Trust Issues: The Fashion Edition. Meet Blockchain, My New Therapist

If you’ve been anywhere near the investment or cryptocurrency world recently, the term “blockchain” will probably ring a few bells. To some, it will give them entrepreneurial excitement. To others, crippling anxiety due to the fear of the unknown bandwagon everyone seems to be hopping on to. The general population often associates blockchain with only the financial world. However, allow me to demystify this technological term and explain how blockchain can not only be used in a plethora of industries, but is now being integrated into the fashion luxury market at a record-breaking speed.

What is Blockchain?

In simple terms, blockchain is a type of database that is used to record and store data in blocks, which are then chained together. As new data comes in, it is inserted into a fresh block. When that block is filled with new data, it chains itself onto the previous block, allowing the data to be chained together in a chronological order from old to new. “Block” and “chain” = blockchain. In even simpler terms, it’s a chain of data presented in nicely linked and visible blocks.

Any type of information can be stored on a blockchain, but the most common use to date has been as a ledger for transactions. This is why it has been predominantly used in a decentralised way in banking and cryptocurrency. It allows for transparency, as the timeline of data entered becomes irreversible and immutable. In Bitcoin’s case for example, transactions are permanently recorded, and anyone can view the historic chain. Each block in the chain is eternal once filled to capacity and is given an exact timestamp as to when it was added to the chain. This allows for an extremely transparent order of events. The transparency and irreversible nature of blockchain does not mean the contents of a historic block can never be altered, but it would require the agreement of the majority of a decentralised network to implement a change.

To summarise, blockchain was created to allow digital information, in its original form without edit, to be recorded and distributed. Blockchain is already being used in a vast number of ways, including the food industry (tracing food products’ journeys to their intended location), healthcare (securely storing patients’ medical records), property ownership, voting systems, and, the focus of this piece, supply chains.

Blockchain and Luxury Fashion

The record-keeping technology is being used in numerous ways in the fashion industry, primarily for transparency in supply chains and the transfer of ownership of digital fashion. The latter is a whole separate ballpark I’ll get into shortly, as the digital fashion economy is shaking up the market…

Blockchain enables purchasers to see the entire history and origin story of a garment, from the yarn it was sown on, the cloth it was cut from, and its entire purchase and transfer history since. It allows for apparel production and distribution to be traceable and transparent. It is every sustainable purchaser’s dream in being able to have physical evidence that the garment they’re purchasing is, in fact, sustainable (if it so claims to be). Sustainable and ethical practices in the fashion industry have the potential to be expanded exponentially through the integration of blockchain.

Authenticity is another blackhole of the fashion luxury market, especially if a user is buying pre-loved items. Counterfeit goods are a huge market, and unless you are purchasing from a trusted reseller, counterfeiters have adopted such attention to detail that some items are almost indistinguishable from their originals.

Where blockchain tracks and stores supply chain information through an embedded chip, customers can see first-hand the origins and journey of a product to enable genuine authentication. This eases the ability to eliminate not only counterfeit products, but those that have also been unethically sourced. The added benefit to this is that nobody can modify, lose or destroy a record once it has been added to the blockchain, so the margin for falsification is slim to none.

Martine Jarlgaard, the technology pioneer working in the intersection of sustainability, technology, fashion and art, was the first to test this concept at the Copenhagen Fashion Summit in May 2017. She produced the first garments having smart labels recorded on the blockchain. Each step of the manufacturing process was recorded in the label for the owners and the brands to authenticate.

Blockchain technology in fashion can also improve efficiency by reducing the production and distribution line. This is done through the entire supply chain being on one centralised digital platform, avoiding the unnecessarily long time it would take to identify the origin of an item. Data is easily reconciliated across all lines and is integrated on one platform.

Another use is for royalty payments. If a designer intends to receive royalty payments, blockchain can be used to track this. Licensed designs and trademarks can be tracked using blockchain, as well as royalty programs or sales originating through the designs. All with the help of a nifty little chip.

LVMH have jumped on the technology, by creating a blockchain platform, AURA, using Ethereum. LVMH partnered with ConsenSys and Microsoft to launch Aura, created to authenticate luxury goods and allow consumers to trace the origins of their products. The platform has been built in recognition of the growth of the pre-loved market and demand for the resale of luxury items. Soon, it’s predicted most second-hand platforms will require digital certificates to resell luxury goods.

Digital Fashion: No Longer Just for Online Dolls & Gaming

The pandemic has done its fair share on shifting the world as we know it, and it didn’t spare the fashion world. Digital fashion has emerged as a new way for individuals to personalise their online identity. Yes, that’s right – you can now buy digital-only clothing. Can you wear it in real life? Nope, this clothing exists only online. So, think pixels rather than fabric. As outrageous as it sounds, we are moving further into the curation and cementation of one’s online presence, and digital fashion is here to assist just that.

While digital fashion has predominantly been part of the gaming world, where one can choose the appearance of their avatar, it is now revolutionising the fashion industry. It’s expressing one’s self, but online as opposed to in person. What makes digital fashion so great is that virtual fashion allows designers to experiment more with tech in clothing, expanding into styles that couldn’t come into fruition in the real world for several logistical reasons. The possibilities are endless. Think of all the real-life wardrobe space one could save!

So where did it come from and how does it work? A Scandinavian company, Carlings, released a digital-only clothing collection in 2018 with a handful of items ranging between £9-£15. Customers would purchase an item, and then send a photo to Carlings for their team to edit the purchased digital outfit onto the customer’s photo. It proved hugely successful.

Following that in May 2019, digital fashion met blockchain. Digital fashion agency The Fabricant designed a stunning one-of-a-kind couture dress and sold it on Ethereum’s blockchain as a non-fungible token. The piece was sold at an auction for $9,500. Not too shabby for a digital dress.

What Are NFTs in Fashion?

Non-fungible tokens (“NFTs”) are cryptocurrency tokens representing unique, irreplaceable, one-off items. These NFTs are then stored on a blockchain and act as proof of ownership of any asset, be it real or virtual. The niche of owning intangible assets, especially as the world is becoming more digitized, is becoming more alluring by the day, and so NFTs have been skyrocketing. For example, the founder of Twitter, Jack Dorsey, sold his first tweet as an NFT for $2.9 million. The tweet read “just setting up my twttr”. Some think it’s madness. Others ask why this is any different to the price that “priceless” art may attract at auction (particularly when it’s authenticity may be in doubt…).

NFTs got their introductory hype back in 2017 from CryptoKitty, an Ethereum-based NFT game initiated by Vancouver-based Dapper Labs. It allowed users to breed rare, digital cats, on the blockchain. This sparked the procurement of digital goods and the world has not looked back. Roham Gharegozlou, CEO of Dapper Labs explained “…in fashion, authenticity is important, limited edition is important, being the first to wear or discover something is important – and it’s impossible to prove the authenticity of a digital thing without blockchain”. (Source of quote: 6 ways blockchain is changing luxury | Vogue Business).

Cliff Fluet, Joint Head of the Media & Entertainment group at Lewis Silkin LLP, MD of Eleven Advisory and Chair of the Ivors Academy, joined The Collective last month to discuss NFTs and their increased prominence in the fashion and retail industry. You can view the recorded webinar here, and read the full article here.

Digital Fashion & Blockchain

Digital collections are becoming increasingly popular for fashion brands, with the likes of Puma, Hugo Boss, LVMH and Gucci testing the waters. Even Rimowa is set to launch and auction off NFTs. Louis Vuitton collaborated recently with the videogame League of Legends to design limited edition skins for players in-game. This then inspired a real, physical collection of the skins. Gucci has also partnered up with AR fashion-tech platform Wanna to distribute digital sneakers as NFTs. The virtual trainers can be purchased for $12 on Gucci’s app, or $8.99 on Wanna’s app.

Earlier this year, a shoe collaboration between design studio RTFKT and digital artist Fewocious cashed in around $3.1 million. More than 600 pairs of virtual, digital shoes, issued as NFTs, sold out in 7 minutes. Karinna Nobbs, co-CEO of NFT marketplace The Dematerialised, said “NFTs are fundamentally going to change digital ownership, creative structures, the creative economy, how we view money even. This is bigger than the Internet.” (What the NFT Gold Rush Means for Fashion | Podcasts | BoF (businessoffashion.com).

Back in June, London Fashion Week broadcast its first ever digital ready-to-wear collection. Viewers were able to follow a live model dressed in the garments from the virtual collection as they transformed in real time. Viewers were able to purchase the assets online after the broadcast.

Virtual self-expression has been around for years in the form of gaming avatars, in whatever medium that may be. The majority of online videogames, that usually enable a user to embody one main player, have allowed users to customise the appearance of these players from clothing to hairstyle. And so naturally, this has evolved into the ability for us as humans to customise our own virtual and digital appearance. It’s all quite full circle really.

Fashion NFT platforms are now emerging too. Brand New Vision, a Hong-Kong based fashion NFT platform, has just closed a seed investment round led by Animoca Brands, a blockchain gaming and NFT player whose valuation topped $1 billion just last week. The market is going to be booming for 3D digital assets in the form of digital fashion collectibles, as we can already see.

Blockchain & Resale: The Circular Economy

As set out in my previous article, which you can read here, the resale luxury market is growing at a rapid speed. Blockchain will soon become a necessity, and maybe even mandatory, in the resale market for authentication purposes. Not only will the platform require it to have further assurance the goods are authentic, but users will want to see it too for peace of mind. The introduction of technology into the fashion industry is also enabling the continued growth of ‘Resale-as-a-Service’.

Blockchain can very easily be integrated into the resale economy. Data is of the utmost importance in the circular economy as it provides concrete certainty (albeit digital and non-tangible) in the resale market. Incorporating blockchain into the creation of a luxury fashion item can combat all these uncertainties and will make for a much brighter and clearer future in the resale world.

End of the Chain

As we are adapting to a more digitized way of living, we expect to see continued growth in the use of blockchain outside its financial origins. Blockchain creates a link between a fashion item’s physical existence and digital identity. A cryptographic seal, chip or serial number is the one thing needed to act as a physical identifier of a product’s digital or physical source. Historically, a company’s supply chain was intentionally non-transparent in order for designers to maintain their original sources of production. However, a shift in consumer attitudes to a more sustainable and ethical sourcing of garments has meant people want more transparency, and that’s where blockchain plays a vital role. Fast fashion is being put to the side, and while many brands are claiming sustainability of their products, often it’s hard to determine. Not with blockchain though. Clothes can now be tracked from raw material to finished article all thanks to a digital ledger.

Blockchain is still in its infancy and the naysayers will continue to point to the lack of regulation and proven track record. It will be interesting to see how regulators deal with the decentralised technology as the market adapts to its benefits. To date, blockchain champions are enthusiastic about the possibilities of decentralised self-regulation.

Individuals are now expanding and pushing the boundaries of creativity by blurring the lines between the physical and digital world. Gaming, virtual reality, retail marketing and other live 3D content environments are all on the rise within the luxury industry. Ultimately, people want what others cannot have. And as far into the psychoanalysis world that I could go with this statement (where I’d probably make Freud proud), the bottom line is that human beings want uniqueness. Scarcity. One-offs. Originals. This is what NFTs can offer digital fashion. And blockchain can facilitate the whole process together in one pretty, sparkling chain.

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Email us at: The.Collective@lewissilkin.com