Original title: How Crypto and Esports Are Fueling Each Other's Growth
Author: Andrew Hayward
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TSM CEO Andy Dinh (left) and FTX CEO Sam Bankman-Fried: TSM/FTX has played a leading role in cryptocurrency/sports trading
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Companies in the cryptocurrency and e-sports industries are already involved in transactions, NFTs, game project collaborations, and more.
Interviewed leaders from my own encryption company and famous e-sports team to discuss the reasons and future development of the gradual integration between industries.
The cryptocurrency exchange FTX announced in June 2021 that it had signed a ten-year, $210 million sponsorship and naming rights agreement with the leading e-sports team SoloMid (TSM). There was a sensation.
But this is not the first major move to align the two industries. A few years ago, popular teams like OG and Team Vitality launched encrypted fan tokens through the Socios platform, generating revenue while allowing fans to participate and vote on team decisions.
Immediately afterwards, cryptocurrency companies such as Coinbase, FTX, and Uniswap cooperated with mainstream teams, tournaments, and leagues, and a large number of sponsorship deals broke out in 2021. This trend continues until 2022, with NFT and Web3 initiatives for teams and leagues emerging, and NFT-driven game tournaments are on the rise.
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From DM to TSM FTX
Esports and cryptocurrency players have a clear overlap: both are male-dominated industries, made up of young, tech-savvy adults who work in the video and gaming industries. They value digital products and have seen esports and cryptocurrencies evolve from a minority fun to a mainstream industry.
The FTX-TSM deal is not only the largest dollar-denominated collaboration between a cryptocurrency and esports company, but also an ideal case study. Believe it or not, changing the team name to FTX TSM contributed to this$210 millionThe trade conversation started with a private message on Twitter.
According to TSM Vice President of Operations Walter Wang, the team's CEO and founder Andy Dinh was sinking deeper and deeper into the cryptocurrency rabbit hole when he suddenly sent a private message to FTX CEO and founder Sam Bankman-Fried.
Bankman-Fried is a well-known League of Legends fan, and TSM is one of the most well-known teams participating in the North American League of Legends Championship Series (LCS). They apparently met over a common interest, and things happened one after another.
"They started communicating, and after a few private messages and a few phone calls, the idea of working together came together. From that moment on, we went all out," Wang explained. Completed within two months. It was one of the craziest moments of Wang's working life.
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League of Legends LCS league and FTX official announcement cooperation tweet
FTX doubled down on its investment in esports in August 2018, when it announced sponsorship of Riot Games' League of Legends LCS league for seven years (terms not disclosed). In April of the same year, the Brazilian team Furia revealed to Esports Insider that FTX signed a one-year contract worth approximately $3.2 million with the team.
Such deals come as FTX is also investing heavily in traditional American sports, having previously signed contracts with Major League Baseball, the NBA's Golden State Warriors and the Miami Heat. Meanwhile, stars like Tom Brady and Steph Curry have emerged as investors and ambassadors. In January, Bankman-Fried appeared on Decrypt's gm podcast to talk about the impact of his esports industry initiatives.
“The brand power in esports is much greater than in traditional sports,” Bankman-Fried said.
"It's a different audience, and for some audiences, not most, but some audiences, it's like the most impactful thing in the world." He continued, "Trying a more targeted , targeting specific audiences that we believe have a high degree of overlap."
Bankman-Fried explained that some of the metrics they track around crypto and esports are “ridiculously high,” but FTX doesn’t see metrics as a “panacea and endpoint” to justify such investments. He also added: "In some ways, it's hardly an indicator-driven thing."
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“Not for the faint of heart”
Companies in the crypto industry want an audience for esports, and esports startups need cash. It has long been an open secret that esports teams burn through cash in the short term, hoping to attract more attention as the industry grows, which will eventually pay off. Countless teams and leagues have gradually fallen apart in the process.
With esports teams going public, including David Beckham-backed Guild Esports, team funding has become even more stretched. For example, Guild announced a loss of nearly 6 million US dollars in the most recent six months, and was forced to lay off employees. Team Astralis posted a loss of $7.9 million in 2020 and a net loss of $5.2 million in 2021.
FaZe Clan listed on Nasdaq in July through a SPAC merger with a valuation of $725 million. The company disclosed a loss of $36.9 million on revenue of $52.9 million in 2021. On the flip side, Danish esports club Copenhagen Flames celebrated a $6,351 profit in 2021, the only team to share positive financial details for the year, according to Hitmaker.
“Running an e-sports team is generating electricity for love, and promises that one day there will be great results.” said Mark Donovan, co-founder and CEO of Kolex, a Web3 startup that provides NFTs for e-sports teams. "Even for an organization that runs an esports competition, a lot of it is the same, and it's been 20 years. It's not for the faint of heart, that's for sure."
Even the most successful esports teams have not been immune to the recent recession. In July, what Forbes called two of the most valuable teams in esports, TSM FTX and 100 Thieves, laid off staff, as did many cryptocurrency firms.
While the digital-first industry has seen viewership explode amid the impact of the pandemic, esports leagues have yet to attract the cash or mainstream attention that top traditional sports leagues have. But for an audience with potentially substantial overlap with cryptocurrencies, as Bankman-Fried suggests, esports sponsorships could offer far greater value.
Donovan said: “Sponsoring these leagues is relatively inexpensive right now in terms of the size of the audience and how well they fit with these companies. Going to sponsor traditional sports leagues is much more expensive and probably not cost-effective.”
Sponsorships make up the bulk of team funding, and such crypto transactions have remained steady since early last year. Coinbase sponsored famous clubs like Team Liquid, Evil Geniuses, and BIG, the last of which was a "multi-million dollar deal" for each team, while Uniswap backed Team Secret in a deal voted by the DAO.
Coinbase signs with major tournament operators ESL and BLAST. Earlier this year, Team Vitality received sponsorship from blockchain platform Tezos, while exchange Bitstamp sponsored teams Immortals and Guild. Bitstamp lost about $5.5 million on Guild’s three-year sponsorship terms, while Immortals’ terms were not disclosed.
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Blockchain recoil
But this partnership has not been smooth sailing, mainly becauseSome gamers are resistant to cryptocurrencies, especially NFTs.Common complaints include the environmental impact of certain blockchains, the prevalence of cryptocurrency scams, and what many believe are game publishers using NFTs as another way to steal money from players.
NFT is a blockchain token that acts as proof of ownership of an item. In addition to items such as PFP and sports collectibles, can also represent usable video game items such as avatars, weapons, or digital lands that can be exploited and monetized in metaverse games.
Those who support NFT games believe that this technology will shake up the distribution model of traditional games, provide players with more benefits by reselling items in the secondary market, generate reward tokens through playing and earning models, and have a say in management , and potentially use interoperable NFT items across multiple games.
“We do believe that over time, people will create a lot of fundamental value through NFTs, cryptocurrencies, and blockchains,” said TSM’s Wang, who recommends long-term ongoing cryptocurrency education to teach players the perceived benefits of Web3 technology key. TSM FTX also partnered with Solana project Aurory for an NFT airdrop last fall.
The NFT cards sold by Epics are inspired by the players and teams of Counter-Strike: Global Offensive (CS:GO) and PUBG mobile games. Donovan recognized the potential of NFT ownership after seeing the demand for rare weapon skins in the CS:GO game, which have sold for hundreds of thousands of dollars.
He said, "In e-sports, there are some leaders who especially like NFT because they are gamers and technology leaders. But if you look in Discord, there is a large group of players who also despise NFT." Donovan also said that it is necessary Educate players and let them know that NFTs are not just expensive PFPs.
Chris Hana, vice president of business development at Kolex and former CEO of esports business publication The Esports Observer, said,NFTs, like CS:GO skins, capitalize on people's desire for digital status symbols.He sees other parallels, including that cryptocurrencies are facing a similar backlash to what esports has faced.
“It’s the same resistance,” he said. “There’s always someone who loves it and burns for it, and someone who thinks it’s bullshit, it’s not going to work, it’s all a hoax. There’s always going to be a lot of skeptics.”
But Hana also seesWeb3 as a buzzword by startupsAccepted, like esports before it, this is a trend. Businesses will try to raise money in order to appear high-tech. Words like "crypto," "blockchain," and "metaverse" arenew terms that had to be proposed, Let others feel that it is the most advanced and cutting-edge thing.
Blockchain technology brings tangible benefits to the functioning of the esports industry. However, leagues and teams have shut down amid claims of unpaid players and staff, unfair financial splits, and an overall lack of transparency.
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Web3 team
Even amidst the skepticism, esports companies are building Web3. Popular team G2 Esports announced a Solana-based NFT collection in January as their ticket to a private "Legion of Samurai" fan community. The pact between G2 Esport and cryptocurrency platform Bondly has broken down due to a lawsuit from the esports organization.
Although SolanaKnown as an environmentally friendly blockchain platform, and uses far less energy than blockchains like Ethereum, G2 Esports still faces attacks from fans. Ivana Brecek, Director of Digital Innovation at G2, once again stated,Cryptocurrency education needs to be enhanced.
“At G2, we believe that NFT and blockchain are the technologies of the future that will fundamentally change the way we interact with digital goods, and we want to be at the forefront of this technological revolution.” Brecek told Decrypt.
Another popular team, 100 Thieves, launched an NFT free mint through the Ethereum scaling solution Polygon, and sent 300,000 of these collectibles within 24 hours (avoiding the use of NFT terms). At the same time, Team Vitality plans to issue NFT through Tezos, and ESL has also launched an NFT platform on Immutable X, an Ethereum extension platform.
However, for e-sports organizations, competitions are just one type of business model.The team has its own live broadcast anchor and Internet celebrity, and they are developing life content and fashion products.TSM, for example, has technical services like esports analysis and training app Blitz, while 100 Thieves is even developing its own games.
Creating a Web3 platform and experience is a potential next step for the team.
Misfits Gaming is a prime example. The organization, which operates franchise teams in League of Legends and Call of Duty, announced plans to launch a new Tezos-based platform called Block Born that will release NFT games and launch content such as tournaments around them. The purpose of Block Born is to highlight games that are ready for the tournament.
"We wanted to find an opportunity to do something," said Will Pazos, Block Born's senior vice president, when announcing the platform in March. on the game."
Meanwhile, the hugely popular FaZe Clan, whose founders and influencers are now internet celebrities, has heralded major moves in the Web3 space.
In a recent GQ interview, FaZe CEO Lee Trink said,He wouldn't be surprised if 80% of the team's revenue came from Web3 within a decade.In the same article, the company's Web3 lead, Tarek Mustapha, appears in a digitally enhanced photo as Mynt, a digital avatar he created in the metaverse.
FaZe Clan's chief strategy officer, Kai Henry, participated in a panel discussion hosted by Ethereum metaverse game The Sandbox at NFT NYC in June. He and Sandbox's co-founder, Author Madrid, teased some sort of undisclosed FaZe game activation code. Henry also talked about FaZe Clan's approach to building in Web3.
"We're taking our time and making sure we're aligning with people who have the best interests of the community in mind, rather than forcing us to do what they think we should do," Henry said. "Over the next year or so, you'll see us on that front." A big step forward.”
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"Just to participate, right?"
The growing convergence of cryptocurrencies and esports has now come full circle. We've already seen a revamped version of CS:GO that rewards players with Bitcoin via the Lightning Network, and now NFT game makers are hosting their own tournaments with big prize pools.
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Axie Infinity event tweet
Community Gaming is the official tournament operator of developer Sky Mavis for the Axie Infinity Championship. The company partners with other Web3 game developers to host tournaments with prize pools and famous esports commentators, helping to raise awareness and create a competitive community around such games.
Co-founder and CEO Chris Gonsalves told Decrypt: "It's all about participation, right? People get bored playing matching games all day, and they want a more social experience. When you get everyone together for an organized event , which is a very important and valuable thing for the community."
Immutable's card racing game Gods Unchained is another long-running NFT game that has hinted at esports ambitions for years, but has yet to hold any large-scale tournaments.
The game's website notes that $570,000 in prize money has been amassed so far, however Immutable recently announced that it will start with small, community-managed tournaments. Immutable Games Studio lead studio lead Justin Hulog, formerly of Riot Games, told Decrypt that the initial tournament has attracted hundreds of players, with more proposed in the future.
"Esports is an intrinsic part of Gods Unchained, as skill and strategy are at its core," Hulog said. "We're challenging the misconception that Web3 games aren't fun, and believe that esports can showcase what players love, like competition."
In the world of Web3 gaming, it's easy to overlook the fun, and speculation over NFT and token prices fueled Axie Infinity's surge and hastened its demise last year. Some early NFT games feel more like DeFi apps masquerading as games than strong games with NFT and token elements around a convincing core.
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ev.io event tweet
He suggested that the next wave of games could make NFTs a dispensable but desirable thing, spurring players' demand for digital status, but at the same time ultimately seeking to provide the masses with a fun free-to-play game to enjoy. He highlights online shooters like EV.IO, BR1, and Undead Blocks, each of which is played onNFT enhancements based on tried and true types.
Community Gaming partnered with NFT gaming marketplace Fractal to host a $10,000 contest for EV.IO this spring. Justin Kan, co-creator of Fractal and co-creator of Twitch, said he thinksSuch events are both fun marketing and a useful refactoring of the NFT game to have fun and compete instead of putting speculation first.
"We're seeing more Web3 games using esports competitions as a go-to-market strategy, which is a nice cultural shift because it puts games first. Players like fun and competition. And to get players, Blockchain games should provide a great gaming experience, and a good game is the best way to achieve that," Justin told Decrypt.
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