When people today imagine the metaverse, most probably envision a fully immersive virtual reality universe like the one Steven Spielberg created for the movie “Ready Player One.”
But according to Megan Kaspar, managing director of Web 3 investment at incubation firm Magnetic, our future digital and physical realities will be far more integrated. Far removed from the pixelated platforms that are popular now and the cartoon PFPs that proliferate on Twitter, Kaspar believes the metaverse will be a blended, photorealistic experience in mixed reality that blurs the lines between human and computer.
Megan Kaspar is a speaker at Consensus 2022, CoinDesk's festival of the year June 9-12 in Austin, Texas. Learn more.
As a poster girl for the trend, Kaspar is a trailblazer with a habit of racking up world firsts. In October 2021 she was the first person to wear non-fungible token (NFT) fashion on live broadcast television, flaunting a series of digital costume changes throughout the interview, including gold earrings programmed to track her head movements so they mimic the swing of a real pair.
Then, in January 2022, she was featured on the front cover of Haute Living’s Miami issue wearing a digital outfit by the luxury designer Fendi, seamlessly superimposed onto her original photoset. On both occasions she was dressed by DressX, a digital fashion platform in which Kaspar invested, which uses 3D software to create and simulate virtual garments that look like real clothing.
In crypto since 2012, Kaspar was early to get into bitcoin as well as ether, SOL and MATIC. More recently, she became a founding member of the first-ever fashion-focused decentralized autonomous organization, Red DAO, which bought the most expensive fashion NFT to date – The Doge Crown by Dolce & Gabbana. Purchased for 423.5 wrapped ether (wETH, worth $1.27 million at the time) from NFT marketplace UNXD, the crown was part of the world’s first couture NFT drop by a luxury brand. Of the nine NFTs in the groundbreaking collection, Red DAO purchased three.
The Doge Crown was a Web 3 move made by a traditional fashion house, with the holder of the NFT entitled to both digital and physical versions of the crown as well as exclusive access to a range of real-world experiences. Kaspar reveals, however, that over 90% of the digital fashion acquired by Red DAO is from digital-native designers. This, she says, is where Red DAO’s mission and purpose truly thrives.
In this interview, I spoke to Kaspar about the current immaturity of wear-to-earn business models in digital fashion, how on-chain data capture will empower individuals to take control of their online identity (and why our digital selves may soon be more important to us than our physical selves) and how Web 3 is really just a bridge between Web 2’s centralization and the fully decentralized Web 4. She also makes a compelling case to explain how NFTs are helping – not hurting – the planet.
The cover shoot you did for Haute Living was the first time a human wore digital luxury fashion on a cover, right? How was that actually achieved?
Maye Musk was on the cover of Vogue Czechoslovakia in November of 2021, wearing a digital T-shirt that was printed with a galaxy image on it. But if you look at those photos, you can still tell that it's digital clothing.
The Haute Living issue came out just a couple of months later, and they did an exquisite job with those photos. I was excited to do that shoot and to be the first person to show the world what the capabilities and possibilities are with digital fashion.
When we took the photos, I wore some SKIMS pieces that were tightly fitted and solid-colored, and then shorts. It also had to be strapless because you can't really Photoshop those out and it can look fake. Then, you can superimpose anything. But for the poses that I sat in or stood in, the algorithms couldn't dress me. They had to be tailored perfectly.
On Red DAO’s Instagram, we took a photo from the Haute Living shoot and Tribute Brand created a special, huge red dress that was superimposed on me. It's amazing how you can get the colors, the dimensions and the shadows to look very real.
What are the use cases for digital fashion? What is the most challenging part of creating it?
We're limited today as to what we can do with digital fashion. There are really only three use cases.
One is digital tailoring on existing photos and videos, which would be great for e-commerce. Models can just take photos and have the clothes digitally imposed on them instead of shipping trunks of clothing all around the world for different shoots and then having a stylist manage the physical items. Influencers can do the same, and they can receive an NFT of the item. Then they can redeem it in the real world or do other things with it.
The second use case is augmented reality. We can use digital fashion and [augmented reality] today on existing platforms like Instagram, TikTok [and] Snapchat, as well as dedicated apps like DRESSX or ZERO10. For example, I have a pair of NFT virtual earrings that I'll wear during Zoom calls, and people won’t even realize they’re virtual.
The third use case is to dress your [profile picture]. And I think PFPs will morph into meta-human avatars. I don't think most people are going to want to identify themselves personally as a Bored Ape or World of Women cartoon. I think the majority of the population will want something that they can aspire to, that represents the human version of them but is better.
We see that a lot in Web 2 with Instagram and different social media platforms, how people represent themselves, how they're sharing content and how they're using those platforms. Web 3 is going to provide an upgraded version of digital identity. And then, proof of ownership comes along with that and many different ways to monetize.
Are there people working on solving the interoperability barrier for those digital items that you want to be able to wear all the time, but at the moment only work on specific platforms?
Interoperability has two buckets. First, you've got software interoperability. For example, if you were on Chrome, you’ll easily be able to use the Snap filter and wear the NFT augmented reality fashion, or perhaps there's an API that Zoom could plug into and that could easily be solved.
The other bucket of interoperability is the digital asset itself and the components of how a pixelated item looks in Decentraland, as opposed to something that was created in Unreal Engine that would appear more photorealistic.
This is something that projects like Glamhive and Meta Closet are looking to solve, where each item will have its own nested file. You have a pair of earrings, and those earrings may have many different files that can work across different platforms. Time will tell if the market will actually want that.
What is your take on skeuomorphism? Why do metaverse artists, designers and architects still create objects that resemble the physical world when they could create literally anything imaginable in digital spaces?
Some traditional designers creating in Web 3, like Rebecca Minkoff and Jonathan Simkhai, are skeuomorph, and I attribute this to relatability. The same reason not all of us will want to be represented by cartoon-like avatars for our digital identity, we want to look and wear fashion that is relatable to our physical human experience. RTFKT and D&G are examples of bridges between replicas of physical reality and fully fantastical fashion and apparel.
Some of the Collezione Genesi couture pieces by D&G are incredible photorealistic matches to their real-world counterparts, while others, like the impossible jackets, cannot exist in the physical. D&G also provides ready-wear digital fashion along with runway digital fashion people wouldn't wear day to day in physical reality.
Others are fantastical, meta-native brands, designers and architects like DRESSX, Replicant, The Fabricant, Xtended Identity, Tribute Brand, ZERO10, Cornerstone, Stefan Kartchev and Regina Turbina.
The NFTs in some of the collections you just mentioned are selling for millions of dollars. Some people think that’s crazy. Is it crazy?
In terms of value, people use certain expensive, luxury items as wealth or status signaling. But we're also seeing that in the digital world, right? If you have one of these special CryptoPunks or a Bored Ape that's worth millions, you're immediately validated. It's like digitally flexing for recognition.
The other day, I was talking about engagement rings, and how I really don't want one unless it's tied to an NFT. And then I started thinking about what a ring can signal depending on what community you're in, like, how it can signal a certain social status. And it hit me that that same thing is going to happen in digital.
Even so, it seems a lot of people don’t really "get" the concept of NFTs and the importance of digital ownership. Do you think digital fashion will still be popular without being blockchain-based?
When I have questions like these, I always look at China first, because they're always ahead of us. In China, there's an app called Little Red Book, or Red. That's their version of Instagram, where they're buying a lot of digital fashion and wearing it in augmented reality.
These items are actually NFTs, but they don’t call them NFTs, they call them digital assets due to regulatory concerns. They're on a centralized blockchain that, I believe, Alibaba and a few other corporations in China have created. And while these digital assets do not come with all the benefits of an open, permissionless blockchain, Little Red Book’s 300 million registered users don't seem to care. Ultimately, it comes down to what the consumers care about.
Will consumers care about digital fashion being an NFT? Will these items be NFTs? I hope they will. I want them to be, because that's how we can be in a fully decentralized, interoperable environment.
I believe that will come in Web 4, because Web 3 is actually going to be a bridge between Web 2’s centralization and Web 4’s full-on decentralization. I think we'll look back in history and see that Web 3 ended up being a distributed space. We're onboarding a lot of consumers to Web 3 right now, because fully decentralized environments are not easy to use and consumers like fast, cheap and easy.
What are some examples of business model innovation that NFTs can bring to the traditional fashion industry?
Web 2 only captures a tiny fraction of data from our daily lives. It is difficult to emphasize the incredible amount of data that will be created and captured through the use of Web 3 devices, such as near-eye wearables enabling augmented reality. With tracking and tracing on blockchains, digital fashion can also be geographically tagged. Brands could track when or how many times you wear an outfit. Your clothing can tell your life story through data collection.
Most importantly, regarding our personal data, our online identity in Web 2 was about capturing fragments of our lives, whereas Web 3 gives us the ability to have ownership and an online identity that can be greater than our physical identity.
Meanwhile, the unlimited environment can lead to brands and designers creating micro collections for scarcity. NFT fashion can be staked or rented out. Or “wear-to-earn” can also result in higher brand engagement, loyalty and retention. Future wear-to-earn models can even use components of move-to-earn and play-to-earn, and this can be a way of generating income in the future.
What are some examples of wear-to-earn projects?
There’s DAVA Project and 10KTF, although 10KTF wasn't specifically wear-to-earn, it was just dressing your PFP. But the business model, the roadmaps, are eventually to get to a wear-to-earn model. These are very nascent. We're not really seeing any companies adopting it or using it yet because I think that the NFT environment has to evolve before that happens. Similar to how [decentralized finance] had to evolve before play-to-earn, we'll see DeFi and NFTs evolve, and then wear-to-earn models.
You could maybe make the argument that Stepn and Space Runners are wear-to-earn, but it's mostly like move-to-earn or act-to-earn. Ultimately, these “to-earns” will come down to using some form of digital fashion or wearable. It may not be an avatar, but it'll most likely come down to accessories, fashion, clothing. And that's an incredible capability that gets unlocked.
What do you plan to do with the items in Red DAO’s collection? Have you tried renting or staking?
We haven't done any staking or renting of our items yet. There just aren’t any really sophisticated platforms for us to do that right now. But we’re looking at it. I think we will do those things in the future.
How does Red DAO function as a DAO?
You have to be invited to join Red DAO. New members are accepted through a voting process involving all the existing Red DAO members, of which we have over 50 including Marc Weinstein, 2PunksCapital and NFT collector G-money, as well as digital fashion designer Charli Cohen and influencers like Dani Loftus. That's what keeps the DAO private and safe. It's actually a Delaware LLC, so it's not a DAO in the sense that it's completely decentralized. It is decentralized in that we use blockchain for voting and decision-making, but that's the extent for now. The units that everyone gets are not tokens that are publicly traded. They're not on a [decentralized exchange] or a centralized exchange.
All the decision-making happens inside of a Discord channel that's gated. You can only enter with the wallet that you use to contribute to the DAO. Everyone evaluates things together in different channels and then it goes up for a vote through the DAO's blockchain platform. Voting on-chain is weighted, depending on the amount of ETH that member has contributed to the DAO.
Many people are concerned about the energy consumption of blockchain technologies and resulting climate concerns. Do you think this will stand in the way of mass adoption of metaverse wearables and other NFT-based digital clothing and accessories?
So many large corporations both in and outside of the fashion industry are using the argument that blockchain is this super-polluting energy-consumption mechanism, which is far from the truth.
If you look at the data on the amount of energy consumed by global bitcoin mining, it's 189 terawatt-hours as compared to 162,194 terawatt-hours of total global energy use, so that accounts for only 0.117% of all energy consumed annually. And over the last two years, bitcoin miners have become increasingly energy efficient through the use of sustainable sources like wind, solar, hydro, geothermal and nuclear. Bitcoin is powered by a 56% mix of sustainable energy, which is more than any other industry in the U.S.
Meanwhile, proof-of-stake and delegated proof-of-stake chains like Telos, Solana, Celo and, hopefully soon, Ethereum too will result in 99.95% less energy usage inside the Ethereum ecosystem. Plus, all of those blockchains are designed for rapid, high-volume transactional activity.
I see Web 3 offering an immense amount of energy efficiency across every major industry globally. Especially the fashion industry, which is one of the top polluting industries in the world, responsible for about 10% of annual global carbon emissions. That’s more than all international flights and maritime shipping combined.
The environment is assaulted every day by wasteful practices in manufacturing, transporting, distributing and disposing of unsold or unwanted clothing. About 40% of Western clothes go unworn, and 40% of what actually gets manufactured in a factory doesn't even go to market, it ends up getting incinerated.
Further, according to the United Nations Environment Program, to make one pair of jeans it takes almost 3,781 liters of water from the production of the initial product to the final product in the store. The emissions are almost 33.4 kilograms of carbon equivalent.
So the impact of the fashion industry moving to a digital-first model is very hard to overstate. Wearable NFTs, which are fashion dematerializing, will play a very large [environmental, social and corporate governance] role globally.
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