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Background:
For fashion, one of the most compelling prospects for NFTs is the way in which secondary sales of physical goods allow brands to permanently collect royalties. The mechanics of doing so have yet to be worked out, but brands would ideally code NFTs tied to physical products using smart contracts triggered by certain conditions, and only on the first sale. Instead, you can make a profit every time an item is sold. But with the technical loopholes and finicky marketplaces used to circumvent loyalty, brands and creators have no way of enforcing the rules.
“One of the big tenets of Web3 is the idea that these loyalties are a creator-driven economy, not necessarily controlled by a large centralized organization … that actually works. Except you haven’t
Key Insights:
- Marketplace responds to controversy over enforcement of royalties. He one of the largest her Web3 marketplaces, Opensea wants to attract creators, so it has an incentive to respect creator loyalty. New marketplaces that are solely for sale will happily cut fees for buyers.
- This led to an existential crisis for the NFT community. This shows that creators are not fully in charge in a space that was touted as having great potential to empower creators.
- There is currently no marketplace or infrastructure for fashion brands looking to earn royalties through secondary sales. It’s also not yet known how brands will expand such systems.
- Many startups, including EON and the Aurora Blockchain Consortium, are working on linking digital identities to physical goods, but it’s complicated.