NFTs have become such a big thing in fashion and all the industry players want to understand what is the potential for fashion and luxury brands.
We've been wearing digital fashion for quite some time certainly within the gaming sphere. Billions of dollars are being transacted there. It really started probably around december of 2020. When you started seeing actual assets being developed, what designers were doing around footwear was super exciting.
But it really does kind of go back much farther into the gaming sphere even though there may not be direct connections with what's happening in the NFT space with games but we we've been here for a while.
I'll take my son as an example : he's a six-year-old kid who loves uh spending his time in minecraft and spends $50 of dad's money every month buying a new shirt, a new helmet and i think that was really wild! You know that was at least for me a moment where i was like okay something's going on. I think over the last year and a half we've seen tremendous moves into dressing our digital selves.
I see the first awareness of NFTs coming up in the in brands trying to protect their intellectual property on the internet. The brands in the athletic footwear space are very concerned about protecting the intellectual property in the physical world and have spent tremendous amount of money on that. We saw them begin to sign deals to start to create NFTs.
The primary reason for that was their desire to protect their intellectual property on the internet as well and so it's sort of a tangential introduction of NFTs into the space.
The main example that i saw back then was when people started using NFTs as a new way to communicate who they are and to use the term i guess it's more of an online digital flex. So if you think about the evolution of goods which i'm sure sounds super exciting to you guys but bear with me for a second. You have your basic goods which keeps you alive then you have your luxury goods. And for the longest period of time, luxury goods have been physical. why? Because you can hold them, own them, they're unique, authentic to a brand and this kind of progression to digital value has happened to a lot of things. Money is now digital.
What is that next step for physical items? Why would you want to do that? Well, it's much easier to transact as a global audience and all that kind of stuff. You might say "well i'll still prefer the physical item" but the bet in the years to come, your digital world, so your personal life, your online identity, your online social media presence, your online persona is going to become more important to some degree than your physical one!
So the idea is how do fashion industries get involved? How do they involve their community? We have started seeing a lot of brands doing it via a social online presence. I mean if we're sitting at home and not around anyone else except for people online, why else buy stuff than to wear it around other people?
There's been a lot of talk about what's happening with NFTs in the market right now and i want to get to that but maybe first can we go through some examples of successes of NFTs with brands.
One good example is is what Adidas has done and where they're really integrating the NFT experience with their membership and their loyalty program. They're enhancing the loyalty program via NFTs and using NFTs as a way to bring more people into their program. It's more about the utility of the NFT as opposed to the NFT itself.
But what do most of the brands are doing with NFT that's that's not working?
The amount of energy that's required to maintain the blockchain to it, to authenticate these NFTs is definitely not neutral. We have so many brands in the sports space who were vocally committed to being more sustainable and yet the NFT as it currently exists is the very opposite of sustainability.
I'm still having trouble reconciling that with the brand's position that they're trying to be more sustainable in the the manufacture and the circularity of their products but they are doing NFTs at the same time.
It's a really valuable point. It does consume quite a bit of energy and obviously it's all relative to whichever industry you want to compare it to. The reason why it's taking up a portion of energy or energy in general is because of the first version of how blockchains were built. Blockchain is the underlying tech that kind of supports all of this and as you can imagine it was a very bold idea but we had very immature tools at that time. It was an initial concept and idea and we built that out. Because of that, it uses quite an older model, let's just call it an older mechanism. What's happening now, all the solutions you can use is kind of an update. It's like a version 2 and it uses a hell of a lot less energy. It's cheaper to create these things and it's much quicker to be able to send and interact. So the solutions already exist right now and it's only scaling upwards from now.
But how do you advise fashion brands to get into NFT?
Is it about the press that you get if you sell a one million dollar pair of sneakers? Or is it about community engagement? I think it's both and a lot more and i think we haven't really even begun to touch exactly where this is going to go. I asked essentially two questions or rather one's a point and the one's a question.
When it comes to fashion, when it comes to sneakers, when it comes to wearables, is it an NFT that needs a physical good or is it a physical good that needs an NFT? That's just a way of framing how you looking at this and how is this going to impact your business. More importantly how is it going to impact your customer? Today the majority of what we're seeing within web3 and within the NFT space if we're looking at assets, it's either a moment to have a marketing moment, which i think is great. You can have a campaign i'm currently working on with a men's cancer foundation in really trying to raise money through a campaign that is gamified in helping men check themselves basically. So i think there's some good in that but the other side could be very transformative and transformative in the sense of the technology that you use and certainly we saw that McKinsey presented how you have to invest into tech but more importantly how it allows you to then get closer to your community.
I think community is a really important word here because your community is made up of not only fans but also consumers. How you begin to take say the the theories or ideologies of web 3 which constantly are being changed. They're just evolving all the time how do you use those to apply a layer that allows for your consumer to either be closer to what you're doing or have a little bit more transparency into what you're doing.
Those are the two main mechanisms that at least i put in front of brands and certainly the c-suite. One of the very clear future uses is in utility for incentivization and membership. There's a lot that can be done there and we're really only beginning to explore that.
I'll use a streetwear example. Brands are within street fashion to be very early adopters of tech. Atom bomb squad is a project that came out of a brand out of la called The Hundreds. In many ways it actually has helped propel their business to a new consumer but they're using it as a way to do gatekeeping meaning that when you used to go to a club you're on the vip list or you're in the line and the same is a little bit true for the project that they're doing. By being a holder and i'm sure everyone's heard this term before, by holding their NFT, there's a set of access points that they give you. They've been able to actually release a variety of clothing collections as well as collaborative collections with some of the biggest projects within the world of NFTs like Bored Ape.
Adidas as well have done a very good job of um you know embracing embracing this idea of collaboration within web 3 and being able to offer their consumer something. So my opinion what we're going to do with web 3 is allow for consumers to touch brands differently and i think that that's quite exciting. We have a lot of things to work through from the energy issue which is certainly being worked on and quite frankly like if you're going to step into web 3 in my mind it has to be better than what you're doing in webtoon. Otherwise you might as well just keep doing what you're doing in web 2.
Retrofitting your current model into web 3 for the sake of web 3 is not the answer. There has to be a goal and certainly a certain level of success that's coming from or at least not just success but forward forward momentum in using web3 that should impact your business.
One of the other issues that i see is there is so much room for fraud and illegal activity. It's really got nothing to do with the good aspects of it but but there's this whole dark side if you will to NFTs. The head of Open Sea said the majority of NFTs that are on their website are are fraud. The unregulated aspect of it, the money laundering aspect of it, the illegal activity aspect of it... all of that all of is very troublesome and it really has nothing to do with the concept of NFTs themselves. It's more about how they're being executed.