So, which blockchain applications can we expect to see the fashion world adopt? And what limitations still need to be overcome before blockchain can become mainstream? Let’s take a closer look.
‘That’ll be $1500, or 0.029 BTC ‘
An increasing number of global retailers — including Microsoft, Starbucks and Tesla — are now accepting cryptocurrency as a payment form. However, in recent weeks, German luxury fashion house Philipp Plein made history by becoming the first fashion brand to accept 15 forms of cryptocurrency as payment.
In many ways, luxury fashion is the perfect use case for cryptocurrency. Firstly, since most high-end fashion brands sell their goods worldwide, they already take on a degree of exchange rate risk by accepting payments in multiple global currencies. As such, they may view the volatility of crypto as less of a barrier to adoption than other retailers.
The issue of excessive volatility has plagued crypto since the technology’s inception. However, an increase in real-world uses for cryptocurrency, as well as emerging solutions like stablecoins (a cryptocurrency pegged to a traditional fiat currency or backed by commodities) look set to alleviate this problem in coming years.
Secondly, due to congestion, many networks, most famously Ethereum , experience unpredictable and sometimes eye-watering transaction fees, also known as “gas” fees. Though there are ways around these fees, they can still make purchasing cheaper products using crypto prohibitively expensive. The relatively high cost of luxury fashion means that gas fees will typically represent a very small proportion of the value of each purchase.
Upgrades currently in development, dubbed Ethereum 2.0 , are set to ultimately address persistently high gas fees on the network, enabling it to scale to thousands of transactions per second. When these upgrades are implemented, it’s likely that a wider range of fashion brands will start to accept Ethereum as a payment form. Meanwhile, there are a number of layer-2 Ethereum networks that can facilitate transactions on the network for a fraction of the cost.
Unlocking supply chain visibility
The global fashion industry has developed a reputation for opaque supply chains and poor sustainability practices. From fast fashion retailers like Boohoo , to established names like H&M and even luxury brands ( Dior and Saint Laurent to name a few) a myriad of companies have been beset by supply chain scandals in recent years.
As a result, consumers are becoming more aware of the ESG (environmental, social and governance) credentials of their favourite fashion brands. In fact, a recent McKinsey study found that 67% of fashion consumers consider the use of sustainable materials to be an important purchasing factor.
In response, an increasing number of brands are harnessing blockchain-powered solutions to demonstrate their ESG credentials. For instance, earlier this year, global fashion powerhouses including Prada, Cartier and LVMH signed an agreement to form the Aura Blockchain Consortium .
The Consortium’s aim is to create a blockchain solution, open to all luxury brands worldwide, that will ensure supply chain transparency by capturing information related to the materials and labor used to create each product. Upon purchasing an item, customers will receive a digital, blockchain-based “encrypted certificate of guarantee.” Each item will have a corresponding identifier, such as a near-field communication (NFC) chip or serial number, which will link to a certificate stored on the blockchain. Since blockchain records cannot be altered or tampered with, this solution has the added benefit of combating counterfeiting, a persistent and serious bugbear for luxury fashion.
The rise of in-game digital fashion
While the idea of spending real-world money on virtual clothing may seem baffling to many, the growing popularity of in-game digital fashion is further evidence that consumers’ understanding of ownership is changing. No longer do you have to physically possess an item to own it.
Typically, in-game digital clothing is purchased as an NFT (non-fungible token) using a cryptocurrency token like Ethereum, Bitcoin or a bespoke digital asset, like fruitlab’s PIP tokens . Each NFT has a unique identifier, stored on the blockchain, which means it cannot be changed or replaced.
Virtual clothing continues to generate real sales in the so-called “ metaverse ,” online environments where users congregate and play games. Burberry is just one brand that has designed a range of NFT accessories, worn by video game characters in the open-world multiplayer game, Blankos Block Party. Gucci has also created digital clothing for several games, including Pokémon Go and The Sims 4. Most notably, however, the brand made headlines earlier this year after opening the “Gucci Garden” on the Roblox gaming platform. An embroidered handbag, originally priced at 475 Robux (or US$6), was reportedly resold for a whopping 350,000 Robux (or around US$4,000).
Widening use cases for NFTs
Video games are just one way in which fashion NFTs are beginning to enter the mainstream. As the NFT landscape evolves, expect to see fewer one-off deals featuring celebrities, and more brands thinking about how NFTs can add value to their business on an ongoing basis. For instance, as part of the marketing campaign for its Fall/Winter 2021 collection, Gucci auctioned an NFT of the video it created to accompany that season’s runway show. The auction, which took place at Christie’s, blurred the line between art and fashion.
Similarly, sneaker company RTFKT famously bridges the gap between the physical and digital realms with its “wearable NFT” drops. The items in these collections are available both as physical items and NFTs that can be worn in-game.
Looking forward, will fashion be the vehicle that finally makes blockchain ubiquitous? Given how much our digital lives have expanded in the last 18 months and the rising role of fashion culture in society worldwide, this idea doesn’t seem as far-fetched as it would have done just two years ago.
As often happens in the world of fashion, blockchain innovations being pioneered by luxury fashion houses today will inevitably trickle down to other retailers tomorrow. In the coming years, we can expect a wider range of brands to start accepting cryptocurrency as payment, and more are looking to implement blockchain solutions to solve ongoing sustainability and sourcing problems. Plus, we’ll see the rise in popularity of digital fashion NFTs — which are unlocking a new form of creative expression and generating additional revenue streams for brands. We are just seeing the inception of this exciting industry, and given the level of interest and investment worldwide, it certainly seems here to stay.