades and will find sport quickly. It is a matter of time before we feel the understanding and legal absorption of these new possibilities”, concludes Maia.

As Cointelegraph Brasil recently reported, Web3 also approaches football through metaverse. The transmission of football matches in immersive virtual environments is already a reality, and should create new ways of interacting between fans and their favorite teams.