Explainer / Why Gucci and Rimowa are cashing in with NFTs – after the digital art boom, luxury brands are next to ride the crypto wave

Jul 26 , 2021

Digital art piece Creation of My Metaverse by Serwah Attafuah, created in 2021, was sold in a non-fungible token (NFT) auction by Sotheby’s for US$25,200. Photo: Sotheby’s via Reuters

Digital artist Beeple changed the game by selling an NFT artwork for US$69 million – then Sotheby’s accepted cryptocurrency for a 101-carat diamond at auction

Now you can buy US$12 virtual Gucci trainers while even Rimowa released an NFT artwork – how will the world be reshaped by non-fungible tokens next?

You’ve probably heard all about non-fungible tokens, or NFTs – and if you’re very clever, you might even understand what they are (more on that later). Most of the hype about these digital tokens so far has been related to art – in particular, the US$69 million fetched by a piece by American artist Beeple, which was paid for in ether and generated worldwide headlines.

An NFT of Everydays: The First 5,000 Days was sold at auction in March 2021. Bids started at US$100, but quickly skyrocketed into the millions, eventually reaching US$69 million and making the artist, Beeple, not only the creator of the most expensive NFT art ever, but the third most expensive of all living artists, behind only Jeff Koons and David Hockney. Photo: Beeple/Christie’s

Recently, music superstar Jay-Z filed a lawsuit against his business partner and co-founder of Roc-A-Fella Records, Damon Dash, who partnered with NFT platform SuperFarm to auction the rapper’s first album, “Reasonable Doubt”, as an NFT. The lawsuit alleges SuperFarm was selling “the rights to all future revenue generated by the album from Damon Dash to the auction winner”, although Dash only held a partial stake.

Ownership is the main thing. You are the owner of a scarce piece of digital value that represents ownership of your scarce piece of physical value

Pierre-Nicolas Hurstel, co-founder and CEO, Arianee

But what works for the world of art could also work in another elevated sphere of commerce: the luxury industry. In June, Sotheby’s announced that it will accept cryptocurrency for a 101.38-carat pear-shaped D colour flawless diamond, one of the largest stones shown at auction. The masterpiece is named The Key 10138. “We wanted to celebrate this enlightening virtue, while also alluding to the crucial function of digital keys in the world of NFTs and cryptocurrency,” explains Wenhao Yu, Sotheby’s deputy chairman of jewellery in Asia.

Sotheby’s auction of a diamond called Key 10138 – weighing 101.38 carats – saw the house accept payment in cryptocurrency. Photo: Sotheby’s.

Before we go any further, here’s the science: fungibility is the quality of being readily exchangeable for something identical; a non-fungible token is a piece of code signifying unique ownership of a digital asset, stored on a blockchain – the same technology that powers cryptocurrencies. The use of blockchain makes NFTs an absolute guarantee of exclusivity – and, clearly, luxury is a world where exclusivity of ownership is highly valued.

Pierre-Nicolas Hurstel, co-founder and CEO of Arianee, a consortium that creates so-called digital passports for luxury items, explains: “What blockchain brings to the table are the notions of digital scarcity, proof of ownership and decentralised ownership. What can be done with that? You quickly get to retail.

Stills from Gucci’s first NFT: a four-minute video clip that fetched US$25,000 in an auction by Christie’s. Photo: Gucci

“Ownership is the main thing. You are the owner of a scarce piece of digital value that represents ownership of your scarce piece of physical value.”

That means a range of potential uses: in addition to making both digital versions of existing products and new, digital-only products – where none of the limits of designing an item in the physical world apply – brands can also potentially use them to guarantee authenticity, or even to track sales to pay royalties. Items could be worn by any sort of digital avatar, for example in games or on social media.

A virtual version of a real item could also mean, for example, that sneakerheads can publish digital pictures of themselves wearing shoes without taking them out of the box.

A look from the Gucci Aria collection; its campaign video was auctioned as the brand’s first NFT. Photo: Gucci