Spencer Dinwiddie’s Blockchain-Based Dream for Fan Engagement

Basketball star Spencer Dinwiddie has ambitious plans for the future of fan engagement.

In the past few years, we’ve observed that influencer culture is one of the most powerful forces on the Internet.

Personalities like social media star Charli D’Amelio make millions from their fans every year. Brands small and large have carried out influencer marketing campaigns with great success. And tech companies like Twitch, OnlyFans, and ByteDance, which facilitate engagement between influencers and fans, quietly take their own cut of the profits.

It’s a thrumming, thriving ecosystem, and most people are eager to take advantage of the influencer Golden Age. But others, like Spencer Dinwiddie, think that the system is ready for disruption. His soon-to-launch fan engagement platform, Calaxy, plans to remove brands and intermediaries, and put the power back in the hands of stars and their fans.

Dinwiddie is best known as a point guard for the Brooklyn Nets, an NBA team owned by Alibaba Co-founder Joe Tsai. A highly-acclaimed player, Dinwiddie was the second-highest scorer for his team in the 2019-2020 NBA season. He’s been described as a “chameleon” by two former coaches due to his ability to switch between various positions. He’s also been called a “cerebral” player–someone who’s always thinking carefully about his next move (CBS Sports).

It’s these qualities, perhaps, which make Dinwiddie so well-suited to the entrepreneurial sphere. His passion for technology grew in tandem with his athletic excellence when he was in college, playing for the Colorado Buffaloes. By the end of college, he had invested in a friend’s influencer marketing platform. And in 2019, he co-founded a venture capital firm with a focus on investing in Black founders (PitchBook).

Dinwiddie’s NBA career made him a star, but his strides in the technology and venture capital world make him a pioneer. His Twitter bio might make for the best self-portrait: “Just a Tech guy with a Jumper.

“Actually, I’ve been a geek my whole life,” he tells Jumpstart. “That’s the funny part about the whole story of me, going back to high school–you know, my second college choice was Harvard.”

Dinwiddie’s journey certainly would have looked very different if he had taken up intellectual pursuits at Harvard instead of enrolling at the University of Colorado Boulder to play for the Buffaloes. He was scouted in the 2014 NBA draft, and went on to play for the Detroit Pistons before joining the Nets in 2016. But all the while, he says, he would avidly follow developments in the tech and venture capital industry, read about new technologies like machine learning, and watch TED Talks on such topics in his free time.

After almost a decade, Dinwiddie is now putting his passion into action with Calaxy. His forays into the world of cryptocurrency and blockchain catalyzed his decision to forge ahead with his plans. He now has an ambitious vision for how fans will engage with their favorites: a platform that will allow influencers to sell shares in everything they own–including their time and attention–directly to their fans. 

Proof-of-concept: personal tokenization and DREAM Fan Shares

When the idea for Calaxy came to him, Dinwiddie knew that people would need time to come around to the concept of ‘human tokenization.’ He would have to prove to himself and the market that his plan could work.

“Essentially, what we thought was the most logical leap was using [myself] as proof of concept,” he says. “Coming out, putting my assets, my contract, on the blockchain in some form or fashion.”

And that’s exactly what he did. Dinwiddie decided to tokenize his $34.4 million three-year NBA contract: break up its value into blockchain-based shares and sell them to investors on a newly-created platform, DREAM Fan Shares. He was locked in with the Nets for the first two years, but if he chose to take a higher-paying contract with another team in the third year, investors in his contract would make significant returns.

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Unfortunately, this was not to be. Dinwiddie announced the plan in October 2019, but in January 2020, was still negotiating with the NBA. Put off by what it viewed as a plan encouraging investors to gamble on Dinwiddie’s success, the organization smothered the idea immediately, even threatening to ban him if he chose to move forward with it (The Block). 

This prompted Dinwiddie to rethink his initial plan. He ultimately launched DREAM Fan Shares in March 2020 in a modified form. Instead of issuing blockchain-backed tokens for a slice of his contract, he instead created a debt offering called SD26, secured by his assets and business interests. The round opened on March 16 and sold nine SD26 tokens at US$150,000 each.

Nick Tomaino, Managing Partner of 1confirmation–a crypto fund backed by Peter Thiel, Marc Andreessen, and Mark Cuban–was one of the investors in the round. Brad Stephens, Managing Partner of Blockchain Capital, was another (Forbes). 

Despite the chaos surrounding negotiations with the NBA and subsequent delays to the launch of the project, Dinwiddie had achieved what he originally intended.

“In a lot of ways,” he says, “my contract and all the publicity was like a Trojan Horse to get in the door and help people know that [I’m] not crazy.”

In other words, Dinwiddie’s proof-of-concept gamble had paid off. He was now backed by crypto royalty and had undeniable evidence that there would be an appetite for financial products linked to ‘human assets’ like celebrities. The time was ripe to start work on Calaxy.

A new approach to fan engagement

“When you look at personal monetization, in a traditional social media sense as of right now, people don’t necessarily always effectively make money off of just being themselves,” Dinwiddie says.

Currently, social media influencers earn by creating a persona around themselves or displaying some kind of special skill to gain followers. After they’ve gained a following, they’re able to earn donations, a cut of user subscription fees, or are directly paid by brands to endorse products or services to their followers.

Influencers can earn incredibly well if they figure out the right content formula to attract followers. Tubefilter estimated the 2020 earnings of one of Twitch’s most-popular livestreamers, xQcOW (4.2 million followers), at $1.9 million. The influencer marketing industry is projected to be worth upwards of $15 billion by 2022 (Forbes).

Everyone wants a piece of this industry. Even Manny Pacquiao, boxing champion and the subject of Jumpstart’s last cover, launched a payments platform for social media influencers, brands, and fans in October 2020 (BBC). However, Dinwiddie is convinced that there are flaws in this industry to be exploited.

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“When you look at the current system of how fans can engage with their favorite influencers, or favorite creators, it’s a very broken top-down system, where there’s these intermediaries taking either too much of the recognition or too much of the cut,” he explains.

Companies like ByteDance, Twitch, and OnlyFans earn through service fees and commission. OnlyFans, for instance, lets creators set their own subscription fees, from which the company takes a 20% cut (Influencer Marketing Hub). Such platforms act as both a marketplace and a trusted intermediary handling the transfer of money. 

Calaxy (short for ‘creator galaxy’) would provide a direct connection, allowing fans to engage with creators in different ways. 

“I look at it in the context of doing the smallest thing like, ‘Hey, I’ll pay you $1 to follow me on Twitter,’ all the way to the hardest thing, which is, ‘I want to secure my NBA contract.’ I want to have that type of utility,” Dinwiddie explains.

This would take place by allowing users to purchase blockchain-based tokens, which can be used to redeem interactions with creators and stars in the network. There are also plans in place for futures speculation on the app, as well as the inclusion of some dividend-producing personal shares (Forbes). Calaxy would earn through small service fees on transactions.

In a sense, the app functions as a natural next step to the present system. Once influencers have built their followings and paid their dues to the relevant social media platforms, they can get onto Calaxy and make money from pure star power. This is what makes Dinwiddie’s idea so clever: existing innovation in the influencer industry seeks to solve its current pain points, but Calaxy proposes to subvert the system entirely.

Blockchain as the catalyst

Calaxy follows a good-old-fashioned startup premise: using technology to remove middlemen and make a system more efficient. Email did the same thing. But Dinwiddie is drawing from an old blueprint and using blockchain to give it an actual shot at working.

Bowie Bonds, for instance, were an attempt back in 1997 to create financial securities linked to David Bowie’s discography. Fantex, a startup founded in 2012, created securities based on the assets of professional athletes. Neither of the two took off. 

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The difference now is that blockchain technology makes it possible to create and track contracts and securities relating to a vast range of activities–even something as small as a contract to follow someone on Twitter.

“Everything in life is not necessarily going to make sense, but blockchain does,” Dinwiddie told PitchBook earlier this year. As he explains, his belief in this technology stems from “trustless trust”–blockchain’s use of encryption protocols and distributed ledger technology to replace trusted third-parties in verifying transactions. He also appreciates the “free-flowing liquidity” that blockchain offers.

“Money just isn’t hampered by borders. It’s not friction-filled. Those things make a lot of sense to me. Why shouldn’t I be able to sell 1% of my house and gain liquidity in my asset, if that’s what I want to do?” he says.

This concept has been put into practice before. For example, Hong Kong-based startup Liquefy (which happens to be the only partner to Calaxy from Asia) uses a process called securities tokenization to split the value of assets like real estate and fine art into shares which accredited investors can purchase.

Similarly, Calaxy will encourage athletes, celebrities, and social media influencers to treat themselves as human assets, help them monetize their personalities and fan engagement activities, and do this all in a way that’s direct and seamless.

Readers may now be wondering how the startup plans to verify transactions, store its cryptocurrency, and ensure that any promised services are provided to users. This is where Calaxy’s tech partnerships come into play.

The entire platform is built on Hedera Hashgraph, a decentralized public network. Hedera gave Calaxy a grant in HBAR–its own cryptocurrency–to support the development and use of the app on its network. Unlike traditional blockchains, where one miner works to verify a block of transactions, Hedera miners verify transactions by collective consensus.

Meanwhile, crypto exchange  CoinBaseis providing custodial services. Since Calaxy’s network is based on buying and transacting with crypto tokens, Calaxy needed a secure way to store the tokens. CoinBase will be taking care of this function by holding large volumes of crypto securely, similar to a bank.

Calaxy’s solution fundamentally revolves around the ‘smart contract,’ which is free of human intervention. However, the smart contract needs relevant data in order to independently verify the upholding of contract terms. For this purpose, Dinwiddie partnered with ChainLink for its ‘oracle’ service. This will work as a market data provider akin to Bloomberg or Google Finance, providing information from outside the blockchain which will be used to keep track of contract deliverables.At the time of writing, Dinwiddie is in the middle of raising a Series A round for Calaxy, and has said in previous interviews that he’s aiming for a 9-figure valuation. A few other NBA players, two singers, and WNBA player Imani McGee-Stafford are already on board (Forbes).

Making a name as an athlete, entrepreneur, and investor

Throughout this journey, Dinwiddie has proven himself a deep thinker with ideas that some might find outrageous. He’s far from the first NBA player to get involved with startups, but he’s also dived significantly deeper into the tech world than his compatriots with his work in blockchain.

Legendary LA Lakers shooting guard, the late Kobe Bryant, was a renowned investor in his own right. His $6 million investment for a 10% stake in sports drink BodyArmor in 2014 is now worth over $200 million (ESPN). Lakers point guard LeBron James formed media company SpringHill Co., worth $100 million, earlier this year. Other NBA-related investors include Carmelo Anthony, Andre Iguodala, and Stephen Curry.

Dinwiddie’s pursuits, in contrast, have skewed much further to the ‘deep tech’ side of startups. But he says that within the NBA, there’s a strong brotherhood in which players come to each other to gain insights on business ventures or startup investing.

“There’s a lot of knowledge to be gained from everybody, because everybody’s trying to break through that ceiling to figure out what’s next and push the envelope,” he adds.

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In his new role as an entrepreneur and venture capital investor, his basketball reputation precedes him in many discussions. This, he says, is great in terms of deal-flow, as people “love the star power catch” his investment comes with, but being an athlete also makes it harder to get taken seriously as an intellectual.

“You know, when I first started talking about blockchain, people were like, ‘Man, there’s no way he’s serious, he’s just trying to make a little bit of money in Bitcoin,’” Dinwiddie says.

Staying on top of changes in the industry and being able to show some learning to others in the crypto space was the key to turning things around. After that, he says, things started to take off–both from the deal-flow side and in terms of people respecting his expertise and opinions. He has since invested in crypto developer Dapper Labs, and continues to source other partnerships and deals.

After all this, though, Dinwiddie is confident that he prefers building to investing–ever the quintessential entrepreneur.“It reminds me so much of putting the work in with basketball,” he reflects. “You know, I think when you put the work in and keep your heart in the right place, you always have a chance to succeed. And then when the game comes again, it should be easy because of all the work you put in.”

Originally published in Jumpstart Magazine Issue 31 as ‘Nothing But Network’

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