The NFT bubble has been an interesting brand spectator sport. Like the gold rush of the dot.com boom, many have been watching from afar to see who would bravely step into the ring next.
If you still haven’t wrapped your bamboozled head around this new phenomenon, fear not. NFT stands for non-fungible token, which is part of the Ethereum blockchain (that’s a topic for another day). It means, that unlike money, you’re buying a certificate of ownership that can’t be exchanged for something of equal value. It’s unique. One of a kind. An original.
The feeding frenzy that came with the arrival of the NFT hype drove a pretty impressive peak of $102 million sales in a single day alone on May 3rd, only to be brought crashing back down to reality with a 90% drop in sales by the end of the month.
What does this say for the future of NFTs? Are they over before they’ve even begun?
Beeple, owner of the $69.3 million painting that shot to fame when it sold as an NFT, thinks not. “Everyone was super, super hyped about [the internet], but it didn’t kill the internet when the bubble popped. It just wiped out all of the crap.”
And despite the recent gold rush, NFTs have actually been doing the rounds in the ether since 2012, before moving into the mainstream in 2017 when the first collectible CryptoKitties were created. So even though the initial peak of sales has declined, they’ve been bubbling under the virtual surface for quite some time – and what the recent surge of non-fungible tokens has done, is brought with it a very clear consumer appetite: exclusivity.
And it’s a desire that is rising, particularly amongst elusive younger audiences.
What’s the obsession with exclusivity?
Just like the drop-culture of anti-establishment streetwear brand Supreme, the idea that you can own something completely exclusive or rare, a one-of-one product that neither your friends- nor anyone else in the world for that matter- could own, is a huge incentive for younger audiences. You’re essentially buying the bragging rights, which can drive the ultimate brand demand and desirability. The tradable, collectible, one-off nature of NFTs of course plays into this sweet spot.
Why? Quite simply, because the scarcity principle means that the rarer something is, the more valuable it is, fostering an urgency to get your hands on the product. It’s the underlying desire to understand what it is that you’re missing out on – a consumerist itch that needs to be scratched.
The recent arrival of NFTs into the mainstream, however, has landed on the burnt-out heels of everyone across the globe craving an escape from the mutually mundane experience of life in lockdown. The perfect storm to propel this demand forward to new heights as consumers seek out the experience of the unique. RIP homogeneity. Viva La Difference.
So above and beyond just jumping on another cultural bandwagon, it’s in the psychological power of exclusivity that NFTs could become such a powerful asset in a brand’s armoury.
Leaning into the luxury demand
NFTs, whilst in their infancy right now, have the potential to really disrupt the luxury sector with scarcity being the foundation for both; tapping into the crypto-wealthy, who value rarity and collectibles as much streetwear afficionados – unsurprisingly two sectors with a natural synergy and a history of collaborations.
Recent forays into the world of NFTs by early adopter luxury brands, illustrate their ability to engage HNWIs (High Net Worth Individuals) and HENRYs (High Earners Not Yet Rich) audiences that will never physically interact with the product, but who see it as an investment opportunity akin to the real-life version – all the while offering reassurance that each product is not only genuine, but one of a kind. A collector’s item for the future.
Now there is of course nothing to stop every Tom, Dick and Harry from saving said digital file at the right click of their mouse, infinitely reproducing it across the Internet. But it isn’t the pixels that are of value here.
The value lies in its proof of authenticity, and that is the fundamental value shift that NFTs are starting to create for digital goods.
This might all sound a little crazy, but once you get your head around the virtual product part, that can be resold, there is no difference to the fine art market. You’re essentially buying a collectible, that only you can own – albeit, with price tags still largely reserved for the elite.
NFTs are all about collectibles, and so is the fashion world.Fashion brands just need to look and see where their fans have a collector’s mindset already, and they can leverage NFTs to unlock new ways of creating products and generating revenue.
As younger people enter the luxury marketplace, demand for virtual clothes will no doubt increase too – a shift in attitude we’ll continue to see pioneered by Gen Z and Gen Alpha, who are investing heavily in their virtual alter-ego avatars and in-game clothing.
Case in point: Benoit Pagotto, founder of digital fashion powerhouse RTFKT, attributes their success to paying attention to the digital-native world of teens.
Gucci’s recent venture onto Roblox, whose core demographic is age 9-15 – whilst not NFT-fuelled – demonstrates the power of democratising luxury products to a younger audience through virtual reality, with collectible limited-edition items costing between $1.20 to $9. NFT-backed digital clothing could be the perfect way to introduce new audiences to your brand and court future high spending powers.
So the big question: just another passing fad, or a lucrative future?
It cannot be denied, the power of the virtual product is getting stronger – so too is the value and relevance – so it makes perfect sense for brands to start capitalising on collectable digital content now. Tap into this in the right ways, creating NFTs that foster long-term value and genuine meaning, while satisfying this growing craving for exclusivity, and you will successfully create an ecosystem that stretches beyond the physical realm. Fail to strike the right chord, and you will undoubtedly just be another passing fad.
The challenge for brands – and the industry as a whole – however, will be tap into future opportunities without leaving a legacy of greenhouse gas emissions behind them in the process. (Ethereum uses about 31 terawatt-hours (TWh) of electricity a year – the equivalent to the whole of Nigeria.) In particular to a watchful young audience who demands transparency more than ever before.
NFTs aside, we can’t help but be reminded of the infamous David Bowie-Jeremy Paxman interview back in 1995 when Bowie wisely predicted the future of the internet, explaining to a dubious Paxman that the internet was in fact an alien life form that we just couldn’t quite comprehend yet.
Well, Bowie, you were right. The internet is only just getting started and we’re no doubt on the precipice of something that truly represents its potential, as we wave goodbye to the old-fashioned technique of merely replicating your in-real-life proposition and head towards visionary adaptations of what your brand stands for. Watch this virtual space.