The recent explosive growth of the NFT (Non-fungible token) industry has piqued the interest of many luxury players who are making their foray into the world. ...
The virtual economy is nothing new, but NFTs have suddenly come to touch most sectors of luxury lifestyle. This year, Forbes turned its cover into an NFT, while Gucci, Porsche and Givenchy sold NFTs, and the artworld experienced an eruption of them.
The industry was valued at 2.5 billion dollars in the first half of 2021, a significant increase on 2020’s estimated net worth of 13.7 million dollars.
“A confluence of different recent factors has expedited the emergence of this space,” said John Egan, CEO of L’Atelier BNP Paribas.
“One is COVID, another is the emergence of the crypto world into the mainstream in the last 10 years, and the third is [that] many young people under 40 […] are looking for an economy within which they can prosper.”
NFTs – part of the Ethereum blockchain and a cryptocurrency similar to bitcoin – can be understood as a bitcoin – a fungible object – that can be “undressed”, explained Michael del Castillo, Forbes Editor for Blockchain and cryptocurrencies.
“Keep the interior blockchain the same and then put something new over the top; a piece of artwork, a song, a digital shoe […] You can start to see how that asset moving hands accomplishes something similar.
“The first generation of crypto assets were all fungible tokens – they had the same value. With luxury, fungibility is not what you want. You want exclusivity which is in a sense the opposite. With a non-fungible token, every single one is different or at least rare.”
In addition, in a world in which you can copy and paste objects with a couple of key strokes, the ability to prove something digital was original, which blockchain delivered, was enormous. The same principles were then applied to non-fungible assets, he explained.
CEO of Jacob & Co, Benjamin Arabov, who was instrumental in bringing the first digital NFT to launch in the luxury watch space, said NFTs could be a lure for the luxury market by boosting authenticity, one of the sector’s major values.
“The potential for NFTs in the luxury space is significant and will play a healthy role in the luxury space: consumers have a digital copy of what they are purchasing – a record of authenticity – which also allows them to track how the product might have been switching hands in the secondary or grey markets. Luxury goods are currently not tracked,” he said.
Despite NFTs’ compatibility with luxury, they aren’t for every brand cautioned Daniela Ott, General Secretary of the Aura Blockchain Consortium, who said they should ask ‘What are our aficionados looking for?’
“See NFTs as part of long-term product strategy,” she said, suggesting brands ask questions on their intention, the size of their collection, their scarcity and whether they will launch on their own NFT site or on an NFT market space. She cautioned that doing the latter was a greater risk in terms of the possible lack of regulation.
That said, Ott also said that, ultimately, “it’s about collecting and whether it’s physical or digital is not so important. It’s about bringing together both worlds for the client.”
Indeed, entering into both the physical and digital NFT space for the same product – pairing them together – will be the next move for Jacob & Co.
“Centralisation is the world we are used to. […] Large companies own resources […] and manage [their] ecosystems. Over the last 15 years, we have seen the emergence of decentralised platforms, so a decentralisation of trust, responsibility, action and activity – mostly famously with bitcoin,” explained Egan.
So, can a conglomerate like LVMH become a 21st-century central bank? Not so fast, he said.
“Global intra-operability across platforms is the goal. But it hasn’t been achieved yet. It’s significantly easier to create a centralised itineration of that. […] I expect we will see a coexistence of centralised platforms and then decentralised platforms. Creating a never-ending space that is intra-operable and rich in detail is currently decades away,” he said.
“A lot of creative people will become successful in these metaverse universes, particularly the decentralized ones. So, luxury must think about the possibility that they could be out-mediated in the creation of desirable goods and arts,” said Professor Stéphane JG Girod.
Ultimately, the metaverse is here to stay. And it can be understood, said del Castillo, as “the internet meeting a videogame. If the Internet had addresses you could walk to in a virtual word, that’s it. Then you have a virtual version of yourself, an avatar. You want to wear high heels or a top hat? That’s it.”
And, as Forbes editor Michael Solomon pointed out, despite the fear of the unknown this new world often creates, we often find our own world so dangerous that a lot of people will be happy to hear that the virtual one is going nowhere.
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