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How can NFT change the world of luxury brands?

Maciej Zieliński

02 Sep 2022
How can NFT change the world of luxury brands?
Table of Contents

Luxury brands and NFT are a great combination that is growing in popularity. Interestingly - fashion designs and companies are implementing NFT faster and more enthusiastically than in other industries. There seems to be a consensus that Web3 will undoubtedly play a huge role in their future. Both fashion and NFT operate on a model of exclusivity and rarity, which may explain how receptive this field is to the technology. At the same time, other "classic" companies are reluctant to engage with Web3 and its derivatives.

Fashion digitizes projects 

Nearly 2.5 billion people have already participated in one way or another in the virtual variety of the broader economy, which is the direction of the world's evolution. There is no doubt that brands need to find their way in the online parallel world, just as they do in the real world. With the advent of digital transformation, luxury has slowly entered this change. Unlike mass companies that have quickly adapted to e-commerce and social media, there are many reasons why many luxury brands are still lagging. Perhaps the biggest challenge facing luxury fashion brands today is how best to recreate the luxury experience in a non-physical form.

What opportunities do the Metaverse and NFT present for luxury brands?

The merging of the physical and digital worlds through the Metaverse platform is quickly becoming an important opportunity for luxury brands. To meet the expectations of luxury goods consumers, brands with such characteristics need to ensure the highest quality of their online experience - for example, personalizing or customizing it through interactive chat or technical support. In addition, luxury goods consumers are accustomed to acquiring tangible goods through shopping. The advent of coins has broken the long-established model of single ownership of exclusive items while ensuring the rarity of virtual things. NFTs prove ownership of assets to their owners and register them in open-source blockchain technology. In this way, the tokens represent a new system for tracking ownership while preserving the notion of exclusivity that the luxury industry has historically used. The entry of exclusive brands into the NFT market is part of their digital strategy, with the introduction of NFT creations expanding their virtual presence and boosting digital creativity.

NFT

Brands have gradually entered the Metaverse to showcase their virtual representatives and NFT products. Prada announced that it had partnered with Adidas Originals to launch a "first of its kind" NFT project. Balmain has partnered with Barbie to offer three unique avatars of the famous doll, with NFT deals in their case costing around $2,000. But while most brands have largely abandoned digital characters or virtual fashion elements, Louis Vuitton has entered the virtual world more engagingly - as it created its own video game.

Examples of luxury brands implementing NFT

Luxury brands are aware of the market, as their advisors have followed consumer interests for years. So it's no surprise that global giants are getting into NFT. Below are companies that have expressed broad interest in blockchain technology and have implemented, implemented, or plan to implement NFT! 

Gucci uses NFT 

Gucci is no stranger to the concept of NFT. The brand first entered the digital market in May 2021, when it released a token film inspired by the Aria series as part of Christie's prestigious Proof of Sovereign sale, headlined by Lady PheOnix. The film was co-directed by Gucci creative director Alessandro Michele and award-winning photographer Floria Sigismondi. The extraordinary piece showcases Michele's Aria collection. Gucci's next NFT project occurred on January 18, 2022, when the company partnered with vinyl toy manufacturer Superplastic to sell 10,000 NFTs called SUPERGUCCI. It's a three-part limited series of digital NFT characters co-created by Michele and Janky & Guggimon of Superplastic - digital characters whose adventures were described initially in CryptoJankyz from Superplastic at Christie's. The NFTs in the collection allows owners to unlock handcrafted white ceramic sculptures 20 cm tall to accompany their digital counterparts. Gucci then launched the 10KTF: Gucci Grail Mint Pass collection in March 2022. The project is a collaboration between digital creator Wagmi-san and Michele to create custom PFP digital apparel based on 11 of the NFT community's most famous designs. Only those who own a PFP from one series will receive a designed mint pass that can be used to purchase a personalized NFT. Moreover, Gucci recently announced a partnership with SuperRare for Vault Art Space. After purchasing $25,000 in RARE tokens to join the SuperRare DAO, Gucci plans to use the Vault Art Space to host exhibitions of NFT artists. 

Yvel - digitizing jewelry  

On June 13, 2022, jewelry company Yvel introduced INFS (independent non-transferable securities) for trading between consumers and businesses. To do so, the company has taken a slightly different approach to the NFT space, creating digital securities that act as non-functional financial products. These NFT-like tokens are physically backed by 24,000 gold coins worth $10,000, decorated with diamonds and other precious stones. The idea is that security backed by physical assets will give digital assets stability, even when the market fluctuates. During the launch of the pre-sale platform in early June, 2,500 coins were issued to accredited investors. These coins will serve as a model for how INFS will operate in the future, driving financial products on the platform. Notably, the tangible guarantees of stablecoins are configurable. This means that investors or companies using the INFS Yvel platform can customize the guarantees according to the market and trends that are currently taking place. Therefore, instead of supporting their non-transferable securities with gold coins, they can support their non-transferable deposits with real experience, products, and profit sharing. The idea is relatively fresh and is slowly gaining more and more supporters.

Clubhouse Archives, Inc - NFT range for a select few 

Club Archives Inc, a blockchain-based NFT luxury apparel brand, recently announced the launch of its marketplace to allow users to purchase a select assortment of luxury apparel. Starting July 13, 2022. Genesis Mint is shortlisting 1,880 digital tokens that will serve as lifetime memberships. Pass holders are gifted with certain amenities, including administrative capabilities, access to exclusive events, and a perpetual share of sales and royalties. By linking NFT to physical goods, every luxury collection launched on the Clubhouse Archives platform will feature 3D clothing made in Italy. The collections that will appear on the platform will be created by designers and voted on by the community, allowing them to play an active role in the development of the brand. The Clubhouse Archies team includes designer and artist James Costa, NFT creator Greg Mike, former Golf Digest fashion director Marty Hackel and more. The platform's first collection will focus on golf sportswear, which is "infused with countercultural luxury streetwear." The forum will use Crossmint as its official trust wallet and payment platform.

Balmain leverages NFT for consumer relations.

French fashion house Balmain recently announced its entry into the NFT game with the announcement of Non-Fungible Thread, an NFT-based fashion ecosystem for those who own Balmain clothing. Collection tools are still under development. Some candidates include digital apparel converted to physical and shipped to their door. Consumers get exclusive collector invitations to future Airdrops and cocktail parties with digital fashion designers. One of the driving forces behind Non-Fungible Thread (still in development) is James Sun, founder and CEO of MINTNFT, an organization dedicated to building Balmain's Web3 vision. Sun believes that for Balmain to distribute NFT on OpenSea or Rarible is a poor way to create a unified community around NFT. The luxury brand seems more focused on building long-lasting relationships with its customer base and creating interactive and engaging experiences for the community, whether digital, physical or a combination of the two. As for the project and how Balmain will implement it, there is much more to come.

Prada - joining forces with Adidas and NFT 

Prada has already made some attempts in the NFT field this year. In January 2022, the company partnered with Adidas Originals on a token project involving 3,000 community-created artworks. These pieces were used to create a unique 1-of-1 NFT by artist Zach Lieberman, which included more than 3,000 images and was sold for 30 ETH. On June 2, 2022, Prada went a step further and released 100 NFTs to coincide with the launch of its latest Timecapsule clothing line, which consists of 100 unisex button-up shirts designed by artist Cassius Hirst. Customers who purchase the collection will automatically receive a free Airdrop NFT, which includes the token serial number and the number of the physical T-shirt it comes with. Details on the availability of the coins are sparse, but the brand's Discord will be revealed to Prada Crypted members in time. The company also mentioned exclusive offers, experiences, and access to future issues.

Summary 

Luxury brands are immersing themselves more and more in the NFT space. They have generally done a great job using technology to interact with their celebrity watchers creatively. While other non-Web3 industries may be less adept at implementing and utilizing blockchain-based technologies, they should still closely examine how the brands we mentioned in this article can fit in and consequently flourish. By the end of 2025, about 40% of consumers will own digitized luxury goods. Hopefully, this direction of NFT is the future of many exciting projects. 

Tagi

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Aethir Tokenomics – Case Study

Kajetan Olas

22 Nov 2024
Aethir Tokenomics – Case Study

Authors of the contents are not affiliated to the reviewed project in any way and none of the information presented should be taken as financial advice.

In this article we analyze tokenomics of Aethir - a project providing on-demand cloud compute resources for the AI, Gaming, and virtualized compute sectors.
Aethir aims to aggregate enterprise-grade GPUs from multiple providers into a DePIN (Decentralized Physical Infrastructure Network). Its competitive edge comes from utlizing the GPUs for very specific use-cases, such as low-latency rendering for online games.
Due to decentralized nature of its infrastructure Aethir can meet the demands of online-gaming in any region. This is especially important for some gamer-abundant regions in Asia with underdeveloped cloud infrastructure that causes high latency ("lags").
We will analyze Aethir's tokenomics, give our opinion on what was done well, and provide specific recommendations on how to improve it.

Evaluation Summary

Aethir Tokenomics Structure

The total supply of ATH tokens is capped at 42 billion ATH. This fixed cap provides a predictable supply environment, and the complete emissions schedule is listed here. As of November 2024 there are approximately 5.2 Billion ATH in circulation. In a year from now (November 2025), the circulating supply will almost triple, and will amount to approximately 15 Billion ATH. By November 2028, today's circulating supply will be diluted by around 86%.

From an investor standpoint the rational decision would be to stake their tokens and hope for rewards that will balance the inflation. Currently the estimated APR for 3-year staking is 195% and for 4-year staking APR is 261%. The rewards are paid out weekly. Furthermore, stakers can expect to get additional rewards from partnered AI projects.

Staking Incentives

Rewards are calculated based on the staking duration and staked amount. These factors are equally important and they linearly influence weekly rewards. This means that someone who stakes 100 ATH for 2 weeks will have the same weekly rewards as someone who stakes 200 ATH for 1 week. This mechanism greatly emphasizes long-term holding. That's because holding a token makes sense only if you go for long-term staking. E.g. a whale staking $200k with 1 week lockup. will have the same weekly rewards as person staking $1k with 4 year lockup. Furthermore the ATH staking rewards are fixed and divided among stakers. Therefore Increase of user base is likely to come with decrease in rewards.
We believe the main weak-point of Aethirs staking is the lack of equivalency between rewards paid out to the users and value generated for the protocol as a result of staking.

Token Distribution

The token distribution of $ATH is well designed and comes with long vesting time-frames. 18-month cliff and 36-moths subsequent linear vesting is applied to team's allocation. This is higher than industry standard and is a sign of long-term commitment.

  • Checkers and Compute Providers: 50%
  • Ecosystem: 15%
  • Team: 12.5%
  • Investors: 11.5%
  • Airdrop: 6%
  • Advisors: 5%

Aethir's airdrop is divided into 3 phases to ensure that only loyal users get rewarded. This mechanism is very-well thought and we rate it highly. It fosters high community engagement within the first months of the project and sets the ground for potentially giving more-control to the DAO.

Governance and Community-Led Development

Aethir’s governance model promotes community-led decision-making in a very practical way. Instead of rushing with creation of a DAO for PR and marketing purposes Aethir is trying to make it the right way. They support projects building on their infrastructure and regularly share updates with their community in the most professional manner.

We believe Aethir would benefit from implementing reputation boosted voting. An example of such system is described here. The core assumption is to abandon the simplistic: 1 token = 1 vote and go towards: Votes = tokens * reputation_based_multiplication_factor.

In the attached example, reputation_based_multiplication_factor rises exponentially with the number of standard deviations above norm, with regard to user's rating. For compute compute providers at Aethir, user's rating could be replaced by provider's uptime.

Perspectives for the future

While it's important to analyze aspects such as supply-side tokenomics, or governance, we must keep in mind that 95% of project's success depends on demand-side. In this regard the outlook for Aethir may be very bright. The project declares $36M annual reccuring revenue. Revenue like this is very rare in the web3 space. Many projects are not able to generate any revenue after succesfull ICO event, due to lack fo product-market-fit.

If you're looking to create a robust tokenomics model and go through institutional-grade testing please reach out to contact@nextrope.com. Our team is ready to help you with the token engineering process and ensure your project’s resilience in the long term.

Tagi

Quadratic Voting in Web3

Kajetan Olas

04 Dec 2024
Quadratic Voting in Web3

Decentralized systems are reshaping how we interact, conduct transactions, and govern online communities. As Web3 continues to advance, the necessity for effective and fair voting mechanisms becomes apparent. Traditional voting systems, such as the one-token-one-vote model, often fall short in capturing the intensity of individual preferences, which can result in centralization. Quadratic Voting (QV) addresses this challenge by enabling individuals to express not only their choices but also the strength of their preferences.

Table of Contents

In QV, voters are allocated a budget of credits that they can spend to cast votes on various issues. The cost of casting multiple votes on a single issue increases quadratically, meaning that each additional vote costs more than the last. This system allows for a more precise expression of preferences, as individuals can invest more heavily in issues they care deeply about while conserving credits on matters of lesser importance.

Understanding Quadratic Voting

Quadratic Voting (QV) is a voting system designed to capture not only the choices of individuals but also the strength of their preferences. In most DAO voting mechanisms, each person typically has one vote per token, which limits the ability to express how strongly they feel about a particular matter. Furthermore, QV limits the power of whales and founding team who typically have large token allocations. These problems are adressed by making the cost of each additional vote increase quadratically.

In QV, each voter is given a budget of credits or tokens that they can spend to cast votes on various issues. The key principle is that the cost to cast n votes on a single issue is proportional to the square of n. This quadratic cost function ensures that while voters can express stronger preferences, doing so requires a disproportionately higher expenditure of their voting credits. This mechanism discourages voters from concentrating all their influence on a single issue unless they feel very strongly about it. In the context of DAOs, it means that large holders will have a hard-time pushing through with a proposal if they'll try to do it on their own.

Practical Example

Consider a voter who has been allocated 25 voting credits to spend on several proposals. The voter has varying degrees of interest in three proposals: Proposal A, Proposal B, and Proposal C.

  • Proposal A: High interest.
  • Proposal B: Moderate interest.
  • Proposal C: Low interest.

The voter might allocate their credits as follows:

Proposal A:

  • Votes cast: 3
  • Cost: 9 delegated tokens

Proposal B:

  • Votes cast: 2
  • Cost: 4 delegated tokens

Proposal C:

  • Votes cast: 1
  • Cost: 1 delegated token

Total delegated tokens: 14
Remaining tokens: 11

With the remaining tokens, the voter can choose to allocate additional votes to the proposals based on their preferences or save for future proposals. If they feel particularly strong about Proposal A, they might decide to cast one more vote:

Additional vote on Proposal A:

  • New total votes: 4
  • New cost: 16 delegated tokens
  • Additional cost: 16−9 = 7 delegated tokens

Updated total delegated tokens: 14+7 = 21

Updated remaining tokens: 25−21 = 425 - 21 = 4

This additional vote on Proposal A costs 7 credits, significantly more than the previous vote, illustrating how the quadratic cost discourages excessive influence on a single issue without strong conviction.

Benefits of Implementing Quadratic Voting

Key Characteristics of the Quadratic Cost Function

  • Marginal Cost Increases Linearly: The marginal cost of each additional vote increases linearly. The cost difference between casting n and n−1 votes is 2n−1.
  • Total Cost Increases Quadratically: The total cost to cast multiple votes rises steeply, discouraging voters from concentrating too many votes on a single issue without significant reason.
  • Promotes Egalitarian Voting: Small voters are encouraged to participate, because relatively they have a much higher impact.

Advantages Over Traditional Voting Systems

Quadratic Voting offers several benefits compared to traditional one-person-one-vote systems:

  • Captures Preference Intensity: By allowing voters to express how strongly they feel about an issue, QV leads to outcomes that better reflect the collective welfare.
  • Reduces Majority Domination: The quadratic cost makes it costly for majority groups to overpower minority interests on every issue.
  • Encourages Honest Voting: Voters are incentivized to allocate votes in proportion to their true preferences, reducing manipulation.

By understanding the foundation of Quadratic Voting, stakeholders in Web3 communities can appreciate how this system supports more representative governance.

Conclusion

Quadratic voting is a novel voting system that may be used within DAOs to foster decentralization. The key idea is to make the cost of voting on a certain issue increase quadratically. The leading player that makes use of this mechanism is Optimism. If you're pondering about the design of your DAO, we highly recommend taking a look at their research on quadratic funding.

If you're looking to create a robust governance model and go through institutional-grade testing please reach out to contact@nextrope.com. Our team is ready to help you with the token engineering process and ensure that your DAO will stand out as a beacon of innovation and resilience in the long term.

Tagi