NEW KIDS ON THE BLOCK
CYCLING WEEKLY|January 06, 2022
Last year saw an explosion of blockchain-based initiatives in the world of cycling. Richard Abraham investigates how and why the sport fell in love with cryptocurrencies and NFTs
Richard Abraham

Earlier this year, Rally Cycling issued a statement on its website announcing the launch of its own cryptocurrency, WattCoin. The idea was that fans could apparently earn WattCoin by riding on their online training platforms and spend them on items on the Rally Cycling website.

“For too long cycling has been dependent on flawed revenue models, and while we are fortunate to have an incredible family of sponsors behind the team, some other organisations are not so lucky. Now, through WattCoin, we can start building a sustainable economic ecosystem,” read the statement, quoting Rally founder Aaron Charles.

The story started to unravel when Charles was asked, by a ‘reporter’, whether he fully understood the crypto-economy.

“Well, no. No, I don’t [understand],” he said. “But I don’t have to. Crypto is the future. It sounds to me like you don’t understand crypto, pal. WATTCOIN IS GOING TO THE FREAKIN’ MOON!”

It’s about here for the reader that the penny drops and a closer inspection reveals the story to be an April Fool. But it certainly had some people fooled.

But why not? Why not launch a cryptocurrency? This ‘launch’ was typical of the sort of ventures found in the blockchain economy: bold, brash and full of promise. In creating a witty April Fool, Rally unwittingly provided a neat summary of the state of play.

Cryptocurrency is a dark art that many people don’t fully understand, but currencies like Bitcoin are now lunging into the mainstream (see box). The blockchain technology that underpins cryptocurrencies is likely to play a part in the future of banking, supply chains, online security and aspects of your digital life, which these days means just about everything. Meanwhile nonfungible tokens (better known as NFTs, see box) experienced a boom in 2021; sales exceeded $2billion in the first quarter of the year alone.

This is all starting to have a big impact on pro sport. Cycling is no exception. The past 12 months saw the first cryptocurrency sponsorship agreement in the WorldTour and the first NFTs in both the sport and the wider bike industry. Supporters believe they are the future of the internet; critics believe they are an unregulated class of assets that amount to little more than gambling. So, what on earth is going on?

Google it

These days if we want to search something on the internet, we use Google. In fact, we just Google. We no longer Ask Jeeves. The same goes for Facebook, built on the shoulders of Bebo and MySpace. The first thing to understand is that cryptocurrency brands currently face something of an authenticity problem in a crowded, emerging market that mostly doesn’t understand what it is. Sports marketing is their solution. With plenty of investment pouring in, crypto companies are directing that money into professional sports teams and leagues.

The cryptocurrency exchange website www.crypto.com recently piled over $400m into a sponsorship land grab that includes French football club Paris-Saint Germain, the NHL, the NBA, American college football, UFC mixed martial arts and Formula 1. Rival brand FTX has dropped $360m on similar deals, including paying NFL star Tom Brady and his supermodel wife Gisele Bündchen $20m to front an ad campaign.

Meanwhile sports teams, strapped for cash after a pandemic blighted 18 months, are happy partners. Many have gone so far as to explore their own crypto ‘tokens’, essentially a club-specific value token that works a bit like a membership. Fans are encouraged to purchase tokens and token holders get various rewards. In the case of FC Barcelona, holders of $BAR get to vote on things like the new mural on the walls of the team changing room and are rewarded for doing so with things like meet and greet experiences with the players. The token’s value began at €2 and is currently trading at around €13 each.

“When stuff is on blockchain the transaction costs to get people to do things – vote or whatever – are very cheap,” explains Alex Sims, associate professor of law at the University of Auckland, New Zealand, and an expert in blockchain technology. “Even with the internet it was still messy, because you would have to check databases and so on. Now it’s so much simpler.”

There are financial gains too. ParisSaint Germain partially paid their new star Lionel Messi his signing-on fee in fan tokens. Said fan token rallied on Messi’s signing, with new sales totalling €30m in the aftermath of the move. That netted PSG €15m, a nice little clawback on their outlay.

Qhubeka makes a play

Speaking to the FT earlier this year to explain this emerging relationship in sport, Formula 1’s director of commercial partnerships Ben Pincus said: “I don’t think it’s opportunistic insofar as [crypto has] done really well through the pandemic, sport is on its knees [and] it will take its money from wherever it can get it from.”

For professional cycling, such bucket-shaking is less a pandemic novelty than a chronic condition. Besides a few superteams backed by billionaires or petrostates, financial insecurity is a hallmark. It was with this in mind that Qhubeka-NextHash became the first WorldTour team to partner with a cryptocurrency venture. The perennially fragile outfit trumpeted the arrival of its new sponsors on the eve of the 2021 Tour de France with a new jersey and optimistic talk of a five-year partnership. NextHash supposedly offers a cryptocurrency marketplace, payment processor, and its own crypto token.

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