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For fashion, one of the most enticing prospects for NFTs is how they could help brands earn royalties – forever – on secondary sales of physical goods. Although the mechanisms for doing so are not yet settled, brands could ideally encode NFTs tied to physical products with smart contracts triggered by certain conditions and benefit each time an item is sold, not just when the item is sold. initial sale. But technical loopholes used to circumvent loyalties and capricious markets leave brands and creators without the means to enforce the rules.
“One of the big tenets of Web3 is that these royalties are the idea that it’s a creator-driven economy, it wouldn’t necessarily be controlled by a big centralized organization…Except it doesn’t doesn’t really play out,” BoF technology correspondent Marc Bain said.
- Marketplaces react to the controversy over the application of royalties. Opensea, one of the largest Web3 marketplaces, wants to attract creators, so it has an incentive to honor creator royalties. New marketplaces looking only for sales are willing to lower fees for buyers.
- This has led to an existential crisis for the NFT community, showing that creators are not entirely in charge in a space that has been touted as having enormous potential to empower them.
- Marketplaces and infrastructures for fashion brands that would like to obtain royalties for secondary sales do not currently exist. It also remains to be seen how brands would adapt such a system.
- A number of start-ups, including EON and Aurora Blockchain Consortium, are working to tie digital identities to physical assets, but it’s complicated.