Original title: "Augmenting Culture: The Emerging Field of Digital Fashion》
Original post by Justin McAfee, 1kx Research Analyst
Compilation of the original text: Overnight Porridge
Compilation of the original text: Overnight Porridge
Digital fashion enables limitless self-expression without physical constraints, and experiments are flourishing, from digital physical (digiphysical) products to fully immersive virtual content. We expect this industry to grow significantly as the virtual economy and virtual environments proliferate.
Digital fashion has fundamentally changed our perception of online identity, while also building on previously inherent cultural artifacts. As our interactions increasingly take place on social media, in games, and in virtual worlds, our online identities hold the key to how we are perceived by others.
It's the age of digital fashion, and it's bigger than you think:
online status:
60% of Gen Z and 62% of Millennials believe how they present themselves online is more important than how they present themselves in person (SquareSpace).
According to a recent Roblox report: (1) Half of respondents change avatars weekly; (2) 47% say their avatars help express their personality, 43% say It made them feel good about themselves; (3) 70% dressed their avatars to resemble their IRL style, and 70% said they were inspired to dress similarly to their avatars in real life.
Commercialization:
1. IRL fashion items are being commoditized through online secondary markets like StockX.
(1) 60% of GenZ men reported using the platform in 2020;
(2) It is estimated that by 2025, the size of the secondary market for fashion commodities will be 15-25% of that of the primary market;
2. In the game, players are interested in trading their own skins, as evidenced by primary sales and gray markets.
(1) Among core US gamers who know about in-game skins, 81% want to use their in-game items for real-world money and are therefore interested in skin trading (NewZoo);
(2) Additionally, 75% of players interested in skin trading said they would pay more for skins if they had monetary value outside of the game (NewZoo);
Digitizing:
Consumers want to feel a sense of belonging by interacting with the brands they buy, and the vast majority of consumers use digital channels before, during or after a purchase. ( Deloitte )
Receive Virtual Cosmetics:
A survey of US MMO players found that 91.3% of respondents would spend money on in-game cosmetic items.
In a 2018 study, 68.6% of the 1,307 respondents said they had no objection to cosmetic microtransactions, while 22% said they strongly disliked pay-to-win. microtransactions.
Nearly three-quarters of Roblox respondents said they would spend money on fashion items, and one-quarter would spend more than $20 on a single cosmetic item.
Global in-game purchases are expected to reach $75 billion by 2025.
Fashion production accounts for 10% of human carbon emissions and 85% of all textiles are thrown away every year. This has led to efforts to reduce the carbon footprint of the fashion industry by controlling supply and rewards, while pursuing digitalization where possible (Bloomberg).
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Image from RTFKT
The Emerging Digital Fashion Field
What was once seen as a niche experiment is now becoming a vibrant market, a major consumer market that is being widely adopted by small and large fashion houses alike. The state of digital fashion today can be broken down into three main movements: Digiphysical, Augmented Reality (AR), and Direct-to-Avatar Wearables. Many projects cross between these areas to increase the total utility of assets within their ecosystems, so they are by no means mutually exclusive.
All three parts come from different layers:
1. Communication layer: It consists of digital physical tools such as NFC chips and dynamic QR codes, as well as blockchain primitives such as smart contracts and data feeds. Together, this information forms a database of ownership and certification, and a way for the fashion industry to communicate with the digital world.
2. Creative layer: tools for coordinating the labor market and developing physical and digital works.
3. Distribution layer: The source of distribution can come from the market or a custom website. This layer also includes tools to support virtual distribution across platforms, such as avatar infrastructure and logistics operations to transport physical products.
4. Augmentation layer: Physical assets or fully virtual objects are enhanced through AR, in-game utilities, token-gated events or experiences, and even play a role in the future governance of the brand.
Digiphysical
Digiphysical fashion combines digital fashion merchandise with physical delivery of real-world merchandise. In its simplest form, a physical item (such as a hoodie) is linked to a digital counterpart (such as an NFT or wearable avatar).
Given that popular demand for a virtual world is still in its infancy, digital-physical fashion benefits from today's consumer demand for physical products, while also preparing for an increasingly virtual future.
Clothing is no longer an identity primitive locked in a closet or isolated from real-life interactions, but a utility-based digital asset that is also the key to an immersive online experience. These experiences can range from games and token-gated community hubs to AR overlays and IP tools. Your physical hoodie might land you a chance to attend a local event or virtual concert, or act as a vote in a decentralized fashion company, translating your desires as a certified consumer into future product launches .
Digiphysical experiments are promoted by brands like RTFKT and Metafactory in web3, and chroma in web2. Other popular brands include 9 dcc, CULT & RAIN and Rags.
Digiphysical is the most complex of the three due to the use of additional infrastructure beyond NFC, including Near Field Communication (NFC) chips, decentralized hosting platforms, and value chain distribution services.
Near Field Communication (NFC) chips connect real-world assets to the blockchain. These chips are embedded in physical objects, and can be scanned with a mobile phone to obtain additional content. While similar to static QR codes, NFC chips utilize cryptography and/or dynamic linking to ensure that only those in close proximity to the physical asset can access it. KONG Land is the main supplier of these chips, which have been widely adopted in various Digiphysical (digital physical) projects.
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Image via Azuki
Today, KONG's chips are embedded in projects as diverse as Metafactory, Rags, Mattereum, IRL Art, and Azuki.
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Image via Kong
The NFC chip stack can be extended with infrastructure such as IYK, which provides custom modules for Digiphysical projects to plug in. Projects can mix and match IYK's no-code tools, modules such as POAP claims, templated websites for viewing digital items, and analytics around NFC taps. As part of the NFC integration, a dynamic one-shot dynamic access link is sent every 30 minutes, ensuring proof of proximity and facilitating location-based analysis. Projects using IYK include 9 dcc, Index Coop x Bankless, and POAP cards.
Recently, Azuki and KONG wrote an EIP for physically backed tokens, demonstrating the potential of these chip integrations. According to the PBT proposal, each NFT is conceptually associated with a physical chip and can only be transferred to a different owner if the chip signature is provided to the contract. If you traded the physical item, the new owner could scan the chip and transfer the NFT from the previous owner's address to their own, always keeping the link between the digital and physical copies.
Decentralized hosting platform
A core infrastructure need for most Digiphysical brands is an escrow-like service to hold physical assets until redeemed by NFT asset holders - this stems from the need to submit an order to a manufacturer to create the physical , whether or not it has been redeemed. While escrow can be bypassed by using a defined period within which the owner of the NFT can claim the physical asset (such as RTFKT's forging window), not all projects take this approach. It makes sense, for example, that 9 dcc would include community treasuries as part of the asset's value proposition - as with the 2021 Unisocks phenomenon, an unclaimed physical-digital pair is worth less than a claimed Items have greater value.
Projects can choose to build their own infrastructure for this, but it may be easier to plug into existing solutions such as 4k Protocol and Courtyard, or via similar futures contract agreements such as Boson.
Both 4k and Courtyard use a model in which physical assets are shipped to storage providers and, once received, generate NFTs that are redeemable for the underlying asset. 4k takes a decentralized approach using a token economics incentive model to bootstrap a network of storage providers (“Guardians”). In the event of item degradation or loss, NFT holders receive forfeited tokens, and these guardians are managed through a staking and forfeiting mechanism. Guardians compensate for this risk through token inflation and protocol fees. Notably, 4k has highlighted the potential of physical-backed NFTs by partnering with Arcade to provide collateral for Rolex. Additionally, 9 dcc partnered with 4k to execute their ITERATION-01 drop, showing how an airdropped 4k NFT can be used as part of the distribution process.
Courtyard takes a more centralized approach, relying on security firm Brink's for shipping and storage. They also want to expand their current operations by building a network of resellers to assess the authenticity of items before they are represented on-chain. To help create a supply of on-chain assets, Courtyard is also considering adding a 1% royalty rebate to the original minter of an item on all subsequent secondary sales of that item.
However, Boson took a different approach to the hosting challenge. Instead of holding physical assets in a vault (until redeemed), buyers and sellers work together to create a futures contract in which both parties deposit equal amounts of funds to guarantee performance. This approach doesn't directly solve the order submission problem, but it does allow individuals to keep the physical item during redemption and be able to resell it later.
Supply Chain and Value Chain
Physical and virtual product development has resulted in a highly distributed supply chain of designers, suppliers, manufacturers, and 3D modelers, necessitating the distribution of the value of the final sale among multiple parties. This opens the door for web3 infrastructure projects like Hibiscus and Crowdmuse that specialize in profit redistribution and contribution management.
Crowdmuse is also dealing with value chain process infrastructure. Their model allows brands, designers, and manufacturers to co-create digital physical collectibles on-chain, transparently track contributions and distribute revenue automatically. In addition to the on-chain database, there is a reputation primitive associated with a contributor DID based on the number of contributions made and products created on the protocol. Creators can also contribute to design specs that earn a share of revenue through licensing, giving small, independent creators the chance to bring their mods to a wider market. Additionally, aware of the impact of manufacturer minimum supply orders, creators can plug into Crowdmuse's pre-order functionality to help reduce the upfront cost of new products.
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Image via Crowdmuse
Augmented reality (AR) superimposes digital objects onto the real world. This feature is already popular in social media, with most users of apps like Snap and TikTok using AR filters in their content. Software technologies like ARKit and ARCore have further improved AR delivery, making it easier and cheaper than ever for brands to create immersive AR experiences. Excitingly, full AR hardware adoption is expected to increase dramatically over the next few years as consumer-grade solutions enter the market.
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Image via The Fabricant
With AR, fashion can expand in a unique way in the physical world, without the constraints of physics itself. All of this can be achieved through the lens of a smartphone without the need for expensive hardware, making AR fashion items as ubiquitous as smartphones.
AR fashion is often done through virtual fittings and filters. For the former, asset owners send their own high-quality photos, and digital artists apply them using 3D modeling and rendering software. Filters, on the other hand, leverage existing AR delivery apps like Snap, TikTok, Instagram, and Zoom to generate digital renderings of assets on people in real time.
DressX is another leader in the AR space, offering 4k rendered stills, live AR dressing through their app, and "metawear" that follows the aforementioned virtual fitting model. As of now, they have established partnerships with leading web2 social platforms including Snap for instant AR, Meta for avatar store and Roblox, and they have become the first pure digital to design layered clothing for the Roblox marketplace fashion brand. DressX offers both digital-only clothing and NFTs, some of which can be used in crypto-native virtual worlds like Decentraland. Recently, DressX announced a change where they will offer users a subscription-based service that will allow them to experiment with various AR fashion looks on the platform for a recurring monthly fee.
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Image from RTFKT
Wearables for avatars (Direct-to-Avatar Wearables)
The most successful games, such as Fortnite and Roblox, have proven this model to be true, with 77% and 54% of active US players in these two games using game skins respectively. However, these models typically do not incorporate a direct ownership layer, although consumer research suggests this would increase player spending.
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Image via Epic Games
A Web3-based avatar economy will benefit from the aforementioned preference for real-world transactions, desire for ownership of assets outside of gaming environments, and growing acceptance of virtual cosmetics.
As with any virtual commodity attempting to cross digital boundaries, the main challenge is interoperability. Different virtual environments have different constraints in terms of aesthetics, polygon count, etc. While cosmetic items do benefit from having no direct utility in the game or world (direct utility would cause balance issues between environments), they still require tweaking.
Some current approaches to addressing interoperability include:
Developer Tools and Cross-Platform SDK: Avatar infrastructure into which virtual worlds and games can be easily plugged is a way to sell cosmetics to a growing player base while helping to address interoperability challenges. Ready Player Me is a cross-platform avatar system that provides developers with an avatar creator and SDK to get user-generated avatars in their games across web, mobile, Unity, Unreal, and other applications. Digital fashion brands can leverage their distribution reach to sell on these platforms – DressX and Artisant are two well-known brands doing so today.
Standardization: RSTLSS takes a unique approach to standardize 3D asset models through seasonal delivery to address interoperability challenges. Users receive mockups of each virtual world integration, and creators can mix and match IP and designs into preset positions to customize their wearables. These designs were then applied to all other applicable models as 2D texture wraps. A smaller set of base models added over time, along with a host of new texture designs, should soon lead to a large library of components for a variety of virtual environments.
Public Datasets: Metafactory is exploring another interesting interoperability effort with their VR/Metaverse Crew. Using Ceramic as a data layer, they hope to create a single "master" NFT for each garment that can be linked to multiple file format types in metadata. As new platforms are integrated, metadata can be updated with the appropriate file type, future-proofing their wearables as more virtual environments are rolled out.
In addition to interoperability, there is also the issue of fitting a wearable device to a specific avatar, which may vary in shape and size within and between platforms. For avatars following the VRM/gLTF standard, owners will need to customize the wearable on the avatar via Blender or Unity + UniVRM. Some tools, such as Marvelous Designer / Clo 3d can do this automatically, but still require the user to complete an extra step. For most users, this will be a huge friction, so developers are already looking for alternative solutions.
Roblox has introduced one of the best solutions on the market (albeit only for their platform) called Layered Clothing. The technology combines Skinned Meshes with a Cage Mesh Deformer to effectively shrink-wrap 3D objects onto 3D models, allowing for easy application of clothing without additional user steps.
And in Web3, using a meta NFT as described above might be one of the best solutions, especially when matched with an interoperable file format standard. Ideally, standards are created across multiple environments through the efforts of interoperability working groups (see: M3, OMI, Metaverse Standards Forum) to make this all more seamless for the end user. Until then, we need further experiments.
Fashion DAO
Fashion-centric DAOs are still a nascent field, but today there are DAOs as general collective vehicles for grant or investment funding, tool/infrastructure development, and experts and beginners alike.
Red DAO is arguably the most well-known fashion DAO. They're an investment DAO in the Tribute Labs ecosystem, and they're using the 4,000 ETH raised to support, buy, archive, collect, and invest in the emerging world of digital wearables and fashion. Founded by Megan Kaspar, Red DAO currently has 43 initial members drawn from across the industry. Last year, they won the auction of The Doge Crown, a bejeweled crown (including the physical version), for 423.5 ETH during the UNXD Dolce and Gabbana fashion event.
DAOs can also be used to build a broad network of creators and create open source tools such as Digitalax. Digitalax bills itself as a collection of tip writers, stylers, and coders building open source tools for the web3 fashion economy. Through various sub-DAOs, their mission is to educate, support and gather fashion designers specialized in the field of CC 0 . One of their main communities is the Global Designer Network, a community of designers helping each other build new and interesting virtual fashion primitives.
We expect more trendy DAOs to emerge in the coming years as projects continue to innovate in organizational design. Beyond decentralized brands like Metafactory, opportunities exist in creator collectives that help steer brands and game offerings, grantmaking organizations that help accelerate the pace of the industry, and open source asset and software creation organizations.
experiment
We expect more experimentation as the project continues to innovate around integrations, frameworks, and operating models in and around Web3:
Financialization of NFTs:
The financialization of NFTs has many applications in the fashion industry. While PFPs have been quieter than expected in the rental market, perhaps due to their unique relationship to personal identity, fashion seems to be a good fit. A decentralized Rent-the-Runway or “wear-to-earn” incentives for renting is not far away.
Additionally, collateralization of high-dollar NFTs for lending and IRL fashion collectibles unlocks fashion as an asset class. As mentioned above, financialization is already possible through platforms like StockX, so extending it to lending is a logical next step.
Wear to Earn:
With growing interest in the x-to-earn model popularized by Stepn, wear-to-earn seems to be the way to go. Decentral Games’ wearables stand out in this regard, with Decentraland casino players earning multipliers through token-incentivized mining when players wear their branded wearables in-game.
Draup is a platform set to launch in the coming months that hopes to incentivize greater use of virtual cosmetics by establishing a mechanism that allows renting, reselling, and (most interestingly) wear-to-earn.
Wear-to-earn isn’t limited to the virtual world either – by using NFC chips, it can be extended to the physical world through a hybrid of token-incentivized affiliate marketing, allowing collectors to buy from wear-branded merchandise. Earn income.
Gamification:
A basic form of gamification might look like a loyalty program, such as earning XP or tokens to upgrade a dynamic avatar. This could develop into a cross-brand social app, or be integrated into the interface of the virtual world - the latter being another compelling way to engage and drive more attention as a go-to-market strategy Avatar customization.
Co-Creation:
As Fabricant and RSTLSS mentioned above, co-authoring is an emerging field in web3 fashion (among others) that seeks to bring collectors into the creative process. Whether through a minting experience influenced by collector preferences, or tokenized curation-based governance, we expect co-creation to play a greater role as brands and communities engage with each other more deeply.
Alternative licensing model:
Some projects have already begun experimenting with alternative licensing models. For example, Digitalax enforces a strict CC 0 policy - any wearable device or item in the ecosystem must be created under a CC 0 license to increase the mixability and composability of its assets.
The Emerging Fashion of NFT Native IP
One of the more promising developments is the use of crypto-native IP in merchandise development (such as Nouns Spectacles or the Nouns x Dopamine collaboration). We look forward to the largest collection of NFTs to further explore fashion.
AI fashion
Creative AI is emerging in various fields, and the fashion industry will also benefit from it. Neural Style Transfer (Neural Style Transfer), which combines objects and styles to synthesize new ideas, and StyleGAN, which creates generated outputs after training on a specific dataset (such as a designer's previous work), are two suitable methods.
With creative AI output, curation plays an increasingly important role. Deep Objects is experimenting with this, using artificial intelligence algorithms to generate shoe designs that are then curated by the community until the final 1/1 piece is created.
Other ideas might include:
A decentralized brand that leverages governance to manage AI-generated clothing;
Combining NFTs with trained models to create ownable, tradable or subdividable human designers;
AI tools for converting 3D models between different virtual environments, making interoperability more seamless and reducing dependency on partners;
The collected clothing is analyzed to create a social application of other asset recommendations, both real and virtual.
Virtual KOL
For digital fashion, virtual KOLs can come in two main forms: models (eg Lil Miquela, Shudu Gram) or anthropomorphic AI fashion designers (eg anthropomorphic StyleGAN). To learn more about virtual influencers and apps, check out my previous work here.
we believe:
As consumers become more demanding about the brands they wear, collectibles and apparel will increasingly be connected via NFC chips and blockchain.
Augmented reality (AR) and avatar wearables will be a common extension of most luxury fashion products.
Cutting-edge experiments, such as co-creation and collector curation, will be born out of crypto-native applications and infrastructure, as legacy brands are slower to innovate. This will lead to high-value acquisitions — as in the case of RTFKT and Nike — and the emergence of new crypto-native luxury brands.
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