Introduction

News flash: Crypto is here to stay. In 2021, the total market size for cryptocurrency crossed the $3trillion mark. Each day news outlets across the world are awash with crypto from the latest news to the most anticipated coins to the latest celebrity to join the Bored Ape Yacht Club.

The NFT market generated over $23billion in trading volume in 2021, with OpenSea, the world's biggest NFT marketplace, hitting $2.2billion volume already in January 2022. With so much money pouring into crypto, there is also a huge amount of hype. It’s exciting, but a delicate tension exists for new entrants - the complexity of this rapidly developing industry makes it difficult for consumers to separate the signal from the noise.

We’ve been in crypto since 2017 - and we’re passionate about how web3 has the potential to create richer fan experiences. Web3 is an all encompassing phrase to describe NFT’s, Metaverse, Crypto, smart contracts and community governance. We’ll define and explore some of these themes in more detail during this article.

This short introductory article is aimed for those in the business of sport, from individual athletes, agents, to commercial professionals working in the industry. We intend to highlight the key areas and terminology - so if you’re new to the sector, you’re in the right place!

We sit at the intersection between web3 and sport. At INTRA, we have a deep heritage within professional sport and entertainment and have built an international reputation for shaping best practices for emerging concepts within performance over the last 15 years. Our mission in web3 is to help athletes and creators develop deeper relationships with their fans and community, whilst simultaneously enabling fans to participate and be rewarded for their support.

Within this Part 1 article, will provide a summary of the following themes giving you an introduction to the space. Our twitter-native sport & web3 guide, vidiprint will provide a  ‘deeper dive’ on each area mentioned below:

• What is Web3?
• Where is the space now?
• Trend 1: NFTs - More than a corporate JPEG
• Trend 2: Individual athletes as web3 tastemakers

*It is important to note from the outset that the crypto industry is unregulated and high-risk (e.g. you could lose all your money). This article is not financial advice.

What is Web3?

Let’s start with a brief history of the web. Interacting with the internet has changed drastically over the last 30 years - below are simplified definitions to break down the complex, technological jargon associated with crypto.

In 1990, users were able to read the contents of a page online - this is known as Web 1.0, evolving to Web 2.0 in 2005, where users were able to read and modify pages, leading us to today where Web 3.0 is starting to form with the arrival of blockchain. Here users are for the first time, able to own parts of the internet with tokens.

Crypto is a form of digital currency created by solving complex cryptographic (mathematical) equations. It exists on a blockchain and is decentralized, meaning it is not controlled by a singular entity like traditional fiat currencies (e.g. central banks). The blockchain is the backbone of crypto and web3.

Bitcoin is the very first decentralized cryptocurrency, launched in 2009 and created by Satoshi Nakamoto. Bitcoin allows immediate sending of funds between users, and these transactions are visible on a public ledger - the blockchain. Ethereum is a decentralised cryptocurrency founded in 2013 by Vitalik Buterin, and currently second to Bitcoin in market capitalisation. It’s native token is Ether (ETH), and unlike Bitcoin, Ethereum allows you to store transactions AND code. Many tokens and applications (such as NFTs) operate on top of this blockchain.

NFT’s (Non-Fungible Tokens) are all the rage at present, with Bored Apes, Beeple’s $69million NFT sale (at Christies) and NBA Top Shot forming the most recognisable work. Contrary to popular belief, NFTs are often more than a standalone image - they are a membership pass to digital communities. NFTs are a unique & verified token to access, engage and represent your digital community. This may include exclusive merchandise, access to events, networking opportunities, through to the latest research and insights on investment.

Some NFTs are created by artists (e.g. digital art, animation, photography to music), some act as a gateway to a community enabling voting rights, or access to future NFT air drops, merchandise and invites to exclusive experiences and events.

Finally, we arrive at the metaverse, a network of 3D virtual worlds focused on social connection. You usually access metaverse environments such as Decentraland and Sandbox on your computer or through a VR headset, with the ability to create digital avatars to represent your identity in the virtual world.

Importantly all of these elements are interconnected, although all advancing at different rates within sport.

Where are we now?

Universal awareness of crypto is 94% globally among adults. Aided by crypto sponsorship deals across sports and popular NFTs, crypto is starting to emerge into consumer consciousness. Nearly one in three crypto consumers already own or use crypto, and in 2022, two in three of this group expect to increase their investment. There are already >180million ETH wallets (wallets holding ETH), and approximately 100,000 new wallets are created each day, highlighting just how quickly the industry is moving.

Most interestingly for sports professionals, North American sports fans are about twice as likely as non-sports fans to say they are familiar with crypto. Indeed sport has been quick to experiment with fresh approaches to creativity and commerce to compliment existing fan data strategies, from the Australian Open’s interactive NFTs linked to live match data to Manchester City FC and Sony’s proof of concept to render the club’s Etihad stadium in the metaverse.

The prime mover in the space has been NFTs which exploded in popularity during spring 2021, fuelled mainly by high profile launches in North America, which have quickly spread internationally. Perhaps the best known project is NBA Top Shot—officially licensed NFT collectibles from the National Basketball Association (NBA), in partnership with Dapper Labs (the company behind CryptoKitties) - generating $133 million in sales in it’s first week, creating an entirely new way for fans to connect with their favourite NBA athletes.

*There will be other players in the space. This snapshot is intended to be for illustrative purposes and will continue to be updated

The current sport web3 ecosystem is dynamic. To capture the current state of play, we have summarised this in the following 3 stacks; 1) Federations 2) Teams, 3) Fans & Community - which includes partners, crypto platforms and web3 experience partners. Please note that Individual athletes aren’t represented here, but we will discuss them in trend 2. The interplay between these zones will be discussed in Trends 1-5 (with Part 1 & 2 of this article).

What are the current trends?

Trend 1: NFTs - More than a corporate JPEG

Sport is one of the most powerful forces in global culture, and part of the fabric of our daily life. From 3.5 billion people watching the 2018 FIFA World Cup, to over 3 billion people tuning into the Tokyo Olympic Games. Action doesn’t just happen in the stadium, it takes place 24/7, on-demand and from the comfort of our home.

As sports organisations strategically leverage digital media to build direct connections with hundreds of millions of fans worldwide (outside the stadiums), these very digital environments are maturing - transforming from linear and transaction focused platforms into multi-dimensional, experiential and collaborative virtual worlds - most prominently through the launch of NFTs.

Whilst the initial focus of NFTs has been on a ‘sporting moment’ (e.g. NBA Top Shot) - the functionality or utility (e.g. the community or exclusive access) behind these digital memberships will continue to develop. Whilst the NFT market generated over $23billion in trading volume in 2021, NFTs for sports media is expected to generate more than $2billion in transactions in 2022, around double the figure for 2021.

1.1 Sports: NFTs have quickly become established as a new way to build deeper fan relationships. In 2021, we saw NFTs take on many formats, from Dapper Labs’ partnership with the NBA and forthcoming Ultimate Fighting Championship (UFC) partnership to package highlight clips which operate like trading cards, to the National Football League(NFL) and Miami Heat’s commemorative NFT ticket stubs, and Angel City FC’s NFT, offering member-only discounts and exclusive access.

Formula 1 launched NFT 3D models of their racing cars, which fans will eventually be able to race in the metaverse, Red Bull Racing launched a commemorative NFT celebrating Max Verstappen’s championship win and the Rugby League World Cup plan to launch an NFT platform for the 2022 tournament. NFTs are reshaping sport fans’ experience. By the end of 2022, 4–5 million sports fans globally will have purchased or been gifted an NFT sports collectible. In addition to having a more interactive experience, given the exponential growth of the NFT market, we believe many people are banking on the value of their NFTs increasing over time. However it is important to note that most sports NFTs sold to date have no ownership or commercial rights in the underlying media (in comparison to popular NFTs projects such Bored Ape Yacht Club where owners also own the intellectual property/rights to the purchased Ape).

1.2 Brands: Stand out developments in the NFT apparel space include RTFKT (pronounced ‘artifact’), creators of virtual sneakers and collectibles, who are one of the first exclusively virtual fashion brands and were recently acquired by Nike. IRL (In real life), sneakers are a $79billion market and are a cultural symbol for our time. Strategically, brands are capitalising on the hype around IRL sneaker drops and fandoms, as they enter virtual worlds, by launching their own NFTs, such as ASICs and Under Armour in 2021.

Interestingly, Nike is seeking to trademark designs across shoes and clothing for virtual goods, filing several patent applications to sell their product within the world of web3, alongside creating ‘Nikeland’ within Roblox immersive gaming site. Adidas announced their first NFT collaboration with Bored Ape Yacht Club which sold out in seconds, and most recently announced an NFT partnership with Prada.

All of these NFT projects have a much larger function, they signal an entry into the merging of realities across fashion, culture and gaming. As owners of these unique assets, owners will be able to dress their avatars across centralised platforms such as Meta and Roblox, alongside decentralized virtual environments such as Decentraland, The Sandbox, Gala Games and growing crypto gaming platforms. The early indications are that ‘status signaling’ with consumer goods will penetrate virtual worlds, developing into a significant market opportunity for major brands.

Trend 2: Individual athletes as web3 tastemakers

NFTs don’t just stop with the organisations, some of the most influential athletes are getting involved: from buying blue chip NFTs to launching their own web3 projects worldwide.

The most prominent is the exclusive private members community, Bored Ape Yacht Club where "floor price" (minimum payment to own a particular NFT) is 93 ETH (~$225,000) or their slightly more affordable derivative, Mutant Apes at a 18.99 ETH floor. Many celebrities have updated their social media profile pictures with their Bored Ape - signalling their association with the exclusive community. It’s worth remembering that all Bored Ape NFTs were originally available to mint for 0.8 ETH!

NFTs can be described as an intersection of technology and culture - it’s many consumers' first entry into crypto, and we are seeing athletes position themselves as tastemakers within the industry. The Bored Ape NFT provides a snapshot, athletes are active amongst a range of NFT projects, with much of the early adoption taking place in the US.

Additionally, athletes have capitalised on the crypto opportunity, from launching their own web3 companies such as Tom Brady’s Autograph, an NFT Platform connecting fans to athletes such as Naomi Osaka, Simone Biles and Tony Hawk, to Michael Jordan’s ‘HEIR’, a digital web3 community which will allow fans to unlock exclusive experiences and limited product releases from their favourite athletes. Former Major League Baseball (MLB) player Micah Johnson, created Aku World, a NFT project which exists at the intersection of business, technology, and culture, serving as an original source material for a Hollywood project. Not forgetting, NBA player Steph Curry who sold virtual pairs of his shoes as NFTs for $333 each.

The NFT market is still in its infancy, given the rapid growth projected within the space. On the ground, we have identified that athletes have difficulty understanding what NFT projects have artistic integrity, the appropriate price to pay, in addition the projected future value for this asset. You only have to open Twitter to experience the amount of noise generated each day by enthusiasts - so it can be extremely difficult to find a balanced view of the space. Finally, there is a significant barrier to entry to safely set up an account, trade safely and protect your assets (See ‘Risks and additional considerations’ section in Part 2).

So in Part 1 of this State of Play article, we’ve introduced web3 and given an overview of where the space is now. Within our first two trends we’ve covered NFTs from the standpoint of sports, brands and also individual athletes.

That sets us up nicely for Part 2 article (out soon) where we will cover:

• Trend 3: Crypto partnerships have arrived (and are here to stay)
• Trend 4: Play and Earn - unlocking new opportunities?
• Trend 5: Decentralized Autonomous Organisation (DAO) - one to watch
• What are the risks and additional considerations?
• Tips for winning in the space

Thank you for reading.

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About the authors

Soraya Thompson - Soraya (she/her) is a web3 culture consultant, and has been in crypto since 2017. As a bi-racial woman, she is passionate about creating richer experiences for womxn in web3. She maintains a portfolio of clients within sport, entertainment and the arts. She is currently Director of Strategy at Intra Performance Group having previously worked at VC backed startups Vivacity Labs, Farewill also the British Council. Reach out to Soraya on Twitter.

James Collins - James (he/him) is performance consultant with 15 years experience working at the top of elite sport and entertainment with clients including; Arsenal FC, Chelsea FC, France Football, UEFA and Team GB Olympic Teams. He is passionate about creating opportunities for people from diverse backgrounds. He is currently Managing Director of Intra Performance Group and a long-term crypto investor. Reach out to James on Twitter.

Disclaimer: This is not financial advice. Your capital is at risk.