Are you in on fashion’s latest fad – the Non Fungible Token, also known as a NFT? It’s all the rage in the fashion world right now, attracting the young, affluent and digitally savvy. As a result, luxury fashion houses are chomping at the bit to get into the race.
First, what exactly is a NFT?
The first step is actually to define “fungible”. In simple terms, an item is fungible if it can be exchanged for another item of equal value without diminishing its own value. Currencies like the US Dollar and the Euro are fungible tokens of exchange. You can use them to buy a product and the value of the currency note remains the same to be used again by the seller who comes in possession of the currency note. Cryptocurrencies also are fungible tokens.
With us so far?
Non Fungible Tokens, on the other hand, are developed using blockchain technology where each NFT has its own unique identity and specific value preventing it from being exchanged with another. An example of a non-digital NFT is a concert ticket which is valid for a particular concert, date, time and seat. It cannot be traded for say another concert on another day or time.
Virtual NFTs can be created for domain names, art, or any collectible and pretty much anything in a virtual world. Even a song or a movie! In a nutshell, NFTs are digital representations of something that’s one of a kind – like a rare photo that cannot be copied. The authentication or originality of this digital asset can be tracked using blockchain technology, which is a digital ledger for crypto transactions.
To further illustrate, here are some examples. Twitter CEO Jack Dorsey’s first tweet sold for $2.9 million in a recent high profile NFT deal. The NBA’s digital arm sells basketball cards over NFT and raked in $230 million so far. Instagram artist Beeple auctioned his NFT (presented in a JPEG file) at Christie’s for $69 million.
RTFKT a virtual sneaker brand collaborated with crypto artist Fewocious, and its collection sold out within seven minutes, garnering $3.1 million!
These instances showcase the massive futuristic opportunity dangling before the fashion Industry, in the form of virtual handbags, garments, sneakers, etc.
But why would anyone want a virtual bag or shoe when you can’t really wear it?! Because luxury customers have digital lives and personas now!!! They want to own digital goods from luxury brands to flaunt virtually too. One can invest in a pair of shoes with its own unique NFT, enabling one to wear the shoes in the real world AND online when gaming or flaunting an avatar on a social media platform! With folks investing in virtual homes too, a NFT of a unique piece of art in a virtual living room takes the experience to the next level…and ensures you have ownership of something no one else does.
Put another way, if something is unique and of high value, then why limit to a physical world. Today’s youth (and not so young) are establishing virtual personas. The desire to establish ones individuality in the digital realm is a possible explanation for the hype around this investment category.
For brands, NFT’s could be THE answer to combating counterfeit trade of luxury items if every physical product is associated with a unique NFT that proves its uniqueness and authenticity. If a Himalaya Birkin were to be accompanied with a unique NFT, no matter how many times it exchanges, the bag’s unique identity and authenticity stays traceable. A verification of sorts for a one-of-a-kind and rare product.
NFT’s could create waves in the resale market too, as blockchains can be tuned to govern future sales as well. For example, Beeple is set to receive a 10% royalty every time his NFT is resold.
The NFT game is new and the outcome for the moment is notional, theoretical, and without fixed rules. We have yet to see the range of futuristic digital world opportunity. And it remains a mystery which luxury giants actually join the NFT rush.
So, what do you think? Will your Birkins be in person and online? Or is this NBD (no big deal)? Let us know.