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It has been a creative year for storage • The Register

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Analysis While much of the world was in lockdown in 2021, storage boomed. It was a year of ransomware, tech advances, hybrid multi-cloud, a switch to subscriptions and services, hypergrowth in analytics startup funding, and building a DPU data centre makeover.

Suppliers grew, were acquired, struggled, were reborn, and a few (very few) went under. We also saw moves on the high-level exec dancefloor as CEOs and other execs darted between companies, looking to make the optimal career move.

Themes

The constant backdrop to the year was COVID-19 and a recovery from business lockdowns in spending, which provided growth opportunities for virtually all storage companies, despite the widespread supply chain issues. Strong growth rates in data, particularly unstructured data for analytics and AI, provided good business for data protecting and managing companies as well as block, file, and object storage suppliers.

Flash and disk suppliers had a good year and the tape media and library suppliers benefited as well.

The other constant backdrop was ransomware with an epidemic of attempts to invade organisations’ data stores, encrypt them and extort cash. Even storage suppliers were not immune – witness Kaseya and ExaGrid. The data protection industry responded with near-universal immutable storage technology, virtual air gaps, and backup file scans. As examples we could cite Infinidat’s InfiniGuard CyberRecovery, the Rubrik ransomware guarantee and Threat Hunter, Cohesity’s security advisor, and the Quantum Scaler tape library ransomware block.

A third pervasive theme was the rise of hybrid multi-cloud products and services. It became generally understood that there is not going to be a mass migration from data centres, be they central or distributed edge sites, to the public cloud titans. Indeed, the public cloud titans, realising this, expanded their on-premises presence. Suppliers realised that multi-cloud appeal was strong; no one likes lock-in to a single supplier, and also that the so-called edge needs local processing and storage.

This is for the same reason that retail stores have local point-of-sale intelligence rather than green-screen cash tills hung off a central mainframe. Edge sites need intelligence and storage distributed to them for fast response and reaction to events.

Many companies supported the idea of offering their products as subscription-based services, like HPE GreenLake and Dell APEX, Pure Storage and Cohesity. Pure went further and offers its storage arrays as on-premises, cloud-style consumable resources

The fourth theme was the incredible strength of the database, data lake, warehouse and analytics industry as a magnet for VCs. It was exemplified as recently as 13 December, with distributed RDBMS startup Cockroach getting a $268m funding round and a $5bn valuation. 

The mass adoption by incumbent players of Kubernetes and container technologies continued apace; we can mention HPE Ezmeral, NetApp astra, CTERA, Hitachi Kubernetes Service, Buurst, and Dell Container Storage Modules. Kubernetes support is a table stakes feature for storage incumbents.

Media

The NAND industry concentrated on 150+ layers in 3D NAND manufacturing with industry leader Samsung pushing 176 layers like Micron and SK Hynix, and Kioxia and Western Digital pumping our BiSCS gen 6 162-layer chips.

The transition away from disk-influenced 2.5-inch drive bays to the EDSFF ruler format began with developments from Micron, Kioxia, Fadu, and NGD.

Jason Adrian, senior director of Azure Platform Architecture at Microsoft, said of Kioxia’s XD6 announcement: “The EDSFF E1.S form factor is the future of flash storage in hyperscale data centres, including Azure platforms.”

That seems pretty clear cut and servers will increasingly be offered with EDSFF bays rather than the legacy disk drive bay slots.

The disk drive manufacturers continued their dogged and determined advance up the nearline drive capacity ladder, with both Western Digital and Seagate announcing 20TB drives and Toshiba reaching the 18TB level. 

All three manufacturers think HAMR (Heat-Assisted Magnetic Recording) is the required technology for capacity advances beyond the 30TB or so level. They each have their own incremental technology steps to get to that level, such as Toshiba’s MAS-MAMR and Western Digital’s OptiNAND. It seems likely, although unsaid by WD, that full MAMR may not happen. Instead OptiNAND 10 and 11-platter drives may get it to the HAMR gateway of 30TB-plus capacities.

MAMR diagram

Blocks and Files MAS-MAMR diagram

Flash

One notion was debunked this year: the idea that there was going to be a flash-disk cost crossover with the $/TB of flash matching or even becoming lower than that of disk. Instead it is now pretty widely recognised that SSDs and HDDs will co-exist for the next decade, with each technology lowering its cost/TB more or less at the same rate.

Tape capacity boundaries continued being pushed back, with Fujifilm demonstrating a 1PB tape in February.

Optane’s role continues to have some doubt attached to it, with Intel not saying much about its manufacturing future after Micron’s departure from the 3D XPoint manufacturing field in March.

An Intel 10-Q SEC filing showed that its Optane business business lost $473m in the first nine months of 2020. Intel hinted Optane could be CXL-connected in the future. VAST Data, which uses Optane drives to store metadata and function as a write buffer, has qualified Kioxia’s FL6 Optane-class SSD as an alternative.

In November Dr J Metz, technical director for systems design at AMD and SNIA board chair, said Intel announced 3DXP “years before its availability, stalling some of the market – including its own.” He added: “I still like Optane a lot. PM (Persistent Memory) is going to play a huge role in both CS and SmartNICs. Advances in NVMe and SNIA are relying on that class of storage to not just exist, but play a central role. It’s just a shame that it hasn’t created the paradigm shift that was anticipated.”

Optane buffs are looking forward to the gen 3 product, potentially an 8-decker with doubled capacity.

DNA storage progressed but it became increasingly obvious that its IO speed can be catastrophically slow. Unless this issue is solved, DNA storage will remain largely a scientific plaything.

Interconnects

In the interconnect area PCIe 4.0 started becoming established, with product announcements from Phison (controllers), Samsung (client SSD), GigaIO (PCIe 4 composable fabric), Kioxia (Exceria SSDs), and Micron (7400 SSD) as examples. The next doubling of PCIe speed to gen 5 started with a Marvell controller in June, and a Kioxia SSD in November.

The future CXL interconnect, based on PCIe gen 5, received a tremendous boost when the overlapping and competing Gen-Z consortium decided to merge its efforts into the CXL technology. Next year we may see the fist CXL-connected external memory stores appearing.

It is possible, if not probable, that the CXL bus will provide a boost to composable systems technology, the automated and dynamic setup and teardown of servers from pooled component resources of compute and memory, accelerators, storage, and networking.

Liqid made most of the composable systems running this year, and got a $100m funding boost in December as a reward for its product, partner, and market-building efforts.

CXL memory hierarchy

CXL Memory hierarchy

Back in the legacy storage networking world we saw 64Gbit/s Fibre Channel with products from HPE, using Broadcom hardware, and Cisco.

There was a flurry of NVMe/TCP announcements from Lightbits Labs, Fungible, and NetApp, and its role as the iSCSI upgrade path seems solid.

High Bandwidth Memory, stacked memory dies connected via an interconnecting interposer layer to processors, made progress as well. Intel’s coming Sapphire Rapids gen 4 Xeon processor will support HBM2e as will Intel’s Ponte Vecchio GPU. Samsung also supports HBM2e.

SmartNICs and DPUs

There were several product and technology moves as suppliers positioned themselves in the data centre server offload market. The products are divided between SmartNICs and specialised processors for east-west data centre networking. 

Intel made lots of noise about being what it called the biggest IPU (Infrastructure Processing Unit) leader through deals with hyperscalers for its server offload cards.

Nvidia ploughed ahead with its BlueField SmartNICs, publicising gen 3 and pushing ahead with VMware and its Project Monterey to have vSphere running on the BlueField cards. Fungible announced that its Storage Initiator Card supported NVMe/TCP,  and can run at 6.5m IOPS to a single server using its FS1600 NVMe storage server and DPU chips.

Dell said in September that VxRail hyperconverged systems fitted with Project Monterey-style SmartNICs were coming in spring next year.

Companies

There were many storage array product pushes in the year, such as HPE’s Alletra follow-ons to its Primera and Nimble arrays, Pure Storage’s range-topping FlashArray//XL, and NetApp’s similarly positioned AFF A900. All-flash arrays dominated, with Infinidat launching its first AFA in June. Kioxia plugged away with with its software-defined KumoScale flash boxes and VAST Data opened a new marketing front by positioning its arrays as FlashBlade-style fast restore and fast archive access boxes.

Seagate put a lot of effort into its LyveDrive business, which transports disk drives from endpoints to data centres. It set up LyveDrive receiving points in Equinix colos, which also saw Pure install FlashBlade systems to provide fast connectivity to the Azure cloud.

We are seeing Pure erecting a storage and container-orchestrating layer across the on-premises and multi-cloud environments. It has a similar vision to NetApp and we think that wherever an application executes, there will be Pure Storage resource that can effectively move around the hybrid multi-cloud environment and find Pure Storage available wherever it goes.

Notable company events include HPE CEO Antonio Neri taking a personal interest in GreenLake and giving it a kick up the ass. GreenLake boss Kumar Sreekanti retired in August so Neri reorganised the GreenLake business teams and leadership.

In September HPE said there would be additions to its GreenLake subscription, marking the company’s shift into direct competition with public cloud data warehouses like Snowflake and SaaS-based data protectors such as Cohesity, Druva, HYCU, and others.  It won Porsche as a GreenLake customer in October and Barclay’s Bank in a 10-year, 100,000+ workload deal just days ago.

Object (and file) storage supplier Scality, which gained $20m in fresh funding in January, went into the cloud-native world by announcing Artesca in April. In general it appeared that object and file storage were preparing to get closer together.

Dell made a series of storage related announcements throughout the year but a significant upturn in storage revenues eluded it. For example, in November we wrote “Dell’s quarterly revenues rose 21 per cent year-on-year to a record $28.4bn, but storage revenues were anaemic with a mere 0.9 per cent rise to $3.89bn.” We suggested there might be problems in high-end array sales, low or no growth in Dell’s PowerScale file and ECS object storage products. 

NetApp did well in the year, growing revenues for the fifth quarter in a row in December, and appointing, for the first time, a chief product officer hired from Microsoft – not an ONTAP mothership member, in other words.

IBM storage sales declined throughout the year, despite upgrades of its products. In October it announced updates for Spectrums Virtualize, Protect, Protect Plus, Scale, AIOps for FlashSystem, and the ESS 3200, which runs Spectrum Scale software. But IBM then saw its storage CMO, Eric Herzog, desert to join competing Infinidat in the same month.

eric hertzog infinidat

Eric Herzog

IBM invested in combined transactional and analytics SQL database company SingleStore in November. There’s a Red Hat connection here as SingleStore is available in IBM’s Cloud Pak for Data, and is certification on Red Hat OpenShift and available in the Red Hat Marketplace. Basically, IBM is waiting for the next mainframe cycle to shift more DS8000 arrays, hoping for Red Hat to move more storage products, and treading water elsewhere in storage after having updated its FlashSystem all-flash arrays in February.

Acquisitions

We recorded 10 acquisitions in the year:

  • DataCore buys Caringo – 22 Jan
  • Twitter buys DriveScale – 25 Jan
  • NetApp DataStax – 20 May
  • NetApp buys Data Mechanics – 23 Jun
  • IBM buys ECX from Catalogic – 24 May
  • HPE buys Zerto – 1 July
  • HPE buys Ampool – 8 July
  • Quantum buys Pivot3 – 19 July
  • NetApp CloudCheckr – 4 Oct
  • DataCore buys MayaData – 18 Nov

Among the partnership deals, four stood out:

  1. Dell selling Druva products deal – 21 Jan
  2. Silk Azure co-sell – 10 Feb
  3. NetApp Rubrik resell deal – 22 Apr
  4. Nutanix-Citrix – 23 Sep

There were three failures we covered: Datera in February with its liquidation in March, InfiniteIO in May, and Pivot3 in July, with assets being bought by Quantum. China’s Tsinghua Unigroup went bankrupt in July. That’s a low number of failures overall.

NetApp end-of-lifed its SolidFire HCI business in March and SolidFire founder Dave Wright resigned from NetApp in July to join a fintech business. From our point of view, the ONTAP all-flash arrays killed the SolidFire all-flash arrays because ONTAP has such a massive presence in the market and inside NetApp. SolidFire revenues were a small percentage of ONTAP revenues and the ONTAP AFF product’s performance was excellent, leaving no real need for a standalone SolidFire array other than as a niche filler.

Various new CEOs were appointed. Infinidat co-CEO Karel Sandler went on 5 January and Phil Bullinger was made CEO next day. We saw new CEOs at StorMagic, Pavilion, Acronis, Fungible, MayaData (before DataCore bought it), Arcserve and, on 16 December, Veeam.

Phil Bullinger infinidat

Phil Bullinger

As well as getting a new CEO, Acronis appointed ex-VMware CEO Paul Maritz as its board chairman in October. Is this a distant hint that an IPO is envisaged?

Notable exec moves were Fidelma Russo joining HPE as its CTO, coming from Dell. Strongbox’s CEO and exec team left as it rebranded as StrongLink under a new CEO, Andrew Hall.

A few companies were reborn through refunding, pivots, and rebranding including Reduxio becoming Ionir, Panzura completing what it called its “refounding” – it has just launched a white glove managed migration service too; Kubernetes startup StorageOS became OnDat; and computational storage startup Nyriad became comprehensively reorganised under new management with a new CEO, execs, and funding. 

DDN has rebooted its Tintri acquisition, helped by management changes, and is growing nicely. Among the new startups Ocient impressed.

Funding

In mid-November we said $5.84bn had been invested in 36 storage startups and post-startup-pre-IPO suppliers this year. With recent new funding for Liqid, Rockport, and Cockroach, the numbers are now $6.17bn and 39 companies.

Ironically, with only one IPO (that of Backblaze), more money has flowed into building up companies than into IPO-ing enterprises standing on their own feet at last. That means there is a fattening queue of potential IPO candidates: Cohesity, Databricks, Druva, Rubrik, Veeam, and WekaIO, for example. Perhaps even VAST Data and Acronis.

Summation

It has been a massively positive year for storage, overcoming the COVID-19 pandemic and associated supply chain issues to grow and prosper. The incumbent Kubernetes adoption phase is over and attention has turned to offering products as cloud-style services through subscriptions, and as hybrid, multi-cloud services.

Data protection is more highly thought of than ever as suppliers have adopted anti-ransomware measures with vigour and alacrity – here we’ve seen Acronis, Cohesity, Commvault, Druva. HYQU,  Rubrik and Veeam, also Veritas, still a huge, huge player. 

Two of the old guard storage array/filer incumbents, HPE and NetApp, are doing well, Dell not quite as well, Hitachi Vantara less so, and IBM not very well at all. Pure continues to grow strongly as does Nutanix. Both need to become profit-making.

Qumulo is growing strongly as is Infinidat. This storage editor feels, though, that the two champion growers are VAST Data and WekaIO, both file-based.

A final thought: storage in 2021 started with COVID and ransomware. It progressed through an ongoing switch to cloud-like services and is finishing strongly on a mix of flash and files. Stick that in your mental folder structure. ®

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Why Intel’s latest chip factory news gives us deja vu • The Register

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Comment Intel puts on a show for its biggest manufacturing announcements, with episodes every few years using a rotating cast of CEOs and US presidents.

Intel boss Pat Gelsinger and President Joe Biden were the latest to join the series, on Friday jointly announcing the chip maker’s investment of $20bn in plants near Columbus, Ohio. The fabs could be operational by 2025 and make chips down to 2nm and beyond.

“This is our first major site announcement in 40 years,” Gelsinger said on on-stage later in the day with Ohio Governor Mike DeWine (R).

“Intel’s announcement today is a signal to China and to the rest of the world that from now on our essential manufactured products in this country will be made in the United States of America,” DeWine said.

Intel’s announcement today is a signal to China and to the rest of the world that from now on our essential manufactured products in this country will be made in the United States of America

Intel has previously wheeled out chief executives and commanders-in-chief to announce the plowing of billions into factories, with the presidents using the events to highlight the bump in manufacturing and jobs for the United States. But the aftermath has been littered with unfulfilled promises and failed goals, partially due to Intel’s sometimes incoherent manufacturing and product strategies.

This time around, Gelsinger has identified manufacturing as a major growth driver, as part of his Integrated Device Manufacturing 2.0 strategy. Intel has promised to expand its contract manufacturing in a meaningful way, fabricating components that use the non-x86 Arm and RISC-V architectures, and signed on Qualcomm, a semiconductor rival, as a foundry customer.

Intel’s latest $20bn commitment will be used to build two plants on a 1,000-acre site that could be expanded to up to 2,000 acres and eight fabs. The site will employ 3,000 folks with an average salary of $135,000, and also bring 7,000 construction jobs to Ohio, DeWine said.

You can’t fault Gelsinger for announcing the factories: his shareholders and the world, amid a chip supply crunch, expect it. But not only should the news be seen in an historical context, it remains to be seen if Intel can meet the promises it laid out for the Ohio facilities.

In 2011, then-CEO Paul Otellini announced Intel was investing $5bn to complete Fab 42 when President Barack Obama visited an Intel facility in Hillsboro, Oregon. At the time, Fab 42 was to make 14nm chips, including smartphone processors, and create 4,000 jobs.

Ultimately, the announcement turned out to be a false promise. Intel cancelled completion of Fab 42 in 2014 after manufacturing woes and blunders in markets including mobile devices. In 2016, Intel laid off 12,000 employees to prioritize its products in the data center and the Internet of Things markets.

In 2017, then-CEO Brian Krzanich repeated the pledge to complete Fab 42, this time repackaged as a fresh announcement with President Donald Trump. Intel said it would invest $7bn to complete Fab 42 to make 7nm chips.

Intel powered up Fab 42 in Arizona in late 2020 to make not 7nm but 10nm chips. That’s the process node that was delayed for years due to critical fabrication missteps, causing Intel to lose its manufacturing lead over TSMC and Samsung.

Chipzilla hopes to do better on its commitments with Gelsinger, who wants to bring Intel back to its engineering roots.

Intel in September broke ground on more factories in Arizona, which carry a $20bn price tag. Work is also underway on manufacturing expansions in Oregon and New Mexico, and overseas in Ireland.

There’s a growing need to commit capacity to foundry customers, and to meet the higher demand for the company’s chips, an Intel spokesman told The Register in an email.

Gelsinger has stressed the “importance of building a more resilient supply chain and ensure reliable access to advanced semiconductors in the US for years to come. Today’s announcement is a critical step in our plans to fulfill these objectives,” the Intel spokesman said. ®

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MEPs give green light to take on Big Tech

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The draft DSA measures include tackling illegal content and holding social media platforms accountable for their algorithms.

The European Parliament has voted in favour of the long-debated Digital Services Act (DSA), Europe’s attempt to shift the balance of power from the hands of Big Tech and into the hands of EU residents.

MEPs voted 530 votes to 78 – with 80 abstentions – to approve the draft DSA text that will see tech giants held accountable for content on their platforms in a spate of new rules and regulations.

The move comes just a month after MEPs voted in favour of the Digital Markets Act (DMA), a similar set of proposed laws that seek to impose stricter rules around tech competition in the EU and rein in the monopoly large multinationals hold in Europe’s digital space.

The set of draft DSA measures include tackling illegal content, preventing the spread of misinformation and disinformation and holding social media platforms accountable for their algorithms.

The Parliament introduced several changes to the initial proposal by the European Commission, including exempting small businesses from certain DSA obligations, making targeted advertising more transparent and easier to refuse, and prohibiting targeted ads for minors.

Online platforms will be prohibited from using “deceiving or nudging techniques to influence users’ behaviour through ‘dark patterns’”, according to the revised DSA draft. Large platforms will also be required to provide “at least one recommender system that is not based on profiling”.

The approved text will now be used as the mandate to negotiate with the French presidency of the Council, representing member states. The negotiation will be led by Christel Schaldemose, an MEP from Denmark.

“Today’s vote shows MEPs and EU citizens want an ambitious digital regulation fit for the future,” she said after the vote. “Online platforms have become increasingly important in our daily life, bringing new opportunities, but also new risks,” she added.

Schaldemose said it was the duty of the European Union to make sure “what is illegal offline is illegal online” and that new digital rules need to benefit consumer and citizens, not Big Tech.

Facebook whistleblower Frances Haugen had hailed the DSA as a potential “global gold standard” in government regulation of Big Tech in her address to the European Parliament last November.

She said that, if enacted and enforced correctly, the DSA has the potential to inspire other nations such as the US to take on Big Tech and “safeguard democracy” before it’s too late.

“Every modern disinformation campaign will exploit news media channels on digital platforms by gaming the system,” Haugen told MEPs in her opening statement. “If the DSA makes it illegal for platforms to address these issues, we risk undermining the effectiveness of the law,” she said.

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Dangerous game? Football clubs look to mine fans’ cash with crypto offerings | Cryptocurrencies

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When FC Barcelona took to the pitch for the 2021 Spanish Super Cup final, the trophy wasn’t the only prize at stake.

Thousands of blaugrana fans were also keeping an eye on the market for FCB’s “fan token”, the club’s very own cryptocurrency. Socios, the web-based platform that pioneered fan tokens, had promised to “burn” 20,000 tokens for every goal Barcelona scored – and 40,000 if they lifted the cup.

In theory, success on the pitch would increase the scarcity of the currency, boosting its value. In practice, Barcelona lost the game and, footballing passions aside, it didn’t make much difference anyway. With 3.5m of the tokens in circulation, not to mention millions more retained by the club for future issuance, a few thousand here or there wouldn’t have moved the needle.

Q&A

What is cryptocurrency?

Show

Cryptocurrencies are an alternative way of making payments to cash or credit cards. The technology behind it allows the ‘money’ to be sent directly to others without it having to pass through the banking system. For that reason they are outside the control of governments and are unregulated by financial watchdogs – and transactions can be made in a way that keeps you reasonably pseudonymous.

If you own a crypto-asset you control a secret digital key that you can use to prove to anyone on the network that a certain amount of that asset is yours. If you spend it, you tell the entire network that you have transferred ownership of it, and use the same key to prove that you are telling the truth. Over time, the history of all those transactions becomes a lasting record of who owns what: that record is called the blockchain.

Bitcoin was one of the first and biggest cryptocurrencies and has been on a wild ride since its creation in 2009, sometimes surging in value as investors have piled in – and occasionally crashing back down. Dogecoin – which started as a joke – has also seen a stratospheric rise in value.

Sceptics warn that the lack of central control make crypto-assets ideal for criminals and terrorists, while libertarian monetarists enjoy the idea of a currency with no inflation and no central bank.

The whole concept of cryptocurrencies has been criticised for its ecological impact, with “mining” for new coins requiring vast energy reserves and the associated carbon footprint of the whole system.

Richard Partington and Martin Belam

Thank you for your feedback.

But the stunt symbolised something more, the burgeoning love affair between football and cryptocurrency, an alliance that holds the promise of new revenue streams for a game that is already awash with cash but always wants more.

Football finance expert Kieran Maguire thinks clubs have latched on to crypto because revenues from other sources are starting to level off, having risen reliably for decades.

“Football clubs have realised that we’re now at max broadcast revenues, with modest growth at most to look forward to,” he said.

“As far as commercial sponsors are concerned, we’re seeing deals being renewed but not with increased money. The only way to increase matchday sales is to increase prices and fans are reluctant.”

Manchester United – whether one believes the club or not – claims to have 1.1 billion fans on the planet. With revenue of £488m in 2019-20, that’s just 45p per year, per fan.

“Clubs are thinking: ‘Can we ‘find another way of extracting money out of that huge fanbase?’ That’s where tokens come in.”

When AC Milan launched a token in early 2021, it raised $6m (£4.4m) in under an hour, or about 12% of the value of the club’s record signing, Leonardo Bonucci. Paris Saint-Germain’s token, the most valuable, has a market value of $45m.

In the murky and unregulated world of crypto though, it’s hard to know how much clubs are actually making. Socios said last year it had sold $300m worth of fan tokens but would not say how much of that went to the clubs with which it partnered.

Other platforms, such as Binance, are also moving into the fan token market, indicating there is room for growth, particularly given that only a few dozen clubs have entered the market in any meaningful way.

Pedro Herrera, senior blockchain analyst at DappRadar, a marketplace for blockchain-related apps, said that most fans buy tokens for the associated perks, such as votes on small decisions about which song to play over the stadium tannoy after a goal, or entry into a draw to win a signed shirt.

“It’s a win for the fan because they feel more involved; it’s a win for the team because it’s adding a layer of monetisation; and it’s a win for the [crypto] industry because you attract the masses and it’s one step closer to mass adoption.”

Maguire isn’t against crypto but adds a more sceptical tone: “Lots of fans love crypto and in its purest form it’s great. Banks have been overcharging people for years in terms of transaction fees and if crypto can reduce those fees that’s fantastic.”

“The problem is when unscrupulous traders, particularly via social media, seek to exploit fans who think a token is a serious investment product, rather than a glorified collectible.

“It’s magic beans. So long as it’s sold as a digital Panini card, it’s OK. But when it’s being seen as a form of investment, it’s moving into uncomfortable territory.”

“It’s unregulated, it’s volatile and it’s subject to manipulation by people who own large amounts of the asset.”

Fan tokens, though, are a mere paragraph in football’s rapidly unfolding crypto saga.

In 2021, crypto sponsors piled into football and were welcomed with open arms by cash-hungry clubs, leagues and players.

Watford player with stake.com shirt
Watford have perhaps England’s biggest crypto deal, a front-of-shirt sponsorship from Stake.com, which offers crypto gambling. Photograph: Tess Derry/PA

Exchange app Crypto.com sponsors Italy’s Serie A, one of the world’s most glamorous leagues, while Socios is Internazionale’s shirt sponsor. EToro, a trading platform that facilitates investment in multiple cryptocurrencies, has deals with more than half of the clubs in the Premier League.

Southampton players are understood to have been offered the option to be paid bonuses in bitcoin, as part of a £7.5m-a-year deal with Coingaming Group. And in January 2021, striker David Barral made history when he became the first player in a major league to be signed with bitcoin, albeit in Spain’s third tier with Internacional de Madrid.

Much better-known players and ex-pros, such as Paul Pogba and John Terry, are promoting cryptocurrencies, trading platforms and non-fungible tokens (NFTs) – the controversial digital art form – too.

This should come as no surprise given the reach that big-name stars have via social media and the money they can make from promotions. Other partnerships are perhaps more unexpected. Visitors to the Twitter profile of former Republic of Ireland international Tony Cascarino might have been wrongfooted by the former striker’s sudden change of pace midway through 2021. One moment he was musing on the latest developments in the Premier League, the next he was evangelising about blockchain bank Babb (no relation to former Ireland teammate Phil) and musing that the “crypto market is on fire”.

Even in its infancy, the reputational risks of this new commercial pact between crypto and football have become all too clear. Last year, Manchester City’s deal with a mysterious firm called 3Key Technologies fell apart in a matter of days as it emerged that nobody seemed to know anything about the company or its executives.

Arsenal FC ad promoting fan tokens
The Advertising Standards Authority banned Arsenal FC ads promoting fan tokens. Photograph: ASA/PA

In December, Arsenal were rapped on the knuckles by the Advertising Standards Authority (ASA), which banned a club promotion that it said was exploiting fans’ “inexperience or credulity, trivialising investment in crypto assets, misleading consumers over the risk of investment and not making it clear the ‘token’ was a crypto asset”.

“For those in sport looking for sponsorship, it’s a whole new market of opportunity but it’s a bit of a landmine you’re dealing with,” said Bill Esdaile, managing director of sports marketing agency Square in the Air.

“My gut feeling is that such a small percentage of people understand how [crypto] works that too many decisions are made on trust, thinking that if [crypto firms] say they’ve got the money, they do.”

The amounts on offer appear to be going up.

Premier League strugglers Watford have perhaps the country’s biggest crypto deal, a front-of-shirt sponsorship from Stake.com. The site offers crypto gambling, which isn’t legal in the UK but may appeal to the league’s hundreds of millions of viewers around the world.

The arrangement even means that Watford players’ shirt sleeves bear the logo of Dogecoin, a “joke” currency whose value swings around wildly, often in response to tweets by Tesla multibillionaire Elon Musk.

Kieran Maguire estimates that the shirt deal could be worth up to £8m, based on the typical value of such partnerships, while an insider at Watford told MSN in August that the Dogecoin sleeve display added £700,000 into the mix.

Sums like these will become increasingly difficult for clubs to ignore, he thinks, particularly if the government goes ahead with a root-and-branch overhaul of gambling regulation that could see football lose the cash cow of shirt deals with betting firms.

“They [clubs] see the token market as slightly to one side, it won’t get picked up by the gambling review and it will help fill the gap,” says Maguire.

“Those deals of £5m to £8m could be replaced by NFT advertising and by crypto.”

In a recent paper, psychology researcher and gambling expert Dr Phil Newall warned that football sponsorship may be about to swap one risky product for another.

“Research has found that cryptocurrency traders are likely to have problem gambling symptoms, and has identified psychological similarities between cryptocurrency trading and online sports betting,” wrote Newall. He believes removing gambling advertising may create more space in which to legitimise equally dangerous products.

As they burn through cash in the pursuit of glory, it seems unlikely that clubs will worry about that.

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