Promoting Inclusiveness and Fairness through NFTs: The Case of Student-Athletes and NILs

Title of the Paper

Promoting Inclusivity and Equity through NFTs: A Case Study of NCAA Student-Athletes' Name, Image, and Likeness (NILs)

Paper Information

• Subject Area: Applications of Blockchain Technology in Inclusive and Equitable Finance
• Keywords: Blockchain, Design Science, Equity, Inclusivity, NFTs, NIL, Sports Economics, Student-Athletes, Digital Rights, Smart Contracts

Research Background and Problem Statement

• Issues or Challenges:

  • Following the NCAA's rule change in June 2021 allowing student-athletes to profit from their Name, Image, and Likeness (NIL), it has become evident that most student-athletes struggle to benefit from this reform.
  • Current NIL contracts are concentrated among a small number of star athletes, raising concerns about inclusivity and equity.
  • There is an unequal distribution of resources across different sports and athletes, coupled with a lack of transparency in payment processes.

• Significance:

  • There are approximately 500,000 NCAA student-athletes, 98% of whom will not turn professional. Insufficient financial support could impact their career planning.
  • Ensuring that all student-athletes can fairly benefit from the economic opportunities provided by NIL rules is critical to enhancing inclusivity in sports education.

• Research Motivation and Related Work:

  • The potential of blockchain to improve financial inclusivity, transparency, and equitable distribution has been widely studied (e.g., applications in enhancing supply chain transparency).
  • The current NIL market's lack of transparency and spending challenges may exacerbate resource allocation conflicts, with 77% of athletic directors believing that insufficient regulation could lead to more sports scandals.
  • This paper is the first to explore the impact of NFT characteristics on fairness and inclusivity in financial resource distribution.

Proposed Solution

• Main Methods and Solutions:

  • Propose a blockchain- and NFT-based system that creates corresponding NFT collectibles for each student-athlete. The market operates as follows:
    1. Primary Market: NFTs are sold in randomized packs, with each purchase triggering royalty payments distributed among all athletes involved in the pack.
    2. Secondary Market: NFTs can be traded or sold, with royalties generated based on the trading volume of the associated athlete and NFT.

• Innovations:

  • Enhancing inclusivity through blockchain and randomized compensation mechanisms, ensuring all athletes have opportunities to earn NIL income.
  • Introducing equitable distribution principles: adjusting secondary market reward distribution weights based on market demand to balance "inclusivity" and "market-driven fairness."
  • Leveraging blockchain's transparency and immutability to automate royalty payments and ensure traceability.
  • Incorporating an "exogenously driven scarcity pricing mechanism" to balance individual athlete interests with market dynamics for optimized profitability.

• Implementation Steps and Key Technologies:

  1. Develop a decentralized application (DApp) on a blockchain platform (e.g., Ethereum) supporting smart contracts.
  2. Define and code NFT smart contracts (randomized allocation mechanisms, royalty percentage distribution).
  3. Develop interactive interfaces for "primary market purchases" and "secondary market trading."
  4. Enable user blockchain address and NFT connection via wallet management tools (e.g., MetaMask).

Research Outcomes

• Specific Results:

  • Proposed and validated an NFT-based allocation model with the following design features:
    1. Randomized NFT sales in the primary market promote inclusivity.
    2. Demand-based pricing mechanisms in the secondary market achieve market-driven fairness.
    3. Blockchain transparency enhances the reliability of all payment transactions.
  • Developed an operational DApp prototype combining NFTs and smart contracts to facilitate interactions between student-athletes and fans.

• Comparative Advantages Over Existing Solutions:

  • In the current market, star athletes dominate NIL transactions. This system ensures that even non-star athletes can benefit through randomized royalties.
  • The system leverages blockchain technology to excel in transparency, speed, and tamper-resistance.

• Experimental or Evaluation Results:

  • Student-athletes provided feedback on the system design through user interviews:
    • Supported the randomized model for enhancing inclusivity and enabling fair resource distribution.
    • Suggested improving user-friendliness (e.g., educating athletes on NFT technology) and expanding community participation incentives.
    • Identified new challenges, such as insufficient fan motivation to purchase and steep learning curves for NFT beginners.
  • Overall, the system was deemed a viable method for equitable and inclusive NIL resource allocation.

• Limitations and Future Directions:

  • The current prototype lacks optimization for performance efficiency and user experience, requiring further iterations.
  • Potential security issues, such as preventing zero-royalty attacks (e.g., bypassing royalty payments through fake transactions), need to be addressed.
  • Future work will explore optimizing initial random allocation probabilities to better align with market demand and investigate the impact of NFT price prediction models on adjusting allocation mechanisms.
  • Further research will focus on designing more direct fan incentives to enhance user engagement.