Bitcoin has enjoyed resounding success in 2021 thus far, shattering multiple record levels as the fever pitch builds up towards the asset’s biggest bull run in history.
This, as non-fungible tokens, or NFTs, taste the glare of the spotlight as cryptocurrency’s hottest trend.
Thanks to a wide array of use cases integrating NFTs and the concept of non-fungibility with legacy, real-world industries, NFTs are shaping up as the harbinger of mainstream adoption that has eluded cryptocurrencies and blockchain technologies up to this point.
Interestingly, Digital art was the top talking segment of the 2021 NFT hype train.
The majority of the 2021 NFT hype train has been mainly in the digital art segment. NFTs solve the age-old problem that artists and creators have always faced regarding protecting their intellectual property from being reproduced or distributed throughout the internet.
NFTs do this by introducing the critical element of scarcity – the primary determinant of value.
Case in point: Mike Winkelmann, who goes by Beeple on the Internet, sold a digital JPG collage for a whopping $69.3 million. On the other hand, Indie artist Grimes sold her crypto art collection for $6 million as NFTs.
Digital art might seem like the primary focus of NFTs; however, they’re just scratching the surface of the practically endless use cases that NFTs bring to the crypto ecosystem. NFTs are set to open up new and exciting value sectors across industries throughout the world sooner than you think – and digital fashion is emerging as one of its hottest sectors.
Digital fashion has already made its bones as an immensely lucrative revenue source in the form of in-game skins. Take Fortnite, which is free to play; however, it pulled in an estimated $2.4 billion in sales during 2018, primarily driven by its revenue-generating in-game fashion such as skins or character outfits.
Meanwhile, YouTube personality Felix “Pewdiepie” Kjellberg got into the action by releasing a set of NFT skins for Wallem, the blockchain-based AR game, which goes for 41 ETH a pop on average – or $80,000 – on NFT marketplace OpenSea.
Fancy one? That’s going to set you back an astronomical 995 ETH, or a cool $2 million. Staggering.
An immense market waiting to explode
The creation of NFT skins heralds the coming of a new age in digital fashion, where legacy fashion brands have begun to explore the possibilities of creating hyperreal 3D digital garments in the design and manufacturing process; therefore, introducing the aspect of sustainability that the industry so desperately needs.
Digital fashion enables designers, creators, and fashion houses to prototype and experiment as much they can – before they even start producing anything.
Just think of the potential windfall brands and designers will make once they bring their creations across the full spectrum of live 3D content environments such as gaming and virtual reality. NFTs essentially gives the fashion sector’s protagonists the ability to create unique, verifiable assets backed by an immutable ownership record that prevents its duplication or destruction – for good. After all, Pewdiepie’s $80,000 Wallem skins are literally just digital representations of basic t-shirts – but the money isn’t fake, and the numbers don’t lie.
Luxury brands aren’t in the business of leaving money on the table. Once they start getting involved in creating entire digital metaverses, they can distribute their high-end offerings to a broader, more diverse audience of players and spectators. In-game merchandising, digital-only product lines, sponsorship endorsements, and the like are just some of the ways to leverage digital fashion from a luxury perspective.
It makes perfect sense. After all, NFTs essentially introduce scarcity – the secret ingredient that drives consumers to spend, spend, and spend on designer goods and apparel. One way brands can do this is to mint one-time digital fashion assets for auction or mint a select number as part of a limited-ed run and sell them at a fixed price.
Fractional garment ownership: a primer
NFTs allow creators to design and manufacture digital fashion assets much in the same way as they already do in real life through ERC-1155 NFTs.
How so? ERC-1155 is a smart contract standard allowing creators to create NFT fragments. In the context of digital fashion, this means that a creator might focus on creating textile patterns as ERC-1155 NFTs, while another creator works on textile textures, while another designs how the garment fits and looks. Once the NFT representing the master garment is sold on the marketplace, each of them stands to earn their fair share of the gains.
Furthermore, NFTs allow royalties to be programmed for the entire lifecycle of a particular NFT. This is in stark contrast to the physical markets, where designers, creators, and brands alike lose money on the secondary market.
NFTs, in essence, allow creators to take their fair share of the royalties each time a digital fashion item changes hands in an automated manner through blockchain programming.
Lastly, smart contract programming on NFTs guarantees their intellectual property rights. Therefore, garments – down to the granular patterns, textures, and materials – are fully protected from unauthorized reproduction. Massive.
Sowing the seeds of a new industry
All of this is coming to pass – and fast. ESPA, the digital infrastructure developed to make minting NFT tokens and connect them to games, VR engines, and other content environments, is already proven to work. ESPA allows esports players to buy NFT-based digital apparel to compete in digital battles to win crypto-based prizes. Revenues are then equitably distributed to every ecosystem participant – designers and developers included.
Once digital fashion gains traction and mass adoption among gamers and VR fans, it will open the floodgates to novel value streams across an infinite spectrum of digital metaverses.
As the world continues its relentless acceleration towards digital, NFT-based clothing and accessories demonstrate the immense potential to make gaming and VR enticing to new, emerging audiences of fashion lovers all over the world.