Would a DAO be able to save Chelsea FC? Crypto adoption is gaining speed. In particular, Decentralized Autonomous Organizations are hot in 2022 and growing rapidly. During this article, we discuss the role of DAOs in decentralizing ownership.
ChelseaDAO aims to allow football fans to participate in the club’s governance process. Football DAOs have been a recurring topic for automation experts since the 70’s. DAOs can help a group of people deliver a number of operations – from automated financial services, to community-generated media and plenty of other applications that have not yet been realized. The DAO initiative suggests a realistic implementation of the technology on under-fire Chelsea FC. The club was seized by the British Government indefinitely, leaving one of the crown jewels of world football unable to sign new contracts, sell match day tickets.
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The article has been written by Xenofon Kontouris, on behalf of Athens Labs. Contact Athens Labs about ChelseaDAO here.
The future of football is wildly different from what you imagine. Software eats the world, and Football is no different. Get ready for the DAO-fication of the Beautiful Game.
Football DAOs are inevitable.
This article will explore how a Football DAO could operate today, and what benefits and risks it may hide for both the fans and the future of Football. The article also introduces the “ChelseaDAO” initiative which suggests a realistic implementation of the technology on under-fire Chelsea FC.
Chelsea FC has been a repeated media point over the past two weeks. It’s not good news.
Over the past 20 years, Chelsea FC has become one of the world’s most dominant and popular football clubs. Under the tutelage of Roman Abramovich, Chelsea FC won every major competition that they’ve been part of at least once.
However, due to the unwarranted and unexpected invasion of Ukraine by the Russian Federation, the series of sanctions facing Russia-tied individuals, including those on Mr. Abramovich, have unearthed previously unimaginable changes.
Where rapid changes exist, so do unprecedented opportunities.
Chelsea FC, current World and European Champions, is one such opportunity.
Over the past weeks, Chelsea FC was seized by the British Government indefinitely, leaving one of the crown jewels of world football unable to sign new contracts, sell match day tickets and merchandise. Chelsea’s bank accounts have been frozen, leaving the Club unable to even afford the gas needed to power their Bus trips to and from competing stadiums.
UPDATE: More leniency was offered to Chelsea FC in Mar. 13th, but the situation remains financially dire. This is an ongoing situation, so facts might change.
On March 11th, the UK government stated that they will allow the sale of the club to interested buyers. Valuation is roughly at 2,5bn GBP, and interested buyers are due to submit a bid by the end of March. All proceeds of the sale should be funneled to the people of Ukraine.
Now, the list of suitors has ballooned. Numerous billionaires are one-upping themselves in order to take control of one of the Footballing world’s biggest brands. At this exact time, the information on who will own Chelsea FC is still cloudy. A number of prominent figures have emerged with competitive bids, yet the fans are nowhere to be found…
This must change. A great first step is the demand made by Chelsea Supporters’ Trust that they should be consulted in the sale of the seized club. ChelseaDAO builds on top of these demands and offers fans a trustless method to do a lot more than just be consulted on who owns their club.
Chelsea FC, as a football club, enjoys a myriad of riches that it developed over the past 20 years. World-class locations, a stadium in the center of London, arguably the best academy in the world and a squad that is ideally positioned to challenge all competitions for years to come.
What is a DAO?
Decentralized Autonomous Organizations – or simply DAOs – are coded, trustless organizations that operate under a certain set of predetermined rules. DAOs have been a recurring topic for automation experts since the 70’s, yet they have gradually moved closer to reality through the invention and expansion of Blockchain and Smart Contract technologies.
DAOs can help a group of people deliver a number of operations – from automated financial services, to community-generated media and plenty of other applications that have not yet been realized.
However, the most prominent use-case of DAOs is the community ownership of an asset or a series of assets. When a group of crypto-native people wants to share resources and expertise to co-own something, building a DAO is their go-to solution.
As such, whenever there is a large community with shared goals and interests, DAOs emerge as a ready-made solutions that all parties can trust. Football is no different. In short, there is no industry better suited to be disrupted by DAOs than sport franchise ownership.
A bit about ChelseaDAO
ChelseaDAO, as an initiative, aims to allow football fans to, wholly or partially, own Chelsea Football Club. Through the DAO, fans can participate in key decisions, stake their ownership to trusted delegated parties within club leadership, support their club with transfer fees, and receiving unique and exclusive rewards for their continued participation in Chelsea FC’s governance.
ChelseaDAO will bring Football back to the hands of fans in a way we’ve never seen before, and it will reward them for actively supporting the club in the process.
But how will this work? What needs to be done first?
Well, through a Token, of course!
A bit about the $BLUES Token.
ChelseaDAO could produce a governance token, titled $BLUES, that all fans can buy into and trade in the open market. The token will represent a share of ownership. This will work whether the Club is owned in full or partially by the DAO.
The $BLUES tokens holders will be able to vote on decisions for the club, but these will often be non-binding votes that the management will review carefully. These decisions can be the selection of the shirt sponsorship, the final design of their jersey, the creation of NFT collectibles, and more.
A top priority for ChelseaDAO is making sure that the continued and constant management of the club remains fully focused. As such, binding votes will take place only during a general assembly which happens once every 3 years. These binding votes will act as proof of confidence for the key people managing the Club.
Emergency votes can be called by the Board or Managing Director of Chelsea FC, and by emergency DAO proposals that receive substantial support by $BLUES holders.
A bit about Staking and Fan Rewards (NFT Collectables)
To avoid governance apathy by token holders, $BLUES tokens can be staked and delegated to key community members. Long-term holders will be allowed to choose a member of the community that can represent them during non-binding votes. The more $BLUES tokens you stake, and the longer you stake them for, the higher the value of the rewards that you gain.
These rewards can be NFT tickets and collectibles. These collectibles will be managed and produced by the community members who have received the most amount of delegated votes. The value of the NFTs will be determined by their rarity.
The top stakers will only receive exceptionally rare NFT collectibles which will be officially recognized by Chelsea FC. The NFTs will be connected and relevant to the Chelsea universe, for example, NFTs that represent the statistics of players from the academy or the team itself, or NFTs that represent particular actions or moments in time, for example, a critical goal in a competition.
But this is not the only way the fans can benefit from ChelseaDAO.
A bit about on-chain Transfer Funds (Real Life Football Manager)
Transfer Pools democratize Football transfers and contracts in ways we’ve not seen before. These pools allow funds to be pooled to achieve a specific target. In ChelseaDAO’s case, these could be transfers of players and contracts. Here is an example:
“Chelsea FC has a budget of 70m GBP and seeks to acquire a key Striker for their upcoming three seasons. The top target is valued at 100m GBP, and Chelsea FC is unwilling to fork out additional cash. However, Chelsea FC fans are extremely excited by this proposed transfer, and are thus willing to pool their funds together through a smart contract treasury mechanism.
These funds can complement the initial budget of Chelsea FC. If fans raise 30m GBP, then the two sums combine to a total of 100m GBP, allowing for the transfer fee to be paid and the transfer of the Striker to go through.
Since 30% of the fee was paid by fans, 30% of the contract should be owned by these fans. If the Striker excels during his time at Chelsea, his transfer fee when sold can exceed the initial 100m GBP fee.
For our example, let’s assume that the Striker gets sold for 200m after three years’ time. All fans who participated in the initial pool will have a claim over 30% of the sale, i.e. 60m GPD for our above example. These funds will then be given back to all fans who participated in the sale in fiat or crypto currency.”
This function can be used for multiple pools, from player contracts, to transfers and even stadium upgrades. The possibilities for enhancing funding are immense, and $BLUES owners can bring forth their own proposals for additional applications of these Fund Pools. Additional schemes can provide a return on these funds until they are used by the club in their designated operation or returned back to fans fully.
A bit about the Tech
For ChelseaDAO to work, we envision that the structure of the DAO can run on an EVM compatible chain, either Ethereum 1.0 (or 2.0, when it becomes available) and on a suitable layer 2 solution to expedite certain transactions. You can read more about Layer 2s here.
The key governance token $BLUES is an ERC-20 token with governance mechanisms attached, that affects the governance of certain decisions in the DAO.
- The creation and allocation of Fund Pools,
- The delegation and staking of $BLUES to another member to increase voting weight (similar to the Ethereum name Service system),
- Decisions on issuance of NFTs (for example should we create an NFT on a particular goal, or on a particular player).
- …and more.
$BLUES tokens should also allow for participation in strategic decision making every three years.
A master smart contract can regulate voting, pools, and the DAO ownership rights, while separate contracts can handle the $BLUES functionality along with the staking and issuance of NFTs in both ERC721 and ERC115 types.
Further functionality could be developed by requesting this through the pool mechanisms. We expect that ChelseaDAO would create both a web and mobile interface for the DAO. In particular, ERC1155 type NFTs would allow the creation of alternative/parallel virtual football games with the participation of fans and supporters of the club.
A bit about Legal and Compliance
The DAO should have legal entities behind it in order to legally own shares of Chelsea FC. The DAO should aim to own these legal entities as soon as there is regulatory clarity. ChelseaDAO could be a member of FCA’s Sandbox on CryptoAssets and should welcome all cooperation with policy makers when it comes to consumer protections and financial regulatory compliance.
It is imperative that ChelseaDAO, as well as any FootballDAO, does not fall victim to individuals who are seeking to escape sanctions and regulatory requirements.
A serious note on Ukraine
All Chelsea fans involved in this article are vehemently opposed to the unjustifiable and retrogressive invasion of Ukraine by the Russian Federation. Humanity is better than this.
We would never issue this article and initiative if we didn’t know that all proceeds of the Chelsea sale will be given to the people of Ukraine.
Now that this has become clear, ChelseaDAO offers a unique win-win opportunity that will allow football fans and interested parties to experiment with cryptoeconomics and incentive structures in Football, while simultaneously providing for Ukrainians in need.
The existing bidding system sets interested parties against each other, excluding the possibility for collaboration or the involvement of fans. The highest bidder wins, yet organizations that had prepared multi-billion GBP bids are shunned to the side, and Football remains in the hands of the ultra-rich.
It is obvious that this will change as the use of DAOs become more and more mainstrea. For Chelsea FC, a tokenized ChelseaDAO can allow for the fluid ownership of the club in the hands of all interested and involved parties. ChelseaDAO can and will help align all interested parties.
Under a tokenized umbrella, instead of one sole owner of Chelsea FC with a 2bn GBP budget, you can have 5 multi-billion investors of $BLUES tokens, plus the millions of fans whose voice shall be heard on each and every transfer, decision and Football pitch.
Aligning these incentives for all interested parties can create a new and dynamic economy behind Chelsea FC that will outperform any and all centralized ownership from one hyper-wealthy individual. It will also limit the risk of owning our club. T
he international uncertainty of the times does not guarantee that future owners of Chelsea FC won’t face similar sanction and downturns to those faced by Roman Abramovich. A free flowing, token based system can create an anti-fragile, robust organization that will grow for decades.
The combination of on and off-field assets, the dissemination of funds to the People of Ukraine, and the urgency of the sale create a unique opportunity that can change Football forever. Football DAOs are inevitable, and this article expands on how such a DAO can work for Chelsea FC.