A first decentralized brand for sneakers has seen the light of digital day on a platform created by a company called Madeium and run in part with tech from a company called Intertrust. Under the name Yxung, the brand runs on a peer-to-peer (P2P) model.
You might remember P2P as the model behind Napster, the music-sharing service that back in the late 1990s and early naughts put the fear of God into the music industry and elicited a number of lawsuits – from, among others, Metallica and Dr. Dre.
How does P2P work?
In short, users connect to a P2P hub – Napster or, in Yxung’s case, the Madeium platform – that contains an index of what all other users have to offer; files are then selected from the index and exchanged (given, bought, sold) through the P2P network.
Yxung is offering sneakers designed by a variety of Madeium members. The sneakers are 3D-printed on demand and have embedded NFC (near-field communication) chips, which can send and receive data by radio waves over a distance of about 4 cm. The chips identify and authenticate the sneakers. This serves the twin purpose of hindering counterfeiters and tracking secondary sales and royalties on behalf of the sneakers’ designers.
This is where Intertrust’s tech comes into play, establishing a secure link between the physical chips in the shoes, a blockchain ledger and the sneakers’ virtual existence in Madeium’s metaverse. According to the press release, designers can thereby “retain on-chain royalties in emerging fashion resale markets.”
Resale pitfalls
Authentication is the problem that resellers and resale platforms have been trying to solve for years. The auction site eBay, for instance, began issuing “Authenticity Guarantees” in 2020 for all sneakers on sale in the U.S. and priced at $100 or more.
StockX, which specializes in the resale of sneakers and apparel, has, over the years, established 14 authentication centers in various parts of the world and employs some 300 authenticators. The company says it examines about a million products per month and, since 2016, has stopped the resale of about $70 million in counterfeit sneakers.
The real-to-virtual link
As we reported at the time, however, the Detroit-based platform took things further last year, foreshadowing what Madeium has now done. It introduced what it calls Vault NFTs, connecting “coveted physical products” – such as in-demand sneakers – “with investable digital assets.”
Investors in sneakers could now purchase their assets indirectly, through the purchase of a linked NFT, and never take possession of the physical shoes, which StockX stores in a vault. Among the selling points are the elimination of shipping fees, the preservation of the asset under controlled conditions and ease of sale. Indeed multiple sales could occur without the sneakers’ ever leaving the vault. Each sale would burn the seller’s NFT and mint a new NFT for the buyer on an Ethereum blockchain.
This is, of course, similar to investment in an exchange-traded fund (ETF) for gold or uranium, where, again, the buyer never takes possession.
The Madeium contribution
Nike did not like StockX’s idea and filed suit, stating: “StockX has chosen to compete in the NFT market not by taking the time to develop its own intellectual property rights, but rather by blatantly freeriding, almost exclusively, on the back of Nike’s famous trademarks and associated goodwill.” StockX, it alleged, was leading customers to believe that its “investible digital assets” were “authorized by Nike when they are not.”
In other words, the sneaker brand’s trademarks were at issue – the creator’s share of the pie. Together with Intertrust, Madeium appears to have found a way to bring the designer into the resale market by inviting all parties to one platform and also hosting on said platform the entire commercial life of the created good, or at least the life of its securely linked virtual counterpart.
Madeium’s platform, however, is designed not for established brands but for independent designers. These designers pay into the system, like members of a cooperative.
Madeium provides the designers with a sort of content management system for both their intellectual property and their business but also hopes to meld the designers into a self-governing collective. To this end, the company has laid out a five-step plan.
First, it will grant Pro accounts to designers who have “proven they can take a concept all the way to the consumer with in-market success.” Second, it will incentivize the “community” of Pro accounts “through bounties, grants, rough consensus, and/or permissioned voting models.” Third, it will operate a “tokenomics,” with crypto tokens distributed to “those contributing system value.” Fourth, it will establish self-governance among designers. “Creatives,” it says, “have ideals that innately make them the best people to self-govern the Web3 space. By nature, creatives are guided by humanity, knowledge sharing, doing what’s right for your fellow creatives, and leveraging creative capital for the benefit of society.” Fifth, and finally, it will make the transition to decentralization and become the first community-run decentralized autonomous organization, or DAO, for design – with memberships, partnerships, tools and an NFT marketplace.
Intertrust, meanwhile, has, since its founding in 1990, been filing patents in the U.S. to secure data exchanges over distributed operating systems and open networks. In other words, it provides data security for the so-called internet of things (IoT), which Amazon defines as a “collective network of connected devices and the technology that facilitates communication between devices and the cloud, as well as between the devices themselves.” This is the world of “smart” devices – computers, phones, video cameras, refrigerators, patio lights, toothbrushes, and what have you – and their connections with the internet.
How big have sneakers become?
Cowen Equity Research has been calling sneakers an alternative asset class since 2019 and tracking the resale market’s growth.
By its estimate, the global resale or secondary market should be approaching $15 billion by about 2025 and double that by 2030.
There are differing estimates for the global primary market. Grand View Research pegs it at $78.59 billion for 2021, Market Reports World at $86.86 billion for 2022, and Statista at $86.58 billion for 2023. We can be generous and assume it’s near $90 billion at present.
