Brands should carefully weigh up NFT opportunities before jumping on the bandwagon.
NFTs (Non-Fungible Tokens) are hot. Very hot. They’ve disrupted the concept of ownership and revolutionised product authentication, powering the creator economy while opening up new avenues for community engagement.
Attracting interest across industries since the famous $69m sale of Beeples’s “Everydays”, NFTs have been dominating headlines in art evolution and are now promising to shake up one of the world’s oldest industries: fashion.
It is a race to get there first and build the best use case.
Fashion houses are jumping on board. In partnership with Christie’s, Gucci presented an NFT video (Aria) on its AW21 collection, which sold for $25k in June; Louis Vuitton released a mobile video game in honour of Louis Vuitton’s 200th birthday called “Louis: The Game”; Burberry dropped NFTs In Mythical Games’ Blankos Block Party; luxury Italian fashion house Dolce & Gabbana started Collezione Genesi – a nine-piece collection of tokenised fashion items in collaboration with Polygon-based UNXD marketplace; DKNY debuted its new NFT logo…
And the list goes on. More and more brands are signing up to fashion R/Evolution and falling for the NFT FOMO to WAGM (‘we’re all gonna make it’) narrative.
There is a lot to unpack here and some myths to bust.
NFTs are a revolutionary concept and certainly open doors for fashion brands in terms of ownership rights, transparency & authenticity, creativity, and engagement. But before we get too excited, it is important to educate ourselves.
We can’t ignore fashion’s core mission for a sustainable future.
Investing in sustainability
Over the last decade, fashion brands have seriously committed to and heavily invested in sustainability and the circular economy, setting goals to minimise carbon footprint via various initiatives that minimise waste, promote quality over quantity, and educate customers to consume consciously.
The battle against fast fashion has resulted in considerable developments, especially in innovative materials, supply chain optimisation, operation efficiency, and a healthier and more trustworthy secondary market.
We must remember that exclusive luxury brands have always been the strongest proponents of quality over quantity, educating their clients to shop less while investing in lifetime pieces.
Earlier this month, I participated in a public debate on NFTs, luxury brands and the metaverse at a conference in London with some notable thinkers in the fashion/tech space. Luca Pepere, CEO of Angelo Galasso – a niche Italian Luxury Menswear fashion brand – gave a thorough explanation of the concept of luxury: high-quality, personalised items which are all handmade and long lasting. There is no waste.
Moreover, many luxury items are special pieces; some are collectibles that increase in value over time, so they can easily be resold. A Chanel bag is an investment that can be resold any time for a decent price on secondary marketplaces like RealReal, Vestaire Collective, or in any vintage shop.
Now, as digital fashion is on the rise and NFTs enter the space, what is happening?
Because NFTs open up multiple attractive opportunities, brands are looking for a way to get involved.
But have they done their research and due diligence? I have my doubts.
Jumped on the NFT bandwagon
Fashion brands have well and truly jumped on the bandwagon in an attempt to ‘get in early’ to a new trend that could potentially increase revenue by monetising on the younger tech generation that lives by games and social media. Generating new experiences and products to sell in the metaverse certainly opens up new channels of interaction with potential clients.
Moreover, digital fashion and NFTs at first glance seem to offer a solution to the industry’s physical waste problem. The US Environmental Protection Agency estimates that, in 2017, 10.2m tonnes of textiles ended up in landfills while another 2.9m tonnes were incinerated. In the UK an estimated 350,000 tonnes of clothes end up in landfill every year. As NFTs are digital, there is nothing to dispose of.
BUT, here is the catch:
NFTs are very energy intensive to produce. Most of them are built on Ethereum, which currently uses proof-of-work consensus (POW), the same process used by Bitcoin, which is renowned for its power-hungry mining.
Earlier on this year, researchers from Cambridge University suggested Bitcoin uses more electricity annually than the whole of Argentina. Even with Ethereum scaling solutions (layer 2) such as Polygon, there isn’t much hope of minimising the energy consumption as layer 1 (Ethereum) is still referred to for security.
Earlier this month, I had an insightful conversation with Alex de Vries, data scientist and founder of the website Digiconomist, about the carbon footprint paradox in crypto.
We also talked fashion; he calculated the footprint of a simple white NFT dress as emitting closer to 600kg of carbon dioxide, the equivalent of burning 663 pounds of coal, according to the Environmental Protection Agency’s Greenhouse Gas Equivalencies Calculator.
On top of that, NFTs generate further emissions on every purchase and re-selling transaction.
Let’s compare the numbers…
A polyester T-shirt might have a carbon emission impact of about 5.5kg, according to the World Resources Institute.
But there is some good news. Instead of using Proof-of-Work Systems, the fashion industry could build solutions using other consensus mechanisms such as proof-of-stake (POS), which can reduce energy consumption by 99%.
This is why I am excited about Cardano’s NFT marketplace developments, as it is built on POS.
Soon, they may be able to work on Ethereum, as the chain is preparing to move to proof-of-stake.
Five years ago, I contacted a well-known British brand to discuss the opportunity of them get involved in crypto with their own token. They hesitated, expressing concerns about energy consumption, a huge negative against their mission to fight climate change. I respected that. They were right.
As technology evolves, there are opportunities to create sustainably, but there is still a lot to learn about how technologies work and the opportunities they can unlock while respecting businesses’ core values.
I always urge brands to educate themselves about technology, especially crypto. To make sound decisions, it’s crucial to hire competent advisors who understand a brand’s ethos, values and principles. The wrong move could damage your reputation forever.