NFTs: a revolution or a bubble?
Non-fungible tokens (NFTs) became all the rage earlier this year especially after a digital artwork was sold at the Christie’s auction for $69 million. But what role can NFTs play in retail?
Dalgona coffees, TikTok videos, virtual parties, Clubhouse invites... these were just some of the harmless products of the lockdown and subsequent boredom combined with increased time spent on the internet. However, something else took the digital world by storm this year and it wasn’t just an innocent trend that the common man could jump on. Why? Because it involved millions of dollars and is turning out to be an active part of the cryptoeconomy.
Non-fungible tokens (NFTs) became all the rage earlier this year especially after a digital artwork was sold at the Christie’s auction for $69 million. However, the concept of
NFTs isn’t new at all, just its value reached record highs this year as more people spending time on the internet with disposable income available in their hands and nowhere to spend it, started investing in it.
But what is an NFT and how does it work?
Simply put, an NFT is a unique asset that can’t be replaced with anything else, unlike cash or gold.
For instance, an AED 10 bill can be exchanged for two AED 5 bills, but NFTs work or scarcity or exclusivity, so there is only one-of-a-kind (quite literally). This is particularly valuable for digital creators, whose work can easily be replicated in the online space and change hands without any record of it. NFTs, on the other hand, are part of a blockchain (a digital ledger), which records all the important details including the identities of creator and owner(s) of the piece.
All collectibles from digital artworks to memorabilia, to event tickets and even memes and gifs can become an NFT. Again, scarcity and exclusivity is what makes NFTs so attractive that it is mobilizing millions of dollars. Another industry that is fueled by scarcity and exclusivity is luxury. Today, digital fashion in gaining prominence globally and in the world where the ongoing rivalry between fast fashion and haute couture keeps surfacing, NFTs could well play a role.
Globally, brands like Louis Vuitton and Burberry have designed and released outfits – or skins, as they are called - for video games. Gamers have been willingly shelling dollars in buying these luxury outfits to dress up their characters. Clearly, potential for NFTs is ripe there. In fact, Gucci even released it Gucci Ghost gif up for sale.
In a world where Instagram takes over the real world and the obsession over one’s online/social media appearance is only growing, brands and retailers have a clear opportunity that they can capitalise on. Digital clothing trends are booming for reasons ranging from ecological sustainability, to endless possibilities for creative expression to reduced manufacturing costs and wastage. In May 2019, the world’s first digital couture dress was sold on the Ethereum blockchain by The Fabricant; DressX has been overlaying fashion pieces on to customer’s pictures; and Nike has been merging the physical and digital worlds with CryptoKicks, a patent for its blockchain-compatible sneakers.
Come to think of it, NFTs create opportunities with less logistical headaches for the retail sellers – no storing, no handling, no shipping, supporting the creator and minimizing middlemen.
The first artist from the region to launch an NFT artwork, Kristel Bechara, believes that there is an opportunity for the luxury market that retailers need to seize.
“I think luxury products and collectibles such as watches will start sending NFTs instead of certificates and licenses. Luxury fashion too such as Hermes, Birkins, will start issuing NFTs instead of papers and license that you lose. Especially because these luxury products are resold, with NFTS you have a clear provenance of the history,” she said.
While Middle Eastern fashion retailers trading NFTs hasn’t become commonplace yet, artists like Bechara are attempting to make tokenized digital art series the norm.
“As a digital artists, I would love for NFTs to go mainstream. Finally digital art will get some recognition. Earlier, I had to sit and explain to people at art fairs that digital art is no less valuable than traditional art. Digital art, media creators, music creators, gamers, are