It is one of the tech buzzwords that has been floating around for a while: blockchain. Still, it seems no one really knows what it is all about and how blockchain technology can be used in fashion. We wanted to find out and talked to Marjorie Hernandez de Vogelsteller. She is the co-founder and CEO of Berlin-based fashion platform Lukso. Together with her four business partners she is developing a blockchain-based ecosystem to create a global standard for the fashion and luxury goods industry offering a common data structure, without a centralized authority, representing a network that is run by its participants. One major aspect is the development of a standard for product verification and legitimacy in the virtual world.
In very simple words: what actually is the “blockchain”?
A blockchain is primarily a network of computers that store data. Unlike a conventional database, a blockchain is decentralized and distributed: It does not live on a local server or a cloud but every network participant has a complete copy of all the transactions stored on the blockchain. The transactions or data get stored in linearly connected blocks and are secured by cryptography.
And what is the purpose of it?
The blockchain technology creates an unbelievable variety of purposes and use cases and every day all over the world blockchain pioneers find new ways how blockchain-based technology can enrich our society and become a catalyst for change. The core functionality, which makes blockchain technology so unique and fascinating, is its ability to verify processes in a way that is completely unfalsifiable, fast and reliable. To give an example: Let’s imagine a consumer purchases an exclusive, very limited and expensive sneaker on a resale platform as Grailed or StockX. Today, he simply needs to trust the retailer, that the product is legit and authentic. There is no way to definitively verify the origin of the product. So there is certain risk for the consumer to end up with a fake product. Now imagine the sneaker had been provided with an immutable digital identity, for example by ways of an RFID chip, and this identity had been added to a blockchain, with all information around the sneaker: the factory it was produced at, the date it was shipped, the original retailer where the reseller has bought it, etc. Thanks to the nature of blockchain, its decentralization, its transparency and the cryptography, now the consumer is able to verify the authenticity of the sneaker without any doubt and digitally own it. Everywhere where two or more parties interact, and trust between the parties is needed to guarantee a successful transaction, the purpose and the advantages of blockchain technology become obvious.
How can you use the blockchain in the fashion industry and in fashion retail?
There are numerous use cases for blockchain technology in the fashion industry, and as we are speaking new use cases are getting discovered. Even though for most of them, implementation is still in progress, it’s just a matter of time, that these use cases will come to life and become something we use naturally on a daily basis. Here is a short overview of some of the use cases that the Lukso blockchain is meant for:
By means of digital twins all fashion or lifestyle items can be made uniquely identifiable through sewn-in chips, assignable through smart contracts, and digitally visible through user interfaces. These digital twins create unprecedented representation that instantly allows the brands and owners of a product to uncover its unique history and to curate its further story. Each product can now speak to its owner directly and with more depth than brands can achieve when they address their customers on social media. Knowing about the narrative around a product can increase its value on all fronts.
The assignment and traceability of digital ownership makes large-scale sharing economies for luxury goods possible on the Lukso platform. Post-ownership models in the fashion and design industry can now give temporary access to exclusive, collectible, and custom-fit items. Users can rent their desired objects for specific occasions both from private owners and from professional agencies.
3. Digital Collectibles
By representing purely digital fashion items on the Lukso blockchain, we create digital collectibles that can be worn using AR camera mapping and virtual spaces. These virtual items introduce an entirely new form of digital collectibles. Pure digital fashion items, are own-able, transferable and trade-able. Due to their proof-able ownership and scarcity, they become valuable collectibles.
4. Influencer Token System
Lukso’s platform provides economic models that build efficient bridges between brands, agencies, marketers and influencers. Brands can aggregate the marketing power of micro- and celebrity influencers through rule-based systems that incentivize and reward the spreading of specific contents across networks. Overall, this approach reduces handling costs, offers transparent KPI measurements, and advances omnichannel brand building.
5. Decentralized Markets
Peer-to-peer markets enable the owners of fashion products to transact directly with each other. Without a centralized platform, users can sell, exchange or lease their items to other participants. In this process, the Lukso blockchain makes it possible for all parties to trust each other: users can prove that they are the rightful owners of a product through their digital ownership, while programmable smart contracts makes sure that the conditions for the transactions are executed in the way that was agreed upon. Through the clear identification and authentication of items, Lukso creates secondary fashion economies that provide safe access to unique and rare pieces.
How does it work in detail: do users need an app?
A mobile app would be one of the convenient interfaces to interact with blockchain-based software, but you can also use desktop applications or Internet browsers.
How do users register?
At first, registering on a blockchain-based application is easier than registering on today's apps; all one needs is to generate a so-called private key with whom transactions can be signed. Naturally people need coins to interact with a blockchain, but many new apps will pay the transaction fees for users directly and hide this way the complexity of getting such. The interesting part is how those created blockchain profiles exist beyond applications, as they are sitting on the blockchain itself and not on a particular app server. Once a user created a profile he is able to receive and send, or trade items and tokens, such as physical or virtual items, brand tokens or any kind of personal tokens. They can also simply create their own for themselves or for their community or projects.
How do they get in touch with the other parties?
On the surface of the application, getting in touch with other parties wouldn’t feel any different than connecting with somebody via Facebook or Instagram. The magic happens below the surface, where users are able to transact and interact on an economic level without any intermediaries.
Why do they need tokens?
Some tokens or coins are the fuel that a blockchain requires to work. It’s based on concepts that incentivize certain actors, sometimes referred to as “miners“ or “validators,” to contribute to the blockchain’s security. On the other side of the equation, users who want to use the computing power of a blockchain, meaning they want to do any form of transaction or interaction with programs installed on a blockchain, need to compensate the miners or validators with a certain amount of coins as fees. Going back to the example with the limited sneaker: If I want to use a blockchain to verify that the sneaker I am about to buy is legitimate, I use the blockchain’s computing power and therefore I need to compensate the miners, or validators who secure and decentralize this blockchain with a certain amount of coins, which is whatever the currency this very blockchain demands is, whether it’s Bitcoin, Ether or LYX on the Lukso blockchain.
So what is now the concept behind Lukso?
Lukso’s network supports the fashion community in driving innovation around the production and ownership of their products. Using the design benefits of blockchain technology, it kick-starts a dynamic, secure, and sustainable platform–for realizing today’s ideas and for spurring those yet to come. On top of the Lukso blockchain anybody can build and run interoperable applications. Its design principles allow for trustless and transparent transactions, which can drive new models of cooperation, coordination and collaboration among fashion and lifestyle stakeholders.
The Lukso blockchain is an open public network based on the Ethereum Virtual Machine (EVM) and can make full use of the first and most advanced smart contracting technology in the blockchain space.
Another term floating around is “digital twins.” What is that all about?
A “Digital Twin“ is a digital representation of a physical product. The digital twin is linked to its physical brother, through a chip or other means and opens up for a multitude of new possibilities. Imagine you purchase a wonderful new Chanel dress–and together with it Chanel provides you with a digital version of the dress as well as some tokens, which you store in your digital wardrobe. Now you are free to use the digital twin in the virtual world: Your digital avatar can wear it while you are attending a concert via VR technology, you can create an Instagram post with a photo of yourself wearing your virtual dress–with that you never actually need a physical version of the dress. This way you can enhance your digital self without producing more unworn clothes and items that catch dust in your wardrobe. This may sound a bit like science fiction to some but lifestyle products will soon evolve to live in the phygital world–the edge of the physical and the digital. We see companies like The Fabricant or Carlings, which already have launched digital fashion collections and this is only the beginning.
What can be the risks of blockchains?
The immediate risk that comes to my mind is the one to not take this technology seriously and not make sure to get your business up to speed, because blockchain will have an immense impact, not only on the fashion industry but to a lot of sectors, probably to society as a whole. That aside, obviously every technology especially one with such a transformative power as blockchain technology has the risk of being young and some pitfalls need to be discovered and improved as we start to develop interfaces for it. Yet this core technology is running since more than 10 years and has create a multibillion dollar economy, which is just the beginning of the Internet of value. Think of the Internet, a technological development that has fundamentally changed the way we work, interact and consume and to which the blockchain technology often gets compared. We are convinced that as long as society makes sure to engage with this technology with open but aware eyes and regulators embrace it as we integrate it in our day-to-day activities the benefits of blockchain technology are far higher than the risks.
After all, do you understand why some people have still concerns towards digitization, AI, blockchain etc. and how would you convince them to open up to these technologies?
Everybody can understand that certain changes or developments can be frightening for people at first. When cars got invented in the 19th century people said that you die if you ride in a car because the human body is not made to survive a speed of 35 miles an hour. I guess that every major technological or societal development was perceived with a certain distrust by part of the people. And that is natural, because change can be frightening. But we have learned that once the ghost is out of the bottle, you cannot put it back. It’s the nature of innovation to make its way and disrupt what was before. Think of the impact that e-commerce had on the retail business, especially in the textile industry. I would say that it is always better to embrace change, rather than fighting it. See if there is a way to learn to love it, to find out how it can help you and your business and what new chances await you.