A couple of weeks ago I asked a question on twitter – ‘if you’ve not made the jump over to Sorare yet, what’s stopping you?’
I got loads of engagement with that tweet so I wanted to take a some time to address the barriers that people spoke of. I’m going to split this up into a series of posts, probably five in total, so that I can go into a bit more detail about each one, starting with Crypto.
Crypto – the biggest barrier of all
The main thing that people spoke about was the crypto element – not understanding it and feeling like it was a bet on top of a bet (what happens if there’s a crypto crash?)
‘I could play it perfectly and crypto crashes and I lose anyway.’
Sorare is built on the Ethereum blockchain. Ether, the Ethereum currency (also ETH), is the second largest cryptocurrency after Bitcoin but there are differences between the two, the main one being that the aim of Ethereum is broader than a simple currency – it provides a platform for applications to be built on.
I’m not a crypto expert and I’m only just getting my head around this but I can see two obvious advantages to Sorare using Ether. Firstly, utilising blockchain technology means that Sorare can issue digital collectables that are just as ‘real’ as their physical counterparts. The code that sits behind the cards is unique, tamper-proof, allows them to be transferred securely between individuals, and means they can be used anywhere – no just on the Sorare platform.
Secondly, for a global game, there has to be a real advantage to us all speaking the same language. I can sell my card to someone in Brazil, without having to worry about converting currencies in between.
So what about the downsides? Well, as I’ve said, I was complete crypto virgin before starting on Sorare and if I can learn the basics of buying and selling Ether, anyone can. You do need to find an exchange (I signed up with Coinbase and then upgraded to Coinbase Pro for lower fees) and a crypto wallet (I use Metamask). The Sorare community can always help you if you get stuck.
You can also bypass crypto altogether when buying in if you want. Since November 2020, Sorare has partnered with Ramp to allow managers to fund their accounts using local currency.
The second concern is a harder one to address – the issue of the fluctuating underlying value of Ethereum.
THE ETH BULL RUN
It’s clear to see that ETH has been on a serious bull run lately, more or less doubling in value over the last month. This comes after a long period of stability, with only very small movements in the currency over a 2 year period. ETH has a tight price correlation with Bitcoin, which has seen a similar picture in recent weeks, although hasn’t performed quite as strongly.
There are of course various things that have caused this sudden price spike but it will be partly driven by a growing awareness and demand for ETH (something which applications like Sorare will be helping to drive). I can only see this continuing.
The other thing likely to be driving this is the planned upgrade to the currency, Ethereum 2.0, which should address concerns about speed and scalability. One of the first things you’ll find out about on joining Sorare is that cards and currency can take quite a bit of time to transfer when demand on the network is high, with the resulting ‘gas fees’ being punishing. Ethereum 2.0 should consign some of those issues to history. That could mean that the bull run continues for some time yet and that ETH stabilises at an all-time high.
But what does that mean for Sorare? Well any growth has to be good for the platform and managers have definitely seen the benefit of this so far, but you don’t actually have to get as involved in the crypto side as you might think.
On Sorare, player values are shown in ETH and in fiat (local) currency at the same time. Recently, its the fiat valuation that’s been pushed to the forefront of the interface so this is the thing that you see first.
The Sorare team have also recently started to dynamically index the starting prices of auctions to Euros, with Rare cards starting at €5, Super Rares at €50 and Unique cards at €500 (previously these prices were anchored in ETH).
This sort of indexing, or anchoring, clearly takes place in the mind of Sorare managers to some extent too.
From what I’ve seen so far, the main driver for prices on Sorare is the form of the player. Fluctuations in form cause fast and significant changes in price. The scarcity of cards underpins this dynamic – if there are only a handful of cards available, prices will spike rapidly if a player hits a purple patch. Similarly, prices will increase as the number of managers on the platform increases and those ‘in demands’ cards become stretched between more and more people.
Sorare has seen exponential growth over recent months, making it difficult to talk with much certainty about how managers value their cards in ETH versus fiat currency – there are simply too many other things impacting on prices. The biggest rise in player values, almost across the board, appears to have happened between September and November, at a time when ETH was pretty stable but many new managers were joining the platform, new clubs were being launched and new seasons were getting into full swing.
It’s fair to say thought that as ETH rises, prices do tend to rise too but it’s not a straight correlation. When ETH was hitting new peaks in early 2021, it was notable that some sales were going through at lower than usual prices (in ETH terms). Basically, if you were happy to pay £200 for a player one week, you’d be pretty unlikely to be happy to pay £400 the next week – so price reduce until they reach a happy medium that is agreeable to both buyer and seller.
My own gallery gives a bit of a sense of this. I was growing my gallery up until the end of the year but the overall ETH value started to drop back a little in November, reflecting the growing value of ETH relative to pounds.
All of the above applies if ETH falls too – it won’t mean that profits are wiped out overnight. In fact, I’d argue that there are plenty of people waiting for ETH to take a dip so that they can buy into Sorare for the first time – so perhaps it wouldn’t be the worst thing in the world for the platform.
Worth nothing too that there is an ETH payout for hitting points thresholds in Global All Star Division 4 – 0.010 ETH for more than 205 points and 0.020 ETH for more than 250 points. At the time of writing, this is equivalent to roughly £9 / £18. These payouts, which are easily achievable, are still indexed to ETH, rather than Euros, so have nearly doubled in real terms in the last month. If ETH stays at this level, and with the Global All Stars League open twice a week most weeks, it’s not unrealistic for managers to assume that they can earn £1,000+ a year from these payouts alone.
A final concern that I’ve heard raised is around tax. Gambling profits are not subject to tax but Sorare isn’t a gambling platform, which does make this a live issue, and the HMRC is increasingly active in cracking down on people paying tax on cryptocurrency assets.
There’s a useful run down on crypto taxes, and the HMRC stance, here: https://koinly.io/guides/hmrc-cryptocurrency-tax-guide/
If you’re a small time user, enjoying Sorare as a game, I don’t think this is something that you need to worry about too much. The annual capital gains tax exemption limit is £12,300 so you should be fine as long as your profit stays below this. Having said that, it might not be that straightforward to work out your actual profit and with anything tax related I’d always suggest you get professional help if you’re not sure and, most importantly, make sure you keep accurate records.
For high rollers, tax is almost certainly going to be an issue to consider. This recent video gives a more in depth viewpoint on the possible tax implications of Sorare so is well worth a watch.
- Buying and selling crypto is easier than you might expect.
- Sorare is moving more towards a fiat (local currency) model so you don’t have to engage with crypto as much as you might think.
- ETH is doing well at the moment and is likely to continue to do so – perhaps it’s not such a bad thing to be involved in anyway?
- Fluctuations in ETH will have an impact on the prices of players – but it’s not a straight correlation and there are other things that have a bigger impact, so you don’t need to worry about that too much.
- There may be tax implications if you’re making a lot of profit from Sorare but it’s not something that should concern you too much when starting out.
That was a longer post than I’d intended but there was a lot to cover – I hope it was useful and helps to allay some fears about the platform.
I’ll tackle the other barriers over the coming weeks, including perceptions around complexity, obscure leagues and high prices being a barrier.
If you want to give Sorare a go, sign up using my referral link and get a free Rare card after you buy your first five cards from the New Signings market: https://sorare.pxf.io/MDJ