Chiliz: Add This One To Your Stock This Crypto Winter (CHZ-USD)
As the broad crypto market tries to find a direction to close out the year, there have been a variety of coins in the space that have held up considerably well since FTX (FTT-USD) collapse. Some are even standing over 100% since June lows. One such coin is Chiliz (CHZ-USD). Chiliz is considered a “creator economy” or “community token” founded in 2017 by Alexandre Dreyfus. In this article, we will look at the token supply metrics, the current focus of the core development team, the market performance of the core product, and the key risks to consider before purchasing the token.
The Chiliz blockchain is basically a sidechain that was built on top of Ethereum (ETH-USD). There are currently just over 6 billion CHZ tokens in circulating supply with 8.88 billion as the supply cap:
- Maximum token supply: 8.88 billion
- Supply in circulation: 6.14 billion (69%)
- Token price: $0.17
- Market cap: $1 billion
- Fully diluted cap: $1.5 billion
- Market Cap Ranking: 41
The original token distribution was over CHZ 3 billion for early investors from a pre-mine token sale.
These investors include Jump Capital and Binance Labs (BNB-USD) among others. The current token distribution shows that over 65% of CHZ is held by the top 10 wallet addresses.
Two of these wallet addresses are Binance addresses and the largest holder is a multisig wallet under the control of Chiliz. This is quite a significant centralization of control compared to other creator economy tokens like the Basic Attention Token (BAT-USD) for example. But the centralization of the Chiliz channel was a bit by design.
The first app built on top of the Chiliz blockchain is Socios. Socios is currently the main front-end consumer of the Chiliz blockchain and the same team behind Chiliz is behind Socios. Socios is a sports entertainment platform that allows fans of certain professional sports clubs to purchase “fan tokens” from those clubs. These fan tokens could be viewed similarly to NFTs, although they have a strong voting power associated with each token.
Token holders can vote on the actual decisions of the clubs the token is associated with. For example, Manchester City token holders can vote on what kind of uniform they would like the team to wear on any given day, or what songs they would like to hear played in the stadium after goals. These tokens do not give holders influence over organizational decisions such as roster building or staffing. Tokens can largely be thought of as supercharged fan club memberships with special powers.
The important aspect of the Socios platform and all fan tokens built on the Chiliz chain is the need for CHZ tokens for transactions. In order for fans to buy tokens from their favorite teams, they must have CHZ tokens as their in-app currency. While not all CHZs are currently in circulation, the remaining dilution risk is much less of a concern than it is in some of the other popular community or creator tokens.
Initially, the Chiliz blockchain was a closed chain that was used to focus entirely on building Socios as a proof of concept. The team behind the chain now calls it a PoSA chain, which stands for “Proof of Stake Authority”. Chiliz says this will allow the network to become more open to approved projects and protocols running on the Chiliz network and will make Chiliz less dependent on Socios in the future.
The Fan Token experiment has been a pretty big success so far in my opinion. There is a little less 1.8 million wallet addresses on-chain and 28.8 million total transactions. The project has received major endorsements from world-class athletes like Lionel Messi. Additionally, numerous professional sports organizations from the NBA, NFL, NHL and MLS have signed on as partners.
Despite interest from US-based organizations, so far only international clubs have released fan tokens to further engage with their communities. But even as the crypto market struggled and the NFT market crashed, CHZ saw a very positive trend in weekly active users since August:
Given the huge footprint of international club partnerships on the Socios platform, a big part of this increase in weekly active users is undoubtedly the anticipation of the FIFA World Cup. Moreover, the fan token market seems to have more resilience than the explosion of useless avatar NFT projects. This is demonstrated by the nearly 3-to-1 advantage Fan Tokens historically have over NFTs in gross sales volume:
|All time sales volume|
|Non-fungible tokens||$41.3 billion|
|Fan Tokens||$113.5 billion|
To be clear, much of this volume is certainly just speculative token trading back and forth by a small number of players. Either way, I think there is some potential for real utility from the Chiliz blockchain if Socios is opened up to the US market. And that brings us to the key risk.
There is no guarantee that Chiliz’s Socios consumer front-end will ever be viewed positively by regulators in the United States. But the organization behind Socios has taken a very cautious approach with jurisdictional risk as the platform is not available to US consumers and no US sports organization has issued tokens through the Chiliz blockchain. In my opinion, this caution was probably very wise. If fan tokens for pro teams in the US are finally allowed, I think the cap for CHZ is very high.
If Fan Tokens are not allowed domestically, CHZ could still grow significantly as long as there is still international interest in Socios and Fan Tokens without US clubs. So far, the interest in international club tokens has been real, but it is certainly concerning that the tokens have been used for speculative purposes to the extent that they have been. Despite the lack of access to Socios, US consumers can still buy CHZ through various exchanges and DeFi exchange protocols.
I already explored Chiliz in my BlockChain Reaction service and gave a little more detail about what I like about the CHZ token. You can read the further analysis here. I gave CHZ a “Best Token Idea” designation in the service and it has been one of the best performing assets in the BlockChain Reaction wallet and overall crypto market since that designation. We are still very much in the crypto winter. No one knows how long this will last or how far some of these pieces will go. But if you’re looking for solid long-term speculative bets in this market that have a high potential return, I think CHZ is definitely the one to put on your radar as the market continues to shed poor coins.
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