The Story Behind Sport Value Tokens
Introduction
I joined Football Index in 2016. I was really excited by the idea — a stock market where instead of trading shares of companies you trade fantasy shares of football players. Then I left in 2019 and I started working on a different product, inspired by the same idea — a sports trading experience. In this article I will try to explain the evolution of the idea.
Football Index
Nothing like Football Index had existed. It was a project started almost by accident. The original idea came from the founder’s wife who said it would be fun to be able to buy shares in celebrities rather than companies. So he built a celebrity market, where celebrities would be ranked by media popularity. However, this didn’t bring a lot of interest and it really took off once they pivoted into football. Football is a religion in the UK. When I joined them in 2016, Football Index was an iGaming product, regulated by the UKGC. It was presented as a trading platform where instead of buying shares of companies, users buy fictional shares of football players, but with real money. Players were ranked by popularity (based on mentions in the media, which was called media buzz) and the holders of the most popular player would receive a payout (dividend). This was the original Football Index.
When I joined Football Index, I made two things:
- Built a more robust and more scalable tech stack
- Implemented a new way to score players based on their performance during the game (but the media popularity score was still kept because of the insistence of the founders).
In this format, traders would buy virtual shares in footballers and build a portfolio. Every day, there was a media buzz competition and the most popular player would pay a media buzz dividend to shareholders. On a match day, every player gets scored (this is similar to fantasy football games) and the best forward, midfield, defender would get dividends. This is what the web interface looked like:
Football Index really took off in 2018 and it achieved a hockey stick type of growth, reaching a turnover of 250M£ in 2019. This was mainly from the UK market (it was licensed in the UK and Ireland only). It became a big thing and a household name in the UK. There were many online and offline fan communities, and it looked like a great product, which was an alternative to traditional betting. The main selling point was that it allowed the conversion of football knowledge into financial gains. It was too good to be true. And it was.
The Collapse of Football Index
It looked like Football Index was onto something big. It had an amazing user community and it grew exponentially to almost reach the point of saturation in the UK market. Having access to internal data, I started realising the different issues that needed to be resolved:
- The product was great but not perfect, some aspects had to be improved.
- The media buzz in particular was bad from both user experience but even worse, it was making the business model unsustainable.
- FI used a market making algorithm which was very flawed.
- The share issuance model was flawed.
- The game mechanics of payout distributions were flawed and unsustainable
- Operational and Management issues
- Marketing was a bit misleading. There was to much emphasis on easy money rather than on the gaming and the zero sum aspect of it. It should have been made clear that it is a gaming product and not a financial investment.
Going in details is beyond the scope of this article and some parts could be very sensitive. The key issue in the business model was that funds from the sale of newly created shares were commingled with company accounts and booked as revenue. This created an illusion that the company is making a lot of money and also the illusion for players that they were making a lot of money. The model was such that market growth depended on new money coming in. And there was a huge risk of a “bank run”. If traders start withdrawing profits, this would cause prices to go down and in turn cause more and more people to sell and try and get their money out, which of course is only a paper profit. Similar issues have been faced by crypto exchanges issuing their own tokens and used as a collateral in their balance sheets.
I was trying to solve those issues while at Football Index, but as a CTO without strong equity, my influence was limited. So, I took the decision to leave before it was too late and work on my ideas on how to fix Football Index at the end of 2019.
Sport Value Market
The idea of Sport Value Market, was to do a better Football Index. I have also been passionate about blockchain and crypto currency since 2016. I saw in the idea of a football stock market a perfect use case for crypto tokens. The core concept of Sport Value Market was to build a market for the expected future performance of sports players in popular sports like football, cricket, basketball, etc. The core principles were:
- A sustainable, zero sum game. No fake money or Ponzi mechanics.
- Every athlete gets a payout based on his real life in-game performance
- Payouts are funded from a mix of fee revenue and funds collected from share issuance
- The is a free secondary market where anyone can trade shares of players any time
- Essentially money flows from poor performers to good performers
Here is an early design of the market view:
However, we faced two major challenges:
- Blockchain technology in 2020 was less advanced. In particular there were no layer two or other networks allowing for small transactions (less than a few dollars). With Ethereum, at its peak price, trading a token on the platform would have cost 150$+ in fees.
- There was no way this platform could have been regulated at the time.
- iGaming investors were not interested in deep blockchain technology
- Blockchain investors were not very interested in sports markets at the time
So we have built a non blockchain version of platform and a Free to play mobile app: Sport Value Market Free App. The idea of that app is to still offer a trading experience, but without putting real money at stake. Every new account starts with 1000 free SVC (Sport Value Coin) to trade. This effectively provides a fantasy sports experience, where players can buy and sell shares of players. Then they get points for the players they hold in the portfolio. One of the reasons for this specific implementation of the app was to avoid being flagged as gambling app and censored from the app stores. Also the hope was that it could be licensed to operate as a real money game of skill in many jurisdictions globally.
When the app was close to completion we ran out of funds and we could not find serious investors. At the same time (2020) Football Index and two other companies building alternative products (Footstock, Sportstack) went bust. This has shut the door for investment and hopes to get regulatory approval. Then, in 2021, cryptocurrency markets started booming and GameFi and Play to Earn (vs Pay to Play) became a thing. Technology had progressed with second layer and other alternative networks. This is when I decided to bring SVM into Web 3.0. After a few iterations, Sport Value Tokens (SVT) was born, as a Web 3 protocol.
Sport Value Tokens
Sport Value Tokens (SVT) is a multi chain protocol regulating the issuance of cryptographic tokens tracking real life performance of athletes and sports players. These tokens constitute a new alternative asset class. A protocol is a set of rules defining how computers can interact with other computers. In the web 3 context, it is typically a system implemented with smart contracts deployed on a blockchain.
SVT protocol regulates the issuance of tokens representing athletes. It also orchestrates the performance related payouts. Each player is scored like in Fantasy Sports, using stats from a data provider. The actual payout code is encoded in smart contracts, which guarantees full transparency and immutability of the rules. This is the main motivation for implementing SVT as a protocol vs a centralised platform. While some of the logic is off chain (data and scoring), the issuance and payouts mechanic is built with smart contracts. SVT is governed by a DAO, using governance tokens (called Sport Value Coins or SVC). SVC token holders have voting powers. SVT is also a revenue generating protocol. The fee revenue is distributed to SVC token holders.
SVT is also an ecosystem composed of:
- SVT protocol
- The community
- SVM Fantasy Free to play app
- SVM Fantasy real money app
- SVT DApp
- Any other third party apps and protocols
What follows next?
We have defined the protocol in a white paper and we are working on a testnet release. After that, we will start raising funds in order to launch it on the main net.
