5 Reasons Why Fashion NFTs are Failing
Department of Textiles (Fashion Technology)
DKTE’S Textile and Engineering Institute, Ichalkaranji, India
What are NFTs?
Non-fungible tokens, or NFTs for short, are mainly developed on the Ethereum Blockchain. Ethereum is a cryptocurrency that has the functionality of smart contracts and was developed as a decentralized blockchain. To put it simply, a cryptocurrency is a form of digital money that can be used to purchase NFTs. NFT offers a blockchain-based identity that provides ownership and authenticity. After purchasing an NFT, you can exchange it for cryptocurrency or another NFT. By using an illustration by Picaso as an example, his signature confirmed its validity. A certificate of ownership will be given with the painting, and you will be the only owner when you purchase it. Similarly, NFTs are digital works of art, and upon purchase, you will hold exclusive ownership and sales rights. NFTs are more of a digital investment that remains on the blockchain; they don’t really have any use cases in the real world.
The Rise of NFTs in Fashion Industry:
According to PYMNTS , NFTs gained popularity in 2020 and had a trading value of $82 million. The following year, their trading value rose to $17 billion. The cryptocurrency market’s hype was the cause of this enormous increase in value. NFTs began to be perceived by people as an investment in their digital assets. NFTs were the digital equivalent of land ownership, much like actual land ownership. Individuals began purchasing digital art as NFTs, and when demand was great, they sold the artwork for massive amounts of money.
Looking at the rapid growth, many luxury and fashion labels began to release their own NFTs in an attempt to capitalize on the hype. Fashion NFTs became famous with the labels such as Louis Vuitton, Gucci, Dolce & Gabbana, and so on. These brands designed their own NFTs, which are virtual clothes that the owner can wear in a virtual environment. Wanna, an augmented reality (AR) platform, lets users virtually try on clothing. It is a Virtual try-on platform where the users can buy the Fashion NFTs from their favorite brands. Because they can purchase NFTs and possess exclusive ownership of them on the app, companies like Gucci have launched their virtual fashion collections there.
5 Reasons Why Fashion NFTs are Failing
1. Downfall of Cryptocurrencies:
The cryptocurrency found itself in a hype-bubble that was meant to burst. The exponential growth of the market in 2020 and 2021 prompted governments globally to acknowledge digital currencies and assets as taxable income. Taxes on cryptocurrencies have increased in order to control user trading. Hence, due to the rise in taxes and the hype of actual digital currency diminishing, the value of cryptocurrencies fell drastically.
To prevent losses, people began selling their digital assets, which caused the value of coins like LUNA to drop to $0. The NFTs’ values, which were formerly in the millions, are now down to thousands since they have a direct connection to the crypto-blockchain. The owners of NFTs had suffered losses due to the collapse of Ethereum, the primary blockchain upon which NFTs were based. Hence, the Fashion NFTs which were once hyped, lost their value as a digital asset which made people slowly drift away from Fashion NFTs.
2. Complexity of the Technology:
For most people, trading cryptocurrencies is an unfamiliar idea, but it is highly adaptable. It is comparable to stock market trading. With the introduction of the NFTs, complexity became apparent. One had to make a digital wallet in order to purchase a Fashion NFT. They must add a specific quantity of cryptocurrencies—ideally Ethereum—to the digital wallet. Subsequently, the digital wallet must be connected to the websites where the fashion NFTs are sold in order for the NFT to be owned. Despite the hype, there was little demand for Fashion NFTs because of this challenging process, which discouraged many new users from ever trying them.
3. Unawareness of the Segment:
This short lived era of ‘Digital Currencies’ and ‘Digital Assets’ failed to spread its awareness to larger audiences. Because the system was unable to successfully onboard many users into its NFT sector, many users were left with only digital currencies. As a result, within the limited set of digital assets, Fashion NFTs were unable to establish a strong presence. The fashion brands were eager to use this new technology to enhance the purchasing experience for their customers, but they were unable to raise awareness. Fashion NFTs which were once a great marketing tool during the rise of cryptocurrencies, now are losing the appeal that they once had. Nowadays, brands no longer use Fashion NFTs as their marketing tool.
4. Lack on Consumer Support:
Fashion NFTs were popular around the end of 2020 and the beginning of 2021, but their publicity was very short-lived. Fashion NFTs did not have the same impact as other digital assets, and while they could be used virtually, they did not offer a true-to-life experience. As a result, a lot of people demonstrated lack of interest by failing to adjust to the world of Fashion NFTs. Moreover, the Fashion NFTs received very little support as the cryptocurrency excitement faded away.
5. Scams and Ponzi Schemes:
By the middle of 2021, NFT and cryptocurrency scams gained notoriety and caused consumers to become unsure. Even though luxury brands were not that susceptible to these scams, Fake Fashion NFTs were there in the market ruining the image of the brand itself. People gradually began to distance themselves from the world of Fashion NFTs as a result of the rise in frauds and ponzi schemes that promised consumers Fashion NFTs.
Fashion NFTs could have been a revolutionary product if it was marketed properly. Due to its heavy dependency on the cryptocurrency, Fashion NFTs are failing as the crypto market faced its downfall. As the government brought new regulations for trading of crypto, brands had to be careful about the transactions of the NFTs. Hence, due to the dependency on crypto market, and unawareness of the use case of Fashion NFTs, people failed to adapt to this new age product resulting in the failure of Fashion NFTs.
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Founder & Editor of Textile Learner. He is a Textile Consultant, Blogger & Entrepreneur. He is working as a textile consultant in several local and international companies. He is also a contributor of Wikipedia.