In the last few weeks, non-fungible tokens (NFTs) have been on everyone’s lips. The NBA, Twitter’s founder Jack Dorsey and even Grimes got involved, resulting in the blockchain-backed unique digital assets selling like hotcakes for startlingly high prices. Even though NFTs are currently making headlines for being mostly used to sell digital art, it became clear to many that they’re bound to take other industries by storm too.
Among those is the fashion industry, which is the one I’ll focus on for the sake of this article. At a conference on fashion and technology hosted by Vogue Business on 18 March, 2021, Robert L. Triefus, an executive vice president at Gucci, said it was inevitable that luxury brands would soon begin to design NFTs.
Gucci has yet to delve into the market itself, but for three or four years already it has been experimenting with virtual spaces, creating digital products for games such as The Sims. In 2019, Gucci also integrated AI into its supply chain and stores in order to reduce waste. More recently, the brand also introduced a $12 pair of digital trainers users can purchase through its app and wear in virtual worlds such as the online game platform Roblox.
While the digital trainers mentioned above aren’t exactly NFTs, because the latter are unique and can’t be replaced with something else and the former are, well, the complete opposite, it’s not hard to imagine Gucci—and many other fashion giants—releasing NFTs for original virtual goods, or even for digital versions of physical goods shoppers have purchased, in turn allowing them to wear their real items into digital worlds such as Fortnite for example.
“There’s no reason that today you couldn’t buy a bag, get an NFT,” said Ian Rogers, chief digital officer at LVMH from 2015 to 2020, in a separate talk at the conference. For those who don’t know what LVMH represents, it is the owner of brands such as Louis Vuitton, Dior, Celine, Fendi, Loewe, Givenchy, and more. Therefore, Rogers—who now works for cryptocurrency firm Ledger but remains a consultant for LVMH—stating that is a pretty big deal.
NFTs have clear applications in luxury. First of all, it’s widely known that fashion doesn’t rely only on utility—barely so, as a matter of fact. Fashion is a means of self-expression but also a way to communicate status and identity. Shoppers today are seeking more elaborate ways to signal these social attributes in the digital world as well as in the physical one. The industry has known for a while now that it needs to focus on digital opportunities, and NFTs have just reinforced that understanding.
“You don’t buy a luxury handbag because of its incredible utility. You buy it because the brand has built culture, and that culture is something you want to be a part of,” said Rogers. And yes, customers want to be part of a specific brand’s culture, but they also want something else that NFTs can offer them: exclusivity.
Although a digital asset can be copied, the private key proving ownership of it is unique and one-of-a-kind. This creates a sense of scarcity, which is already interlinked with the value of specific fashion items. People don’t only buy a Gucci bag because they might be needing a new bag, neither do they buy one just because they know that its quality will be perfect. They buy a Gucci bag because they know that only a tiny part of the population will be able to afford the same one, therefore turning it into a rare item, only available to a specific niche. NFTs could potentially represent that same exclusivity factor.
On the other hand, “it’s a world that still has to be understood,” Triefus said when speaking about how pricing virtual goods will work. “For us at the moment we’re looking at experiments and pilots where values are attached to certain experiences or digital products so that we can understand what the value system is.” Already, sceptics are speaking of the NFT craze as a “bubble waiting to pop.”
Just like many other topics in life, only time will tell, but in this case at least, we can know for sure that whatever happens next will be permanently recorded, from start to finish!
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What is the link between Fortnite, Drest and the NBA? All make revenue from zero-touch cultural products that rewrite the rules of how we store value through the use of non-fungible tokens (NFT). Let me explain what these are and why you should care about all this now:
Zero-touch cultural products are not new; Kayne West has been at it for years. People buy clothes for their Instagram pic and then return them. Alejandro Jodorowsky’s movie Dune never came out but has a stan following. But what is culture these days if it isn’t content?
A zero-touch cultural product is intended never to be consumed in the traditional sense. They are meant to float around as pixels. But what can be the value in ‘owning’ a basketball moment or digital art? What if people start to collect emerging music, digital fashion, unseen parts of films or TV shows? People have always paid to own a moment; a piece of history and culture, a Babe Ruth baseball card, Prince’s guitar or vintage Dior. Many people invest in things they think will be valuable in the future. Just remember half of the world’s art is in vaults in Switzerland underground in the dark.
A non-fungible token (NFT) is a type of cryptographic token which represents something unique. The ‘fungible’ in non-fungible token describes something identical to something else—a Hermes bag or a Tesla share. When you buy an NFT, you are purchasing a token and the ‘thing’ linked to it, the transaction is registered on the blockchain, and each token is unique, which provides a permanent record of that purchase and provides proof of ownership. NFTs can be anything—domain names, virtual gaming items, and even tweets—but the most popular NFT category is digital art like images, audio, and video clips—basically, zero-touch cultural products.
Artists experimenting with cryptocurrency isn’t new; decentralised collectable marketplaces have existed since CryptoKitties launched in 2017. But with a growing awareness of NFTs among artists and creators, we should note that blockchain-powered signatures ensure that the original creator can simply verify a piece of digital content. Making them a viable path for brands, makers, musicians, designers and artists to sell their work, build community, and redefine how we define scarcity and assign value. Though we predict the people who will make the most money from this are brands (making a profit without making anything) and celebrities (who sell their old things to super fans or collectors).
NFTs are selling for real big money. At the end of February 2021, someone paid $100,000 for an NBA Top Shot. Fortnite Skins generated the majority of the $2.4 billion Epic pulled in from the game last year (Skins have always been the bulk of Fortnite’s revenue: free game, with paid-for or earned outfits). The artist Beeple sold 20 of his digital artworks for $3.5 million through a series of sales on Nifty Gateway.
NBA Top Shot is a platform created to sell and trade videos of memorable moments in NBA history—simply put, it sells trading cards, except the trading cards here are digital videos. Vancouver-based Dapper Labs developed it, which is also the company behind the CryptoKitties mentioned above. The NBA has sold $11 million worth of ‘packs’, and the cards in those packs traded for $70 million more on the secondary marketplace. The Top Shot site is created on Flow BlockChain and offers the ability to see every Maxi card being offered, its serial number, price and more.
At first, it is hard to get your head around; yes, you can get the same video on the internet anywhere, any time and watch it. You can also get the same picture of a Picasso on the internet and print it out, and that doesn’t change the value of the painting.
New ‘moments’ (trading cards) sell out faster than sneaker drops. Even the $9 entry-level packs, which contain three ‘moments’ and are intended as a low-cost way to get new users in the door, aren’t regularly available, and allotments of 25,000 packs are gone instantly when they drop. The $999 “Holo Icon” packs were in such high demand that the site crashed when they were released early February.
Though you might not be a basketball fan, it is important to see what this could unlock for other spaces such as fashion, music, art, films, and more.
In December 2020, digital artist Mike Winkelman, better known as Beeple or @beeple_crap, broke crypto art records. This February 2021, Beeple became the first artist to auction a purely digital, NFT-backed artwork at a major auction house, Christie’s.
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Although these ‘things’ or artworks tend to be digital files, they can also be physical objects. Beeple’s first sale “open editions” was essentially physical; each would have the NFT present by way of a “signed, numbered titanium backplate with hidden authentication markers” along with an “authentic Beeple hair sample.”
What is essential to understand when it comes to the art world’s new relationship with NFTs is how ‘smart contracts’ can change the game for artists and disrupt the institution, becoming a significant force.
NFTs are backed by ‘smart contracts’, which are written into the token from the outset. The terms of these contracts will execute automatically from then on. Notably, artists can write themselves into these contracts for a secondary market, allowing them to earn whatever percentage they establish upon every subsequent sale in perpetuity. Thus, if the artist’s career skyrockets and work balloons in value, they’ll see benefit financially in perpetuity.
All of this feels like similar energy to $GME and is in the same conditions that originally fueled it—economic instability, rage against the system, and bored young people. It is fucking with the assignment of value.
Those over a certain age will understandably find this all mind-blowing. But Gen Internet knows that a digital good or a crypto asset is a better investment than old school see, touch or feel things in this world. No one has power over them; there is no central authority; their efforts can’t be easily fucked over by some government agency or institution. Gen Internet has finally found one of its powers—financial unity. For the most part, they aren’t looking to break laws; they are simply looking to break the system.
People are looking for alternative ways to play with their money. If you aren’t graced with a trust fund and want to invest some money, you could learn the stock market, but it’s gamed against you. Just look at the $GME drama and Robinhood’s legal battle. But if you are a stan or a fan and love the NBA or art, why not use your knowledge to make some money and connect with a community?
Sarah is the founder of The Akin, a global insight and strategy studio, and a contributor to Screen Shot Pro.