What are NFTs and how are they changing the fashion industry?
NFT stands for non-fungible token, a relatively new term that is becoming more and more popular, even in the fashion industry.
As Forbes explains, an NFT is "a digital asset that represents real-world objects like art, music, in-game items and videos". People can buy and sell NFTs online, usually with cryptocurrencies.
Their peculiarity is that they are unique (or limited) thanks to unique identification codes. This is important because common digital goods can be replicated an infinite number of times. For example, an artist can create a digital illustration and then sell it to multiple buyers. However, the wide availability of a digital asset reduces its exclusivity and thus its potential value.
The artist could also share the illustration on their website, but once online other users could (illegally) use it, and proving real ownership could be difficult.
With NFTs, these obstacles are overcome. And this is the reason for their success.
Does it mean that people can no longer copy other people's digital creations? Not really.
In 2021 the digital artist "Beeple" created an NFT that sold at Christie's for $ 69.3 million. The thing is, that NFT is a photographic composite that is also available online and users can take screenshots of it. So why did the buyer pay such a price for something that is ... free? What matters is not the NFT but the rights associated with it. Nobody can copy the ownership of an NFT, even though anybody may copy the work itself. It is like physical art: anyone can buy a print of a famous painting, but only one person has the original.
NFTs and blockchain
Non-fungible tokens are created with the same tools with which cryptocurrencies are created, but they are not the same thing.
Cryptocurrencies are fungible tokens, that is, each token is interchangeable with another. This means that one Ethereum is worth the same as another, regardless of who owns it or where it comes from.
NFTs are different from each other and therefore are not interchangeable. People cannot trade one for another, because they have unique attributes and value.
The use of blockchain technology is what allows NFTs to be non-fungible.
A blockchain is a digital ledger used to record transactions. It is a decentralised system, which means that there is not any central authority to control it or keep it secure. In a sense, it is a self-regulating system.
Blockchain is transparent, meaning that an NFT's ownership can be tracked. This makes non-fungible tokens difficult to copy or fake.
Non-fungible tokens and the fashion industry
The fact that NFTs are unique and cannot be replicated is a huge advantage for the fashion industry. And the applications are manifold.
For example, brands can tie an NFT to a physical product. The NFT works as proof of purchase and authenticity. It also allows the customer to have more information about it. The NFT can be integrated into the product via an RFID chip or a QR Code.
Non-fungible tokens are also giving rise to new types of products and new business models.
This is particularly interesting, considering the growing popularity of the Metaverse.
This world that makes extensive use of Augmented Reality and Virtual Reality is populated by avatars who need clothes and many users are willing to buy the digital version of branded clothes.
Furthermore, digital fashion are finding great space on social media. Influencers are constantly looking for garments to show, and digital clothing reduces costs and waste with tailor-made, surprising, and exclusive results. All to the advantage of the brands.
NFTs could be used to create virtual fashion shows or digital runways, but also to sell experiences or access to exclusive content.
Benefits of NFTs for the fashion industry
Balenciaga launched an NFT-based campaign called "Afterworld: The Age of Tomorrow" which included a virtual fashion show accessible only to people who purchased an NFT. Burberry also used NFTs within its digital collection "The Burberry NFT". And Nike created a NFT sneakers collection.
Why are fashion brands putting so much trust in Non-fungible tokens? Because of the many benefits:
- the sale of NFTs and related products creates new revenues,
- NFTs offer buyers a more engaging customer experience and, consequently, increase customer loyalty toward the brand,
- luxury brands have an extra tool to guarantee authenticity and exclusivity,
- the fashion industry needs to innovate if it wants to capture the attention of Millennials and GenZs. These generations expect companies to use digital channels to interact with them. Companies have to adapt to them, not the other way around. And NTFs are an interesting solution.