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After tobacco advertising largely disappeared from racing series in 2006, another controversial industry appeared: cryptocurrency.
What exactly is crypto?
If you’re anything like me, you’ve heard of cryptocurrency, you vaguely know what Bitcoin is, but you wouldn’t know where to start if someone asked you to explain it.
In the simplest terms, it’s a digital currency that presents an alternative to going through the traditional banking system.
It primarily relies on encryption algorithms to create not just a form of currency, but also a global accounting system.
The creators and users frequently state that it solves what they saw as problems within normal payment systems. For example, it tends to take some time to send money to someone in another country.
This is due to factors such as your bank’s working hours. Within crypto, there are no banks, hence no barriers to moving money.
Its popularity grew after Bitcoin was developed in 2008, and as of March 2022, there are over 18,000 cryptocurrencies.
How did crypto become part of the motorsport world?
The cryptocurrency business has been creeping into F1 since 2019 when Red Bull agreed on a deal with FuturoCoin.
Jump forward three years to the 2022 season, and almost all the teams on the grid have a crypto sponsor.
Red Bull recently made headlines by signing a deal with cryptocurrency platform Bybit, reported to be worth $150m.
Team boss Christian Horner said: “They share the team’s passion to exist at the forefront of technological innovation, to set the competitive pace and to disrupt the status quo.
Allied to that is Bybit’s commitment to enlivening the fan experience in F1 through digital innovation. This is also a key mission for the team and Bybit’s assistance will help us build a deeper more immersive and unique connection with the team for fans around the world.”
Whilst not all the sponsorships are quite this lucrative, they’re undoubtedly becoming more popular within the paddock.
Mercedes has worked with FTX since September 2021, while McLaren is partnering Bitci.com for this season.
In a similar vein, Ferrari works with Velas Network, and Alpha Tauri kept Fantom on as a key sponsor after collaborating with them last year.
French outfit Alpine has gone a step further, launching a token with Binance. Tokens are fairly self-explanatory: they act as units of cryptocurrency and can be bought with digital coins. They are often referred to as ‘digital assets’.
These sponsors could easily fade into the background just like all the other brands plastered onto liveries. However, one of Formula 1’s official partners this year is Crypto.com.
They are also a title sponsor of the upcoming Miami GP, and provide financial backing for Aston Martin.
F1 showed public support for crypto by agreeing to this partnership, perhaps demonstrating that the controversial industry is here to stay.
Is crypto only involved with F1?
F1 is regarded as the pinnacle of motorsport, but this has not stopped crypto companies from venturing into other series.
Arguably the most prominent example is in Formula 2, where Swiss driver Ralph Boschung is known for his links to cryptocurrencies.
A deal with Carl Runefelt led to a specially designed livery for Boschung’s season with Campos Racing. Runefelt is a content creator specialising in crypto.
He explained: “I put my face on the car – this has never been done before. I also put eight Bitcoin logos on it, promoting Bitcoin this year in front of millions.
This season will be absolutely epic, and I’d like to thank Formula 2 and Ralph for this amazing partnership that will bring mass awareness to Bitcoin & crypto.”
Alongside this, Kasta (yet another crypto network) backs Boschung. Their partnership is slightly more complicated than your usual sponsor.
Kasta has agreed to ‘burn’ around 9862 tokens for every point the racer earns. For instance, Boschung took away 15 points in Imola last weekend after getting a podium. As a result, the company burned nearly 148,000 tokens.
Of course, the destruction of these tokens is purely digital, but it does have some significance. As the number of tokens becomes more scarce, their value increases, making using Kasta a more attractive prospect to some.
Why is this all so controversial?
Crypto is not yet mainstream; the skills and tools you need to master it require far more time and effort than traditional banking.
Its main criticism is its impact on the environment. Research has estimated that a single Bitcoin transaction uses 2100 kWh, which is around the amount an average American household uses over 75 days.
In addition to this, Bitcoin’s annual carbon footprint is roughly equivalent to that of Argentina’s. By using non-renewable energy sources, the crypto industry contributes to significant damage to the environment.
Avid users argue that this impact is still less than that created by normal banking. This would be a major advantage if crypto was everyone’s main form of payment, but it isn’t. Consequently, crypto just consumes even more energy, worsening the problem.
It varies from platform to platform, but in general, the environmental impact is wholly negative.
Despite its popularity, nine countries had a total ban on crypto as of November 2021. From Qatar and Iraq to China and Bangladesh, it is clear that many governments do not trust this fad.
This may be due to the lack of regulation on this form of currency. As there are no third parties such as banks involved in the process, it is hard to convert crypto into a tangible currency.
Thirdly, its volatile nature is a major issue. As a relatively new system, unexpected changes in the market are frequent, leading to sudden price changes.
It is not uncommon for the value to drop by hundreds of dollars very rapidly. Like gambling, the risk can lead to a compulsive obsession with the crypto market.
So, should crypto remain a sponsor of racing series?
The team principals certainly appear to believe so.
“I think that the world is evolving, and the world is changing,” said Christian Horner. “The whole crypto sector is a fascinating one. You’re seeing it more throughout all the sports and, of course, it’s something that we look at.
“We take the sustainability argument very seriously and of course so do our partners, so obviously we are looking at technologies that can improve that. If we can assist to achieve that, it is an exciting new sector and it’s great to see so much interest and that F1 is so attractive.”
Many fans have suggested that the environmental issues crypto contributes to go against F1’s sustainability promises.
Mercedes boss Toto Wolff did not shy away from the criticisms but nevertheless has faith in the industry.
He explained: “The sustainability argument is extremely important, but it is not only about mining and the energy that is consumed, but also where the energy comes from. But you can’t shut yourself down to modern technology. It’s definitely an area that will grow.
“When we are looking back in 10 years’ time, having to make payments that take two days and can’t be done outside of week hours, it is something that’s going to be a relic of the past.
“For me, it was fascinating to understand crypto exchanges, and [Mercedes sponsor] FTX is a crypto exchange, with billions of transactions every day. That is something that you can’t stop, and you have to do it right. And we certainly are a good sparring partner for them for sustainability targets.”
The backlash against these sponsorships will likely continue until the benefits of crypto overpower the voices of its critics.
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