Would you splurge $449,000 on sneakers? Whoops, someone did it. Nike has sold a virtual sneaker of the Dunk Genesis CryptoKicks series. This is a line of non-fungible tokens (NFTs) priced between $2,500 and $449,000 in pairs.
That’s not all. The iconic footwear brand has already earned him $185 million through NFT drops. Dolce & Gabbana (D&G), Tiffany, Gucci and Adidas have also joined Nike, earning him $240 million so far through NFTs, looking to turn digital assets into a serious additional revenue stream.
Indian fashion brands also jumped on the bandwagon, taking cues from their global peers during the peak of NFT mania last year. Ace designer Manish Malhotra has unveiled his NFT collection of 5 pieces. Three hand-drawn sketches of the garment, former model Lisa taken by the designer and an old photo of his Lei, and a video of his show. Anamika Khanna, Raghavendra Rathore, Pankaj & Nidhi, designers of luxury brand AK-OK, are also among his famous digital artworks. Most of them were sold within minutes for hefty sums. A sketch of Malhotra in a custom costume called ‘Illumination Showstopper’ designed for Kareena Kapoor sold for Rs 2.8 lakh.
But what are fashion NFTs anyway? NFTs or non-fungible tokens are blockchain-based digital assets that, due to their unique properties, can be traded or exchanged for tokens of similar value. You can’t. Sure, it might work for abstract categories like art, music, and games. But what do intangible digital assets mean for tangible items like clothes and shoes? Do they have a purpose?
“The concept of spending real money on clothes that don’t physically exist is a bit confusing, but virtual possessions generate real sales,” says designer Malhotra. Malhotra is one of the first designers to launch a fashion NFT in the country. For example, a fashion NFT could be virtual clothing worn in a virtual world.
Indeed, it is an additional source of income for designers. But what are the benefits for buyers? Not much. It’s been a year since fashion joined his NFT craze, but he hasn’t advanced beyond offering expensive collectibles. Even in his early days of the NFT market, it remained an ultra-niche category without a worthwhile use case for buyers. “Unfortunately, at this point, most NFTs are only used in marketing communications to capitalize on the hype. I can think of seven or eight use cases. It’s just providing an image of something with it,” says cryptocurrency expert Ajeet Khurana, founder of Web 3.0 company Reflexical.
But why do NFTs need a use case? It is an asset class that works on the principle of supply and demand. Each time an NFT is resold, the original creator will receive royalties. To do that, we need to provide the impetus for NFT holders to continue trading. “Don’t come, drop and disappear. We only use it as a gimmick for the NFT marketplace,” said Sandesh B. Suvarna, vice president of WazirX, which owns the NFT marketplace. He adds that any popular NFT collection makes millions of dollars only by consistently providing value to NFT owners, citing Nike as an example. The footwear giant acquired his Web 3 company RTFKT in December 2021, stepping up his game on the Metaverse. Half of his NFT earnings of $185 million are royalties earned by holders through subsequent transactions. Additionally, in secondary volume he generated over $1.3 billion.
However, the overall NFT market is in a downturn, with trading volumes plummeting by 97% since the beginning of the year, according to data hosted by Dune Analytics, a crypto-related data platform. Additionally, the Indian government imposes a flat 30% tax on profits or income from virtual digital assets such as cryptocurrencies and NFTs. While the NFT hype appears to have lost its initial euphoria, some believe the crash was a necessary shakeout from an overheated market before it found its footing.
Nike has already launched its Nikeland store in the Metaverse, and Adidas has purchased virtual land in a blockchain-backed sandbox virtual world. Another of his virtual worlds, his Decentraland, also hosted Metaverse Fashion Week, attended by some of the biggest names in high fashion. Meanwhile, brands are also working to bridge the physical and digital. For example, D&G uses his NFT as a digital twin. His five of his NFTs in the range came with custom his-fitting physical pieces designed by Domenico Dolce and Stefano Gabbana himself. Others are figuring out how to offer exclusive perks in the physical world, such as access to content and custom styles to build connections and loyalty with their users. Her four-minute film NFT ‘Aria’ for Gucci gave buyers a glimpse into its design and production process by letting buyers experience the item through virtual reality.
While brands around the world are working to discover truly innovative utility to tap into a new class of buyers, Indian designers experimenting with NFTs are not. “Probably due to the complexity, interoperability obstacles and lack of legal framework surrounding blockchain technology. tested and tested,” says Malhotra.
