It’s a late one, but welcome back to another week of Token Tuesdays!
In the past few months, we’ve seen the emergence of tokenized clothing brands on Ethereum. These unique assets leverage bonding curves to provide dynamic pricing and a new mechanism for market price discovery.
The “hypebeast frenzy” going on in streetwear today is a perfect example of where tokenization would help optimize the existing market for all parties involved.
Shout out to Cooper for staying up until 4:30am grinding this one out while in Paris. It came out great so we hope you enjoy this dive into the democratization of fashion.
-Lucas and Cooper
When it comes to the tokenization of unique assets, web3 applications unlock innovative new ways to contribute and capitalize on the upside of scarce value.
In the traditional world, fashion is one industry in which verifiable scarcity has been taken to an extreme.
To provide a few concrete examples, check out this article on the nature of hypebeast resale markets. What unfolds is secondary markets for clothing like Yeezy’s which sell at upwards of 1000% more than their original sale value.
But what happens when the very people who contribute to these drops are able to share in their upside?
Earlier today, we saw the launch of two extremely interesting brand economies – both of which tie together aspects of tokenization, democratization and scarcity as a new parallel for value creation.
Inspired by streetwear, gaming, NFT art and crypto-economics, MetaFactory has developed a crowdfunding platform for the creation of limited run, custom goods with an initial focus on fashion and apparel.
Orchestrated by the creators of SAINTFAMEdao, Zora is a marketplace to buy, sell and trade limited-edition goods. All of these goods are launched as tokens allowing for dynamic pricing, fractional ownership and pre-production trading.
Introducing Zora: A marketplace to buy, sell and trade limited-edition goods.ZoraZora is a marketplace to buy, sell and trade limited-edition goods.ourzora.com
March 2nd 2020
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From the surface, both of these projects are conceptually similar. By adding a tokenized layer to physical goods leveraging a bonding curve, early adopters are able to benefit from the future demand of a limited-edition run.
In this week’s article, we’ll be diving into both of these projects, along with a historical timeline of this model that we’ve seen play out to date.
Incubated as an experiment by an Ethereum leading DEX – Uniswap – Unisocks was the first example of tokenized goods sold on a bonding curve.
There were 500 SOCKS tokens each representing a pair of Unisocks. The price of each pair was dynamic, meaning it changed based on supply and demand. SOCKS were redeemable for the physical good at any time, while the price would increase (or decrease) with every pair that was purchased (or sold).
At the time of writing, one pair of socks is trading for a whopping $86 with 215 SOCKS currently sitting in a liquidity pool. Here’s a look at how they were priced.
Building off of this, we’re now seeing the expansion of this idea with new mechanisms for enhanced value capture.
$FAME Genesis Shirt
This past December, an internet-owned fashion collective called Saint Fame launched their first limited edition good – FAME shirts.
To recap, the price for FAME gradually fluctuated – dropping from $250/token to roughly $80 following the release of the shirt design. Since then, the price of FAME has climbed to over $400, signaling that many of these items may take on a second life leading up to the point when they become production ready (or redeemable).
The interesting takeaway here is that despite the changes in the price of the shirt, the cumulative volume is definitely worth keeping in mind. With liquidity fees being passed through Uniswap, those willing to seed the pool with tokens stand to earn a passive return while holding their FAME tokens.
“Saint Fame has made ~$17,000 from dropping in this model, currently averaging a sale price of $233. This average is excellent considering that low starting price of $8.”
“Compare this to selling at a flat rate of $60, which is a common price of a screen-printed long sleeve shirt, where Saint Fame would make only $6,000. FAME has seen almost $35,000 in trading volume since launch, with a rich amount of speculative activity on the shirt, with many people buying fractions of a FAME.”
In summary, Saint Fame introduced a way for people to trade culture.
While FAME was the first Zora Drop, new products will also have their own token – like $XYZ representing a pair of sneakers.
Shortly after the launch of FAME, a project called MetaFactory was created to further expand on the ideas of democratized fashion.
In particular, what happens when you tinker with different forms of sale mechanisms – tying in elements of profit-sharing, interest and blind auctions to increase the game theory on a product like FAME?
In their announcement post, MetaFactory dives into their genesis item – a reversible bomber jacket – which grants tokenholders profit-sharing rights and cumulative interest using Charged Particles based on Chai – a wrapped version of Dai earning the Dai Savings Rate.
“All buyers will be rewarded with a proportional share of sales for their support. This value, determined by the product order number, will be directly infused into the buyer’s digital token and will automatically begin earning interest.”
What we begin to see is different strategies to influence FOMO among buyers – all of which ultimately drive value back to both those individual buyers and the creators themselves.
What’s the Difference?
Let’s face it – both MetaFactory and Zora Drops are creating markets for limited edition apparel using Ethereum.
While both projects are sure to add a tremendous amount of value (both monetary and social) to the ecosystem, many may be curious to hear what makes them different from one another.
Let’s take a look under the hood at some of the unique strategies which may prove to be worthy in the wild.
Movies like Ready Player One introduced the concept of virtual universes. Now imagine that within those worlds, you could be wearing virtual apparel.
With projects like Crypto Voxels, we’re seeing this happen today. In fact, the first inaugural meetup actually happened in Crypto Voxels, at the MetaFactory house – 16 Hook St.
The first bomber jacket will come with a digital equivilant which can be repped in the metaverse along with in the real world.
Drew Harding, co-founder of MetaFactory notes:
“Physical apparel is the anchor and likely to be the initial attraction for most, but I believe it will be the digital side and its future applications that will propel MetaFactory forward. We decided to combine these two trends and leverage them to cultivate culture and build community through the introduction of digi-physical apparel.”
SaintFame’s use of BOI tokens for the design of FAME was executed to perfection.
For those unaware, Matt Vernon has lead UX design for some of the most popular DeFi projects in the space (like Dharma) – earning him a reputation that gives FAME value in and of itself – regardless of the visual nature of the physical shirt itself.
With this, it’s clear that Vora Drops will be quite strategic with the designers (or brands) behind the next product(s) likely garnering significant hype from their respective communities.
Similarly, MetaFactory has also been fostering a strategic approach to designers, leveraging popular digital art creators like Twisted Vacancy, Van, Alotta Money and Skeenee for their next product launches.
Over time, it will be interesting to see which of the projects open the gates for more general participation, allowing lesser known creators to leverage these unique brand creation mechanisms.
If one thing is for certain, the interplay between a digital token and a physical item is tricky.
With FAME, we’ve seen first hand that the value of an item can shift drastically prior to it ever being created.
Both projects are likely to test different sale structures – such as blind auctions or appreciating price curves – which can be leveraged in different ways relative to the nature of any given product.
For those deeper down the rabbit hole, it’s interesting to note that both projects are structured as DAOs, meaning governance rests in the hands of its shareholders.
It’s likely that each community will focus on specific trends, schemes and perspectives that give each product a degree of notoriety.
Seeing as all of these decisions will be influenced by the different members, it’s very likely that the type of products released by each of the two projects will be distinguishably different.
Similarly, the infrastructure used to govern these DAOs will also differ.
Over time, these initiatives will provide tremendous value in better understanding how to best coordinate scare value creation using web3 solutions.
Perhaps the most interesting aspect of this trend is the inevitable competition to establish market dominance.
Just as we’ve seen a suite of smart contracting protocols come to the table, the gradual democratization of fashion is an initiative which will spawn brands (and products) unlike anything we’ve seen to date.
Jacob Horne, one of the founders of Saint Fame, notes:
“We have pioneered a new model for the creation and ownership of culture. Culture itself can now be created and owned natively on the internet: using tokens and DAOs at its core. Imagine if a subreddit had money it could control, that’s the kind of world we are just entering into. It’s a fundamentally new paradigm for organizing ourselves as humans.”
For those in the know, redeeming some of these first items is sure to bring a degree of clout to the largest blockchain conferences in the world.
Over the next few months, we’ll be keeping a close eye on the democratization of fashion.
If you or your business are interested in getting in touch with either of these projects or in leveraging any of these ideas, give us a shout!
Until then, we’ll see you next Tuesday!