Early crypto-based gaming in the form of CryptoKitties, Axie Infinity and others showed the world how blockchain technology could revolutionize the gaming industry. At the same time, virtual universes like Decentraland and The Sandbox were developing cult followings of various groups of users represented by avatars within each metaverse. Although the metaverses we’ve become acquainted with today use many of the same elements we’ve grown accustomed to in video games and even blockchain gaming, these metaverses exist for their own sake and don’t necessarily have any narrative or objective other than to serve as social venues.
It is no surprise then, that in a place that encourages socialization and self-expression, NFTs in the form of clothing and avatar customization have taken hold. Equally unsurprising is that the idea of virtual customization is now spilling over into the ways we customize our “selves” in the real world with accessories, apparel and other items. Big brands have finally taken note of the marketing and financial possibilities presented by this new world.
Why Virtual Clothing
Let's start from the beginning. Why would anyone pay for a virtual piece of clothing that they can't wear? Simply put, social interaction is on the cusp of another major change. In-person contact is progressively being replaced by digital interaction and VR/AR, with the pandemic catalyzing this phenomenon by preventing physical contact for what seems like years. Setting aside the deep socio-cultural implications, the move to virtual interaction has prompted the need for a virtual presence or personality. Already, many NFT Twitter users are largely known by and for the avatars they display as their profile pictures. As metaverses continue to gain in popularity—and more importantly, actual usage—there will be an even stronger need to be represented by unique and expressive features.
Much like the real world, those features will eventually be augmented by new and old brands who step in to provide customization for avatars and their users. Already, wearables are quite popular in Decentraland, where you can purchase products for avatars that each exist as distinct NFTs, tradable within or outside of the ecosystem using various cryptocurrencies, and in some cases, fiat.
Developing entirely separately and catering to a very different audience, new companies are offering physical wearables that are represented by NFTs. One such example is Watch Skins, founded in 2020, which offers smartwatch faces. The novelty? These interactive faces, which usually represent analog watches, are tradable NFTs. The prices of some Watch Skins collections, at around 0.5 ETH, are still reasonable relative to the luxury watch market, but imagine how the market would boom if Apple integrated NFTs into its marketplace for Apple Watch.
Other companies such as DressX and Auroboros have taken a different route. These companies have introduced digital clothing that can be embedded in your own personal photographs using AR. You can buy a virtual garment and change outfits in any photo to show it off. You can find almost anything in their stores, from semi-formal wear to outlandish fantasy outfits. According to DressX's founders, virtual clothing cuts waste and emissions by over 95%. These AR clothing companies initially weren’t invested in NFT and payments were made by fiat. However, DressX got involved in the NFT space, opening a virtual store in Decentraland in August, and Auroboros plans to launch an NFT collection next year. The use of NFTs in this market will go mainstream sooner rather than later.
Enter Nike and Adidas
Now, let's move on to the big news from this week. RTFKT is a small startup founded in 2020 by three friends with the idea of producing collectible NFT sneakers, as well as other virtualized items and art. The company recently launched the CloneX avatar project in collaboration with famed artist Takashi Murakami. The collection of 3D avatars is fully integrated into virtual reality and, in just a few weeks, has amassed over $70 million USD in trading volume.
Another of their hits was a shoe collection in collaboration with CryptoPunks, which netted more than $3 million USD in sales in early 2021.
Although RTFKT had developed a sizable following within the NFT and design community, it was basically unknown within the world of “normie” finance. On December 13, Nike announced that it had acquired RTFKT. Although the plans for the purchase have not been disclosed, it is clear that Nike will leverage the team's skills to develop NFT and augmented reality wearables, saving Nike technical hassles in its early steps into the blockchain.
“We’re acquiring a very talented team of creators with an authentic and connected brand. Our plan is to invest in the RTFKT brand, serve and grow their innovative and creative community and extend Nike’s digital footprint and capabilities,” wrote John Donahoe, President of Nike, Inc.
But Nike wasn’t first to market. On December 2, Adidas announced a major collaboration with some of the biggest NFT brands—CryptoPunks and Bored Yacht Ape Club. Subsequently, the account changed its profile picture to an Ape dressed in a promotional jacket.
Minting of its 20,000-piece Early Access collection took place on December 17 for 0.2ETH, but it was troubled by a number of issues, including failed transactions resulting in significant losses in gas fees. A second sale of 9,620 pieces open to anyone took place later that day.
By the end of the day, Adidas had generated $23 million USD in selling JPEGs that opened the door to acquiring both metaverse and IRL clothing.
While it may never be possible to wear a garment made of computer code (although never say never), it is clear that fashion is making its way into virtual worlds and adopting NFTs as the medium of delivery and transacting. We expect that the integration between blockchain, AR, metaverses and physical reality will improve rapidly with increased competition and new entrants into the market.