[$CHZ] - Proposal for Collateral Onboarding - Chiliz / Sports x DeFi

Dear MKR Community.

I’m the Alex Dreyfus, founder of $CHZ Chiliz, a 2-year-old blockchain venture based in Malta with 60 employees. We are the official crypto & blockchain partner of FC Barcelona, Juventus, Paris Saint-Germain, OG (DOTA2), and many other household brands.

We’ve been invited to participate in the onboarding process. While we realize we are not Chainlink or one of the major traditional digital assets, we believe our application should be explored by the community as we are unique in what we do, we could bring eventually a completely new usage/opportunities in mainstream applications.

So here we come :slight_smile: feel free to shoot questions. I will also edit the thread in the next few days, when I feel we are missing some information.

**

1. Who is the interested party for this collateral application?

Chiliz ($CHZ) which is run by HX Entertainment Ltd (Malta).

2. Provide a brief high-level overview of the project, with a focus on the applying collateral token.

Our venture is tokenizing the fan influence of sports teams. We are working with 10+ of the biggest sports teams in the world already like FC Barcelona, Juventus, Paris Saint-Germain, AS Roma, Atletico Madrid, OG (DOTA2), Galatasaray, Independiente (Argentina) and more to be announced soon.

We are creating “Fan Tokens” which are Fungible Tokens (explorer.chiliz.com) for each of these teams on our platforms. Fans can download the app Socios.com (200k+ download in since launch, with a goal of 1m by end of the year) and participate in the real life of the club, by having a voice.

We recently launched the trading of JUV token (Juventus) https://www.financemagnates.com/cryptocurrency/news/chiliz-begins-juventus-fan-token-trading-more-in-pipeline/ which will be followed by all other tokens we have launched with clubs.

We aim to be more and more visible in the crypto sphere and we believe that embracing MKR and Collateral would add utility to $CHZ and the global vision of promoting crypto as a mainstream product.

This is part of a bigger global strategy in our partnerships roadmap with crypto ventures, like we did with Chainlink (LINK) & Enjin (ENJ).

3. Provide a brief history of the project.

Chiliz and its Consumer-Facing app, Socios.com were founded early 2018 in Malta by an experienced team with Online Gaming, Sports Betting, Technology & Media background. We raised $60m in a private placement in H1 2018 with strategic partners like Binance, OKEX (OK Blockchain Capital), Ceyuan Ventures (Beijing), etc … We have very strong communities in Japan, Korea (with an active office), Turkey, Europe and Latam.

We are 60+ people, mainly based in Malta.

We are now preparing the launch of an updated version of our mobile app, including trading, debit card, community features, and many strategic innovations.

4. Link the whitepaper, documentation portals, and source code for the system(s) that interact with the proposed collateral, and all relevant Ethereum addresses. If the system is complex, schematic(s) are especially appreciated.

I guess the most important information are available on there :

www.chiliz.com: main site and especially with our colleagues (https://www.chiliz.com/docs/CHZ_whitepaper.pdf)
https://etherscan.io/token/0x3506424f91fd33084466f402d5d97f05f8e3b4af

www.socios.com: our consumer-facing product, with all partners, etc…

Important to read: medium.com/chiliz & medium.com/socios - please.

5. Link any available audits of the project. Both procedural and smart contract focused audits.

Our CHZ smart contract was audited by CERTIK : https://certificate.certik.io/?key=75067dbf2eaa13d94c68c85349345e86d6fcb7dd5a118ce300053696756798c2

6. Link to any active communities relating to your project.

Our telegram channel https://t.me/chiliz_io is the main one in english, but we have also Japanese https://t.me/chilizjapan (2k), Korea (Kakao), Turkey (https://t.me/ChilizTurkey), etc …

Our Twitter account are:

twitter.com/chiliz and most importantly twitter.com/socios (consumer-facing)

7. How is the applying collateral type currently used?

$CHZ is the utility token of the whole ecosystem of Chiliz & Socios.com. It is like the $BNB of Sports & Entertainment. it’s used on Socios.com mobile app, but also on Chiliz.net exchange - the first crypto exchange for sports tokens (JUV/CHZ, BAR/CHZ, PSG/CHZ, etc …). It will become more and more a mainstream digital asset promoted by some of the biggest brands in the world.

8. Does one organization bear legal responsibility for the collateral? What jurisdiction does that organization reside in?

$CHZ is issued by Malta-registered company HX Entertainment Limited, where most of the employees are based. The company is audited and privately owned by the founders and venture capital firms.

9. Where does exchange for the asset occur?

$CHZ is listed on strategic exchanges like Binance.com, UpBit (KRW), Paribu (Turkey), Coinone (Korea), Wazirx (India) (https://coinmarketcap.com/currencies/chiliz/#markets)

10. (Optional) Has your project obtained any legal opinions or memoranda regarding the regulatory standing of the token or an explanation of the same from the perspective of any jurisdiction? If so, those materials should be provided for community review.

Yes. We have signed Legal Opinion issued by expert law firms in the US, South Korea, Malta and a few more.

11. (Optional) Describe whether there are any regulatory registrations for the token and provide related documentation (including an explanation of any past or existing interactions with any regulatory authorities, regardless of jurisdiction), if applicable.

N/A

12. (Optional) List any possible oracle data sources for the proposed Collateral type.

Chainlink to offer $CHZ oracle data source.

13. (Optional) List any parties interested in taking part in liquidations for the proposed Collateral type.

N/A

10 Likes

@alexdreyfus,

A fan interaction token for sport clubs and gaming platforms - I must admit this highly interesting application has slipped under my radar.

Some questions:

  1. Is it stated somewhere that the CHZ 8,888,888,888 minted is the final hard cap and that no more CHZ will ever be minted? I searched your whitepaper https://www.chiliz.com/docs/CHZ_whitepaper.pdf but could not find direct statements to this end.

  2. You have a first user in the JUV (Juventus FC) token signed on in December of 2019, gratulations. I see there was quite a bit of press coverage on the use of the platform to choose the new club goal song. Since this January 2020 use of JUV I am unable to find (on the net) any other uses for this token. Do you have a list of polls or other interactions performed on the Socios app since then? I have made contact with a Juventus fan club to ask about the extent of the use of this token, but at the time of writing they have yet to respond.

  3. According to https://explorer.chiliz.com/address/0x14a5750b0e54b57d12767b84a326c9fe59472da5/tokens there are 1,385 JUV tokens minted - indicating a market cap of less than EUR 3,000 for JUV tokens. Is this correct? This indicates to me at least that while highly interesting, actual usage might be some time off.

  4. You write in your application that you have received legal opinion for your Malta jurisdiction - would it be possible for you to upload this? Since you are Malta based and linked to sports I think it would be beneficial for the community to know what your legal position is on Malta.

1 Like

hi Planet_X.

  1. re: fixed supply, it is 8.8 billion (8 being lucky number in China) and you can see that https://etherscan.io/token/0x3506424f91fd33084466f402d5d97f05f8e3b4af and in the smart contract. We CANNOT increase the supply of tokens.

  2. If you download the app (Socios.com) you’ll find in the Juventus Fan Token page, the access to all polls already done. There is a BIG one coming mid may from Juventus. But if you go on all other clubs pages in the app, you’ll find it too (PSG, Atletico Madrid, OG DOTA2, etc …). Extra: https://en.psg.fr/teams/first-team/content/socioscom-kicks-off-the-hunt-for-paris-saint-germain-fan-tokens

Fans Tokens are “shares of influence”, aka they are your right to vote on decision of the club. There is more utilities coming up, but the idea is to give a voice to the fans.

You can also trade Juventus Fan Token: https://coinmarketcap.com/currencies/juventus-fan-token/ and soon Barcelona, PSG, and all the other mainstream brands we have partnered with.

  1. No. There is 20 million JUV minted (fix supply), as you can find it here: https://explorer.chiliz.com/tokens/0x14a5750b0e54b57d12767b84a326c9fe59472da5/token_transfers

The circulating supply is 2 million JUV. You can see the trading there: https://www.chiliz.net/exchange/JUV/CHZ still very much early stage, but once we will have launched all others, including FC Barcelona and the 50 we are targeting by end of the year, it will start to look very interesting.

I invite you to download the app (Socios.com) to see a bit where we are heading, as a product, as we are live. We are launching in-app trading in few weeks + chat (only JUV token holders can talk to each others, etc …) + more community features.

  1. Well, Legal Opinion says that we are legal :slight_smile: I’ll find a way to put a link eventually.
1 Like

Oracle Team Collateral Onboarding Evaluation

V1.0.5
Author: Niklas Kunkel (Oracle Team)
Contributors:
Date: 05/14/20

Explanation of the Oracle Team Collateral Onboarding Methodology

Economic Impact

How much Dai can be expected to be generated against CHZ?

Concrete Data:
Token Contract Address: 0x3506424F91fD33084466F402d5D97f05F8e3b4AF
Circulating Token Supply: 4,567,138,626* CHZ
Token Market Cap of Circulating Token Supply ( TMC ): $44,866,612
Total Number of Holders: 8,014 addresses
Token Distribution: Top 20 holders hold 76.2% of Circulating Token Supply*
Avg Collateralization Ratio of Maker Protocol ( avgCR ): 361.38%

*this excludes:
Chiliz Multi-Sig

Assumptions:

  1. Assume a reasonable minimum collateralization ratio ( minCR ) based off empirical values in collateral portfolio. Since CHZ is likely to be at least as risky as ETH/BAT, let’s assume minCR = 150%.

  2. Market Cap Utilization ( MCU ), the amount of the TMC that can reasonably expect to be deposited in the Maker Protocol, is bounded by empirical values in collateral portfolio.
    Currently the lowest and highest MCU in the Maker Protocol are [0.73%, 3.87%]

Formulas:

Estimated Lower Economic Impact = TMC * MIN(MCU) / avgCR 
Estimated Lower Economic Impact  = $44,866,612 * .0073 / 3.6138 = 90,632.0957 DAI

Estimated Upper Economic Impact = TMC * MAX(MCU) / minCR
Estimated Upper Economic Impact  = $44,866,612 * .0387 / 1.5 = 1,157,558.59 DAI

Due to the average of the estimated lower and upper economic impact, the Oracle Team is assigning CHZ a Low Economic Impact label

Given the distribution of token holders relative to the total number of token holders, how many users with significant sums of the proposed collateral are we reasonably targeting with this integration?
~135 people (90th percentile)

Technical Complexity

Determine how complex integrating Oracles for this collateral type would be and how long it would take to implement such a solution.

Is a solution currently not possible because of a key missing component?
There is no immediate indication that CHZ would be difficult to integrate from an Oracle perspective.

Are there enough high quality data sources available to construct a reliable, resilient, and secure Oracle for the proposed collateral asset?
No. While there are a couple good quality sources such as Binance and Upbit the remaining sources are low quality. Paribu is a sketchy exchange from Turkey with a history of wash-trading. Chiliz is an exchange owned by the issuer and an obvious conflict of interest. Not only that but the Chiliz trading pair is against the JUV token which only makes the price for that pair less relevant to calculating a USD equivalent. The only other credible exchange is KuCoin however the pairing has less than 10k volume and so is easily manipulatable. Chainlink is not a good source for the price as it itself is an aggregator and dealing with the same 1st degree data sourcing problems as we are. It doesn’t solve the data sourcing problem it merely obfuscates it.

Can the current tooling support the types of data sources that are needed?
Yes.

Can the current tooling support the types of data modeling that are needed?
Yes, the median model is already supported in the Oracle stack.

Does adding these features interfere with ongoing or planned development of new tooling on the Oracle Team roadmap?
Adding the good quality Binance and Upbit sources is not an issue.

What dependencies (both technical and system), risks, costs, and latency are added to the Oracle Protocol as a function of these added features?
The lack of good quality exchanges sources introduces significant risk for Oracle manipulation either by 3rd party market participants, or the exchanges themselves. This could cause unbacked Dai to be generated against this collateral type. Similarly the issuer controls almost 50% of the supply of the Chiliz token, which they could use at any time to generate Dai.

Does adding these features require work from other stakeholders such as the Smart Contracts Team(s)?
No.

How long would it take to design, implement, test, and deploy such a solution?
About 1 week to develop and test.

Given the lack of good quality sources making the Oracle price prone to manipulation the Oracle Team considers this a high technical complexity project.

Evaluation

The combination of Economic Impact mapped against the Technical Complexity of onboarding a new collateral type can paint a picture of whether an Oracle Team ought to accept, decline, or defer a collateral onboarding application.

Low Technical Complexity High Technical Complexity
Low Economic Impact maybe decline
High Economic Impact accept maybe

Low Economic Impact x High Technical Complexity => decline

Reccomendation

The combination of low economic impact and high technical complexity to implement an Oracle inclines the Oracle Team to decline the CHZ onboarding application. There is too much risk for the Maker Protocol associated with the lack of quality data sources.

3 Likes