What is Chiliz?
Chiliz (CHZ) is a digital currency for sports and entertainment, powering the world’s first blockchain-based fan engagement & rewards platform, Socios.com. Fans can purchase & trade branded Fan Tokens as well as having the ability to participate, influence, and vote in club-focused surveys & polls. Chiliz aims to foster a blockchain ecosystem built for sports and entertainment.
Football clubs including Juventus and Paris Saint-Germain are the first teams to join the platform to produce their Fan Tokens. Socios.com plans to onboard 50+ teams from football and other sporting verticals including esports and other conventional games such as cricket and the like. At present, Chiliz has onboarded 19 Official Partners to Socios.com, and has held Fan Token Offerings for 11 of those partners. In addition the Chiliz Blockchain Campus is an accelerator and industry hub connecting some of the industry’s largest stakeholders across Asia and Europe, together with other emerging blockchain entrepreneurs.
In March of 2022, Chilliz launched Chilliz Chain 2.0 (CC2) “Scoville” testnet, a curated, scalable, semi-decentralised blockchain for start-up and enterprise level sports & media organizations. CC2 mainnet launch is expected after approximately 6 months of testnet activity. CC2 is only available to a selected number of creators, for access to the network Brands and IP holders can go through a whitelisting process to be approved. Network validators will vote on which parties are approved to build on Chiliz Chain 2.0.This protocol is set to be the foundation of a web3 development ecosystem where stakeholders from the sports & entertainment industries are able to build web3 experiences. This initiative was created to enable further utility by expanding the Socios and Chilliz blockchain through transitioning $CHZ away from being an in-app currency to the network enabler of the open, multi-vertical Chiliz Chain v2 ecosystem.
On the technical side, CHZ is an ERC-20 token on the Ethereum Blockchain and is additionally supported as a BEP-2 token by the Binance Smart Chain (note that BEP-2 is not supported by Wealthsimple). To ensure integrity, Chiliz run their own permissioned instance of the Ethereum blockchain. This permissioned sidechain is the core of Socios.com. It hosts every team, league, game title or other organisation who connects with the platform, together with each organisation’s crowd voting mechanisms run as a semi-autonomous organization on this blockchain.
The total fixed supply of CHZ is fixed at 8,888,888,888.
How does CHZ compare to Bitcoin?
CHZ differs from Bitcoin in a few important ways.
First, Bitcoin is a “coin” and CHZ is a “token.” That is because Bitcoin powers the Bitcoin blockchain, and it is mined by a decentralized network of computers that solve complicated maths puzzles to verify transactions. By contrast, CHZ is a token that runs on the Ethereum blockchain and additionally as a BEP-2 token on the Binance Chain. On Ethereum, ETH is the only coin that can be mined and miners mine ETH to process CHZ transactions. It is what is known as an ERC-20 token, the name applied to the generic token standard for the Ethereum blockchain.
Being an ERC-20 token has perks. Blockchains aren’t great at speaking to each other—you can’t get an Ethereum contract to work with a Bitcoin smart contract without some complicated engineering. However, it’s very easy for ERC-20 tokens to speak to one another, which means that CHZ can be used in most other decentralized finance applications.
Thirdly, unlike Bitcoin, CHZ is a governance and utility token. While, like Bitcoin, CHZ can be used as a means of payment or a store of value, its market price may be very volatile and so it may not be useful for payments or storing value.
Finally, CHZ’s market capitalization is smaller than Bitcoin’s. As of March 2022, CHZ’s market capitalization was estimated to be $1.6 billion, as compared to Bitcoin’s market capitalization of $800 billion.
Before trading any crypto assets it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset. First and foremost:
No Canadian securities regulatory authority has expressed an opinion about CHZ, including an opinion that CHZ is not itself a security and/or derivative.
Wealthsimple has performed a legal assessment of CHZ prior to making it available on Wealthsimple Crypto and has concluded that CHZ is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future and the impact of this on an asset’s value is outlined in our Product Disclosure.
We evaluated CHZ based on publicly available information, including (but not limited to):
- The creation, governance, usage and design of CHZ, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created CHZ;
- The supply, demand, maturity, utility and liquidity of CHZ;
- Material technical risks associated with CHZ, including any code defects, security breaches and other threats concerning CHZ and its supporting blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and
- Legal and regulatory risks associated with CHZ, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of CHZ.
Like all other crypto assets, there are some general risks to investing in CHZ. These include short history risk, volatility risk, liquidity risk, demand risk, forking risk, cryptography risk, regulatory risk, concentration risk, electronic trading risk and cyber security risk. Each of these risks are described in more detail in our in-app Product Disclosure.
Given that CHZ tokens are the base currency for trading Fan Tokens, the market price of CHZ may be dependent on the demand for Fan Tokens; as increased demand for Fan Tokens would tend to increase the demand for CHZ. The demand for Fan Tokens is in turn a function of fans’ interest in particular teams or players. As a result market price of CHZ - and any expectation of profit in purchasing CHZ - is therefore affected by factors other than the efforts of Chiliz / Socios.com.
Additionally, as of March 2022, Chilliz intends to migrate to Chilliz 2.0 with 6 month timeline. This will require further monitoring of the protocol to ensure its overall functionality and use are consistent with Wealthsimple’s risk standards.
Further to these general risks, the CHZ community, HX entertainment, Socios, affiliated fan tokens, the CHZ development team and other affiliated entities are not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of CHZ have no recourse to Socios or Wealthsimple if CHZ declines in value for any reason.
We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading CHZ. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.
WDA is offering Crypto Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Wealthsimple Digital Assets Inc. dated June 18, 2021. Please be aware that the statutory rights of action for damages and the right of rescission in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Statement.