KYW DEEP DIVE — The Non-Fungible Newsletter

It's NFT time, baby.

GOOD MORNING, FAMILY. Happy Monday! I am back. I missed you. I also have a deep dive ready to go for you. NFT’s, baby. Let’s get it.

You know what time it is.

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The Wild Wild West of the internet

It’s no secret that the sneaker game is broken right now. Buying hyped pairs is as hard as ever. Consumers like us are clearly frustrated. Nike — the industry leader — even acknowledges this.

That frustration leads to change. It leads the consumer down different paths with different obsessions — some related, some not.

• Some people find ways to game the system. This is how the bot thing got started. And it’s been going strong for years now with no end in sight.

• Others? They just simply find alternatives. Other things to do. Other ways to occupy their time.

NFT’s might just be that next alternative for the sneakerhead — at least for the ones of a certain generation.

For those of us out of the loop, NFT’s, or “non-fungible tokens,” are pieces of digital media that are essentially collector’s items. They can be art, media, videos, memes, tweets, literally whatever. If it’s on the internet, it can become an NFT.

These pieces of media are stored on a blockchain and turned into individual assets unique to the person who actually owns whatever the…thing is. That ownership can be transferred, but no one else will have the same unique asset as the owner — even if it looks the same.

It’s a fascinating concept. And it’s one that has been talked about on the internet and covered at a fever-pitch over the last few months. The most popular example, to this point, might be NBA Topshot.

• I wrote about it a bit here. This is a blockchain-based digital platform where videos have been minted into virtual trading cards.

• There’s a whole community of people who are buying, trading and selling these things and there have already been hundreds of millions of dollars transferred over the platform.

That’s not the only place these things exist. Cryptokitties, Cryptopunk, OpenSea, Valuables, Top Shot and more are all revolutionizing this space.

By now, you’ve read a bunch on them. You’ve seen all of the pieces about how they’re either the next big mover and how you should totally get in on it or how they’re just a scam.

I’m not really here to convince you of either today. Yeah, there’s lots of money in this right now. But the possibilities of what NFTs might change are just as fascinating.

And that’s what we’re here to talk about today. How NFT’s might change the sneaker world, why brands might jump in and, really, whether that’s something the powers that be are even ready for.

Let’s dive in.

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Let’s talk about changes

(Photo by Marcos Rivas on Unsplash)

It’s totally fair to ask how something as simple a digital token might shift the way a whole industry operates — especially one growing as quickly as the sneaker industry.

So I did. I talked to Joe Conyers, the executive vice president and global head of NFT for Crypto.com. This is our conversation.

This conversation has been lightly edited for brevity

Sykes: Thanks for taking the time, Joe. I wanted to chat with you about the way I sort of see things going with NFT’s and sneakers. I have some…thoughts. If they make sense, fine. But if they don’t you can tell me I’m stupid. 

Conyers: Hey, when you’re trying to predict the future, if you’re not being stupid you’re probably not being bold enough. 

Sykes: One of the reasons why I feel like this is such an opportunity for the sneaker industry today is because the experience is so warped. It’s not even about the sneaker anymore.

Conyers: It’s talking to your friends about what you buy. It’s having the conversation, did you buy that thing? Did you see this price? Do you see that so-and-so copped that thing? It’s community. 

Sykes: Exactly. So with these sneakers being so hard to buy, if I could buy them as an NFT and show them off digitally why wouldn’t I? I could easily see a crypto Off-White drop being as popular as the actual thing in some years.

Conyers: I can only imagine Nike and the big boys have already started the conversation. There are a bunch of platforms that are being made. These are the pipes for this whole world. There’s this platform called DigitalAx  — it’s the first dedicated digital-only fashion auction exchange platform and a digital fashion tool-kit. They’re going to plug you into the actual game engine.

Sykes: Word?

Conyers: So, like, imagine you buy a token from there. It’s transportable into your Fortnite, into your different games out there. I see the Off-White Virgil stuff and I see that as “I’m going to wear that on my Fortnite character.” And in some cases, if you can’t do that, kids won’t play the game. It’s fascinating.

Sykes: So you think the things that the average consumer chases after today will be virtual at some point in the future? 

Conyers: I’ve learned so much about how people are transacting — really, the young kids. And every indicator of the universe that every 12-year-old is in right now compared to what we think five years from now might look like when they’re 17, they’re not buying actual sneakers. They’re going to be buying stuff in their games

Sykes: Another big thing I think about with this stuff is authentication. I think NFT’s have a chance to strengthen that and eliminate counterfeiting.

Conyers: That’s something people have already been playing with the counterfeiting thing on the blockchain for years now. Maersk, the shipping container company, I know has containers registered on blockchain now so that they can prevent human trafficking and smuggling and arms dealing and what not. And, my understanding is that’s really helped them. That translates.

Sykes: That’s a huge way for companies to take advantage of this, but how else do they do it? Virtual pieces? Or virtual pieces or maybe there’s something I’m missing?

Conyers: I think yes, the answer is all of these things. All of this is going to happen. There’s also a world where you have virtual add-ons and customizations to the kicks. You’ve got the Apple glasses and you turn on your wallet and now you can see, like, angel wings or fire coming out of your shoes. You could accessorize, essentially, with a digital accessory.

Sykes: Explain that.

Conyers: What if, say, you throw on some Apple glasses or something and you have your wallet, and in it, you have accessories for your shoe. Say you have some angel wings or some flames for your kicks that you already have. That’s something I can definitely see happening.

Sykes: How ripe is the sneaker industry is for something like that? For these sort of changes? How soon could some of this happen?

Conyers: I think it’s a little early for them right now. You still can’t flex it on camera just yet. The infrastructure isn’t built up. And sure, someone can make a sneakerhead game. But, like, ultimately you have to have some sort of intrinsic utility to this stuff. You can always wear a shoe. Not that there’s always a market for this stuff, but there’s always something you can do with it. For sneaker collectors right now, there has to be some utility. So, it’s still a little early.

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Today, we’re featuring one of those rare kicks. We’ve got the Doernbecher 5 Retro on tap from April Holmes.

• This shoe pays homage to 12-year-old Isaac Arzate, who participated in Nike’s Doernbecher Freestyle program while recovering from open-heart surgery at OHSU Doernbecher Children’s Hospital in 2012.

• He tragically passed in April 2012, but his original sketches were included in the final design by his family.

This joint is super limited, but Another Lane has the plug. Go sign up to cop the Doernbecher 5 and much, much more from sellers who are of and for the culture.

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Virtual sneakers are already big business

I don’t know if virtual NFT sneakers will ever become a viable replacement option for actual sneakers. But one thing we already know is that they’re already lucrative.

That might be putting it lightly when looking at some of the figures being tossed around. Crypto creation brand RTFKT studios made millions off of a virtual sneaker collaboration

Just like a typical sneaker company, they partner with brands and creatives to create unique virtual shoes and sell them off at thousands of dollars a pop. It’s essentially an NFT collab. Perfect example — the studio made $3.1 million in a few minutes off of virtual sneaker art created by FEWOCiOUS, per Input Magazine.

Many of the brand’s NFTs are made in collaboration with digital artists and have sold for up to $10,000 a pop. In just seven minutes earlier this month, RTFKT Studios sold $3.1 million worth of sneaker NFTS.

They also dropped a collab with Atari to create a 1 of 1 virtual sneaker that sold for over $16,000. It looked wild as hell, too.

These are literally never going to be on anyone’s feet. They have no functional value outside of just owning it. But still, it’s worth thousands to someone. And that’s just wild.

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Of course, there are skeptics

And there’s good reason to be skeptical. Again, people are paying thousands of dollars for shoes they’ll never wear, videos they don’t own, art they can’t put on a wall.

It’s natural to wonder where the value comes from. And, in some cases, that’s still pretty unclear.

Let’s be real about it. You’ve got a bunch of super-rich celebs pumping cash into this stuff. Jack Dorsey, Elon Musk, the NBA. They’re invested. Because of that, the value explodes. And as that value explodes, more people get on board.

But there are a few problems that come with this.

• For example, with NBA Top Shot, it seems that most of the who are diving in are looking to resell. There are legitimate collectors who are shelling out thousands of dollars to cop this stuff, but once they move on to the next thing, what happens? That’s a question that needs to be answered.

• On top of that, there are also questions about whether the immutability of this is all real.

This applies to virtual sneakers, too. Again, there’s no actual functionality here. There’s no application. And until there is, there will always be skeptics.

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Ready or not, here they come

Regardless of that, this is going to be a thing for the sneaker industry one way or another. Big brands see all that money and they want a part of it. That’s how capitalism works.

The sneaker industry might not be quite ripe for NFT’s just yet, as Conyers said, but something is certainly coming. Nike is already on it.

Introducing Cryptokicks.

• Back in 2019, Nike filed a patent for “Cryptokicks” with the US Patent and Trademark Office.

• The application outlined a number of services that the term could apply to, per The Next Web.

That authentication piece is real. That’s something that, apparently, might come with this.

“When a consumer buys a genuine pair of shoes a digital representation of a show may be generated, linked with the consumer, and assigned a cryptographic token, where the digital shoe and cryptographic token collectively represent a ‘CryptoKick,'” the patent reads.

That isn’t all, though. The patent also included functions as hardware and software wallet for cryptocurrency, an online marketplace for footwear and clothing as well as downloadable computer software for managing crypto transactions using blockchain tech. This seems to be pretty wide-ranging.

We don’t know when this is coming and we don’t have the full details. But don’t expect it to take too long for this to become a reality.

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That’s a wrap, family! Thank you so much for reading! Appreciate your time today. Hope you all have a fantastic week.

I’ll chat with you on Wednesday.

Until then. Peace. Be safe, be kind, spread love. Signing off.

-Sykes 💯