After 2000 Hours of Researching Fashion NFTs, Here Is What I Learned

The Web3 Fashion ecosystem has grown a lot in 2022. From speculative promises in 2021, 2022 has seen actual implementations of digital/physical merging, composable digital avatars, and creator/community tools that will enable customization of self-expression.

The promise of Web3 remains:

composability of assets (e.g., ReadyPlayerMe)
real ownership (i.e., NFT tech)
new interaction mediums (e.g., digital, digitally-enabled physical, and new social graphs enabled by POAPs).

Data Insights

Below are the key insights primarily based on 47 of the most traded Fashion NFT collections on the Ethereum blockchain since 01.01.2022. All of the data was collected by me, with the exception of the ”Web2 Fashion Brand Performance,” which used Noah Levine’s data as input.

Insight #1: Fashion NFT Volume Still Low – We’re Early

The total Fashion NFT volume in 2022 was ~ $1.2B. This is a mere 0.14% of the 0.88 trillion traditional fashion market and $179M less than the $1.42B volume of the Bored Ape Yacht Collection in 2022. Volume-wise, Fashion NFTs have a long way to go to reach mainstream adoption in the NFT space. This also indicates how early we are in the cycle for Fashion NFTs. After all, the NFT Fashion scene is still largely less than one year old (with some exceptions).

Insight #2: Fashion NFT Volume Correlates With the General NFT Market

Fashion NFT volume visualized against, Bored Ape Yacht Club volume (i.e., one of the leading NFT collections and a macro indicator).

Insight #3: Secondary Volume Trumps Primary Volume

Insight #4: Secondary Markets Are More Important Revenue Generators Than Mint Revenues

The secondary royalties exceed the primary volume. If you remove the RTFKT collections case, the royalties drop to ~$27M, and primary sales drop to ~$31M.

Insight #5: RTFKT (Nike) Is the Main Driver of Fashion NFT Volume

The concentration of the market structure indicates that we’re still early in the Fashion NFT space. If we include all of the RTFKT (Nike) collections, they roughly account for 72.5% of the 2022 Fashion NFT volume. Its PFP (picture for proof, aka profile picture) component, Clone X, accounts for almost 50%.

Insight #6: PFPs Are Still the Clearest NFT Product-Market Fit

PFP volume makes up 68% of the total Fashion NFT volume, which indicates how strong the PFP-Web3 market fit is even in the context of Fashion NFTs.

Profile pictures in and of themselves could be considered a fashion statement; wardrobe changes (e.g., 10KTF x Gucci and Azuki) highlight this. These wardrobe changes have yet to attract large interest among the Web3 community but could do so with newer entrants to the space.

Insight #7: Phygitals Are Still a Small Percentage of the Total Fashion NFT Volume

Total Volume in 2022: ~$15M

The “phygital” (or digitally linked physicals) market is also dominated by RTFKT. It has a ~76% share of the market but also the most phygital collections so far (7). In fact, their Clone X SZN 1 made up 40% of all phygital secondary sales.

There is usually a claim window after which the NFTs become essentially worthless. Hence the sporadic volume graphs.

Top 5: Projects

RTFKT Clone X Forging SZN 1 (40%)
RTFKT x RIMOWA (20%)
RTFKT Nike AR Hoodie Pre-Forged (11.4%)
Azuki Twin Tigers (7.36%)
Cult & Rain Genesis Collection (6.7%)

Insight #8: RTFKT Dominates the Royalty Category

RTFKT leads the royalty category as well. While dominant, it’s not as dominant in this category at 69.5% of the market.

Insight #9: Ethereum Fashion NFTs Lead the Market (By a Lot)

Insight #10: Nike Leads Value to Holders, Lacoste Attracts Most First-Time Minters

Insight #11: Solana and Flow Have the Largest Fashion NFT Collections After Ethereum

Developments in Web3 Fashion Tech in 2022

While Fashion NFT volumes have decreased from the beginning of the year due in part to global macro conditions, this hasn’t stopped innovation in the space. Some of these innovations include:

NFC/NFT Linked Physical Merchandise

The three main competitors in the space are:

IYK. A “pull-technology” NFC chip ensures the chip always travels with the physical object. The holder of the physical can always pull the NFT into their wallet by scanning the NFC tag. The NFT cannot be traded on its own. Used by 9dcc, BanklessDAO, PCC.
KONG HaLo. Unlike regular NFC chips, these can sign transactions on the Ethereum network. Used by projects like Azuki, Metafactory, and Rags.
RTFKT WM Chip. NFC chip connects to your Web3 wallet. Links specified NFT to physical. In 2023, holders will be able to unlink NFT from the physical item.

Physical Item Vaulting Enables Digital/Physical Connection

The infrastructure that enables the StockX model of Web3.

Secure Verification of Assets

Tokenproof allows verification of NFT ownership without carrying around your Web3 wallet. This solves some of the major security concerns related to Web3 wallets.

Generative Fashion Creates New Production Models

Read about it here.

NFT Tools Make Web3 Project Management Easier

Trends to Look Out For in 2023

Wear-to-Earn (W2E)

For many, wear-to-earn (W2E) is the ultimate use case for fashion NFTs. While it has been discussed for a while, implementations of W2E specifically haven’t yet taken off in a major way.

Solana’s STEPN app was a glimpse into the possibilities of the wear-to-earn model, with ~95,000 cumulative users. While STEPN technically used a move-to-earn (M2E) mechanism instead of a wear-to-earn one, the app uses virtual shoes as the interface for earning. This is also the mechanism RTFKT is set to introduce via its Cryptokicks IRL shoes.

Passive Income From NFTs May Become a Reality

Protocols like reNFT (rental) and NFTfi (lending) are looking to create financial structures and liquidity around NFTs. These unlock the latent value within NFTs and create a new utility layer for NFTs.

Newfound ETH Sustainability

One of the Cinderella stories of 2022 was Polygon’s partnership arc. It partnered with some of the most notable Web2 companies like Nike, Disney, and Starbucks. Polygon essentially offered two benefits over ETH, sustainability and cheaper transactions. Now that the Ethereum blockchain has cut its energy use by 99%, it will be interesting to see whether brands will continue to partner with L2s in similar numbers as in 2022.

Emphasis on Co-Creation as New Web3 Fashion Platforms Are Born

LUKSO blockchain’s long road to mainnet will soon be achieved, introducing new concepts such as Universal Profiles that make smart contract metadata more dynamic.

The recently launched RSTLSS project enables users to create composable wearables for Web3 gaming, social, and IRL. Integrations include ReadyPlayerMe, Mona VR Chat, Somnium Space, Spatial, Instagram, and Snapchat.

ReadyPlayerMe continues its partnership and has made it easy for users to build composable avatars in minutes. Integrations include RTFKT, Spatial, Somnium Space, and Mona. I posted about this on Twitter in 2021

AR/VR and AI Will Redefine the Fashion Stack

As I wrote in my piece on generative fashion, digital in-game skins have made us realize that fashion is shifting increasingly toward visual aesthetics and communication value. Instead of physical craftsmanship, AR/VR craftsmanship will create the haute couture of the digital realm. This is also where AI has the most potential to impact. From creating assets directly via scripts to text-to-3D capabilities, AI will democratize the digital asset creation process.

Summary

Fashion NFT volumes are still minimal compared to traditional fashion volumes. This indicates how early we still are.
RTFKT (Nike) is still clearly leading the Fashion NFT market in part due to a first-mover advantage.
New technologies (e.g., W2E, M2E, composability, financialization, AR) will not only expand NFT capabilities but also introduce new possibilities to fashion.

Author Bio

I focus on the cross-section of NFTs, crypto, and fashion:

Naked Collector has been the top source of Web3 Fashion research/data since 2021.
5+ years of experience in crypto markets.
Part of 100+ NFT communities.
Followed by some of the key trendsetters in the Web3 Fashion/Digital Fashion space.

P.S. If you are a Web2 company looking to get into Web3 or a Web3 project, I'd love to work with you! Just shoot me a DM.

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This article was originally published on Substack.