From the oh-so-adorable CryptoKitties to a 69 million digital collage sold at Christie’s, non-fungible tokens (or NFTs) have infiltrated the cultural sector. These unique files live on a blockchain, keeping track of who has ownership and rights to display the work, and they can take the form of anything: drawings, GIFs, songs, video game skins, trading cards, you name it.
Not to be left behind, luxury brands have scrambled to figure out where they fit into this world. Following the release of its first virtual sneakers, Gucci revealed that it would soon be launching an NFT. Shortly after, Jacob & Co. sold the first-ever NFT watch for 100,000 at auction. Meanwhile, Richemont, Prada, and LVMH unveiled plans to spearhead the world’s first global luxury blockchain to combat pesky counterfeits.
But this craze has also brought a lot of confusion. That’s why, on April 27, Jing Daily hosted a webinar titled "Luxury’s NFT Obsession: Determining Legality and Longevity” to decipher these digital tokens and their lasting impact. The discussion was moderated by Enrique Menendez, editor in chief of Jing Daily. Featured speakers included Julie Zerbo, editor in chief of The Fashion Law; gaming expert Kelly Vero; RTFKT co-founder Benoît Pagotto; and NFT collector Whale Shark.
Below are some important points that luxury brands and aspiring NFT collectors alike should know before stepping into the metaverse.
Whether it was livestreaming, e-commerce, or esports, luxury houses have been notoriously slow at adopting digital trends. And now, with NFTs picking up steam, brands have only just begun to scratch the surface. “I still think we are now seeing traditionally branded offerings, like Gucci sneakers,” Zerbo said.
But rather than virtual clothing, The Fashion Law founder is more interested in how companies will tie NFTs to physical goods and what that could mean legally. One example she gave is how French startup Arianee has rolled out digital passports that can log the service history of luxury items. These items could become particularly useful tools for luxury items, she added, since warranties can be impacted by unauthorized repairs.
In fact, Pagotto finds that offering physical goods with digital items is still what some consumers need, particularly those who have trouble connecting emotionally with products that aren’t tangible (for those who don’t understand the emotional appeal of NFTs, Pagotto suggests buying one for yourself — it’s addictive).
Vero, who has worked in the video games industry for 25 years, reiterates that emotion is the key. “[Gaming] is in our blood, so when something becomes that synonymous with who we are as people, we look for [products] that best describe who we are,” she said. “The further that we go into the digital world, the more we have to reinforce that psychology.”
While places like Beijing’s Silk Market have allowed luxury counterfeits to thrive, NFT technology provides buyers and brands with a stamp of authenticity. As Whale Shark breaks down, when you create an NFT, you mint a token on a blockchain. You can then include metadata in that token that specifies which smart contract created the NFT, the time and date it was established, and the number of items in circulation — verifying its provenance, point of origin, and scarcity.
To spot a fake, “all I need to do is look at the origin of that smart contract and understand that the IP didn’t come from the original provider’s address,” he continued.
Vero echoed that smart contracts are crucial in NFT transactions. “It adds so much value to what it is that you’ve purchased," he said. "The more metadata you put in there, the better opportunity you have to protect that brand and ensure the longevity of the item you’ve created.”
It’s no secret that the crypto boom comes at a steep environmental cost. But Whale Shark has good news: The Ethereum blockchain is switching from proof-of-work, which requires “a gazillion GPUs running at maximum heat, at maximum power,” he said, to proof-of-stake, enabling calculations to be done virtually.
While a full transition may take another few years, there are other blockchains that brands can use in the meantime; Flow, for one, is “fully optimized for NFT creation, selling, and management,” he pointed out.
Besides choosing more energy-efficient platforms, digital sustainability can also look like reusing items even after the fashion season ends. “There is no reason, with the digital advancements that we have, that you cannot continuously use items, either as wireframes and reskin them or as proper reskins of existing platforms, engines, items, and artifacts,” Vero shared.
Given the speed of adoption over the last few months, Whale Shark expects NFTs to go mainstream soon. However, before people rush to build their portfolios, the seasoned collector, who has 210,000 NFTs under his belt, offers a word of caution.
“In any market boom, what you’re going to see is 99.99 percent of the existing products and projects being built today will not be commercially viable one to two years from now,” he said. As such, it will take a discerning eye to determine which digital goods will retain value in the future.
A tip? “Buy what you love,” Whale Shark suggested. Also, consider whether the art has mainstream appeal and if it has future potential to onboard at major auction houses.
Not only are NFTs here for the long haul, but helming the ship will be a small group of people “outside of the system” who are guided by a completely different ethos — one that rewards and respects creatives. “Even in the technology side, in the past ten years, it was all about the engineers,” Pagotto explained. “Now, creators are going to drive the future.”
“I think we are at the beginning of a completely new era of how creatives and business are working together, and I think the creatives will take the upper hand,” he added.