Cryptocurrencies and fan tokens: the key questions

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The UK advertising watchdog’s decision that Arsenal broke the rules regarding its promotion of crypto-based fan tokens has put digital currency and other crypto assets back in the spotlight.

Here’s a reminder of what cryptocurrencies are, how they work, and why some see them as controversial.

– So, what is a cryptocurrency?

Put simply, it is a decentralized digital currency and therefore not issued or controlled by a single entity such as a bank, and cryptology to conduct transactions securely and in many cases anonymously between two parts.

Currencies are often built on blockchain networks, a type of digital ledger technology where all transactions are publicly verified and recorded and cannot be changed, creating an information chain designed to improve transparency and prevent fraud.

New currency can also be created through a process known as “mining,” where miners verify transactions for the blockchain and are rewarded with a new currency when they are successfully completed.

The ruling claimed some fans may not have known what they are investing in (Tim Goode / PA)

– What makes them controversial?

Critics argue that the anonymity provided by cryptocurrencies is exploited by cybercriminals and other crooks, providing an easy way to launder or hide ill-earned funds.

Another problem is volatility – many currencies have their prices tied to supply and demand, which has caused prices to fluctuate violently in recent years.

A general lack of understanding and inexperience with cryptocurrencies among the general public has also caused problems, with many unable to differentiate between legitimate ads for cryptocurrency and financial scams posted by cyber criminals.

The industry also remains unregulated and the UK’s financial watchdog, the Financial Conduct Authority (FCA), has warned that investing in cryptocurrencies is high risk and investors should be prepared to lose everything. their money.

Bitcoin machine
Bitcoin is one of the major players in crypto-assets (Dominic Lipinski / PA)

– So what are these Fan Tokens?

In the wake of the rise of cryptocurrencies such as Bitcoin, other forms of crypto-assets began to appear, such as fan tokens.

These are promoted as a way to get a vote on certain decisions the club should make – so buying a token means you have a say.

However, they often involve having to buy cryptocurrency first, as most tokens can only be exchanged for a certain currency.

This has raised concerns that people are being tricked into investing in crypto assets without fully understanding what they are doing.

This is also a growing problem – a number of Premier League football clubs and across Europe have already launched their own fan tokens, with some now also selling another type of crypto-asset – non-fungible tokens ( NFT).

Jack Dorsey
Jack Dorsey recently sold the very first tweet as NFT (Matt Crossick / PA)

– And what are NFTs?

These are marketed as a type of digital collection and a token that can be used to show ownership of a digital item, often paid for in cryptocurrency.

The idea is to recreate the market for physical works of art or rare memorabilia for the digital world and enable artists and others to make money from digital creations.

So far, popular GIF makers have sold their work, and Twitter founder Jack Dorsey has sold ownership of the first tweet on the platform.

NFTs, proponents say, offer proof of ownership in the same way a gallery or individual gets from purchasing an original work of art – and although the digital image or item can still be easily copied online, they argue that NFTs give someone the honor of knowing they own the original.

Critics, however, argue that NFTs are a scam by so-called “crypto scammers” and are sold as a “get-rich-quick scheme.”

David Gerard, author of Attack Of The 50-foot Blockchain, said: “Without a specific contract stating otherwise, an NFT does not grant ownership of the artwork it designates in a meaningful sense.

“NFTs exist so that crypto scammers can have a new kind of magic bean to sell for real money, and pretend they’re not selling magic beans.”


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