(Image courtesy of Texintel)
Guest Article Written By Dani Loftus of This Outfit Does Not Exist
2023 was the year digital fashion went out of style.
As Packy Mcormick so perfectly put it, in regards to his own Not Boring newsletter, “I thought that the momentum would continue forever as long as I kept working really hard. That’s not how momentum works, though, and it felt like my momentum hit a wall in 2023.”
To echo Packy’s sentiment, no matter how hard each player in our ecosystem worked, the past 12 months have seen the “hype” around Web3 fashion wane. After a series of shocks beginning in 2022, crypto prices plummeted from an all-time Bitcoin high of $68,789 in November 2021 to less than $20,000 in June 2022. And, with the lifting of COVID-19 restrictions, the world rushed to touch grass, leading to a sharp decline in “metaverse” adoption with time spent online falling to pre-pandemic levels.
Observing this falter in digital fashion, many of the CEOs who touted Web3 as the poster child of luxury innovation have retreated sheepishly—removing all mentions of “metaverse” from their roadmaps and frantically completing whichever qualifications allow them to sub-out the “Web3” in their bios, all while writing off the money spent on NFTs as tax losses.
For those of us committed to digital fashion, this shift has been at best disheartening and at worst detrimental. Companies that raised millions stumbled with sales, founders with revenue struggled to raise, and momentum slowed from a server crashing tsunami to a single tear trickling down an avatar's cheek to the sound of virtual violins.
So What Went Wrong?
Over the final months of 2023, I asked myself how this all happened. How did we move from a group of innovators building fashion’s future to a collective creating products for a consumer base of one?
My Answer: Naïveté.
Let me explain…When I started This Outfit Does Not Exist in December 2020, friends, family, and (most) strangers on the internet did not know what digital fashion was. Nor did they wish to. In their versions of reality, digital clothes were superfluous. In fact, looking at digital fashion pre-2021, the only people who cared were:
- The futurists—those who made a living thinking in possibilities: innovation teams (e.g. me), science fiction writers (e.g. Neal Stephenson), journalists (e.g. Maghan McDowell), and a few investors (e.g. Andy Weissman).
- The idealists—those working in the fashion industry who were privy to its unfair practices sought out a more democratic, sustainable, and creative future, e.g. the teams behind The Fabricant, DressX, and RSTLSS.
- The first consumers—those who were already using digital fashion in the form of “skins” to develop online identities, e.g. those 235 million monthly players of Fortnite and 300 million monthly players of Roblox.
If you didn’t fall into one of these categories, or have a close affinity to one of these groups—parents of Roblox obsessed pre-teens, this one’s for you!—digital fashion was not just far-fetched, it was incomprehensible.
Flash Forward 12 Months
By December 2021, those friends, family, and of course strangers on the internet, who’d initially shunned digital clothes, were all certified metaverse experts, preaching the values and virtues of a digital world as fervently as many of the initial believers. And, to digital fashion’s detriment, the majority of true evangelists lapped it up.
Reckoning With Our “Early Adopters”
Early adopters are defined by economist E.M Rogers as “those individuals that use new products before the majority of people.” Thought to make up 13.5% of the population, they are risk-takers and trendsetters who have a strong influence on the success or failure of a new product. 2021 saw what seemed like “early adopters” enter the digital asset market. 84 million digital wallets were recorded in 2022, an increase of 74% since 2019.
To the small group of innovators—defined by Rogers as the 2.5% of people “open to risks and the first to try new ideas”—who truly believed in a digital future, this was just what we’d dreamed of (albeit much more quickly than expected). Due to the strength of our conviction in this digital world, it’s only natural that those who were “early” into digital culture swiftly fell into the trap of confirmation bias.
First coined by English psychologist Peter Wason, confirmation bias is “the tendency of people to favor information that confirms or strengthens their beliefs or values.” Where digital innovators should have looked at this crowd of early adopters with skepticism, interrogating their reasons for entering the market, we viewed them through rose-tinted digital spectacles, welcoming them in with open arms and lovingly assuming their beliefs aligned with our own.
How Wrong We Were…
If 2021–2022 were the years of the rose-tinted (digital) specs, 2023 was the year they got ripped off, scarring slightly in the process. Looking at the sharp decline in market sentiment, the harsh reality is that very few of the people who entered the first cycle of the Web3 fashion market were actually early adopters…
Instead of being driven by needs—a need to create, consume, build a better industry, or self-express in the digital world—those who hopped on the digital asset bandwagon between 2021 and 2023 were likely motivated by one of two things:
- Financializaton—to the wider world, NFTs began when formerly unknown artist Beeple sold his work Everydays: the First 5000 Days as an NFT at Christie’s for $69.3 million.
By 2022, everyone was trying to get (or grift) a piece. January of 2022 saw a daily average of 87,000 NFTs sold per day with a daily sales value of $191 million on the Ethereum blockchain.
For many, in those rose-tinted years, all that was needed to go “to the moon” (make money) was to “ape into” (chuck cash at) a project early (before the price declined) and then ride the wave until it dumped (lost all value).
If this wasn’t enough, many projects worked actively to further financial incentives via airdrop culture (giving ‘free money’ to early users) and tools for yield farming (where an investor lent crypto assets to earn a return) which ran rife.
In essence, whether as a “collector,” “virtual world explorer” or “user” of any given “product,” any way in which you interacted with digital assets between 2021 and 2023 had the potential to be financially lucrative. And, as we’ve seen over and over in the history of markets, money talks. - FOMO—fear of missing out was equally as crucial to the rise of the digital asset space, manifesting itself in both a financial and a cultural context.
From a cash-first standpoint, getting in early to a project equated to the highest returns. The 10,000 digital art pieces from the Bored Ape Yacht club were originally sold for 0.08ETH (less than $200 at the time) rising to a 145 ETH floor at their peak in May 2022 (whereby the least valuable of the 10,000 was worth ~$290,000).
Similarly with culture, following a press push, ludicrous celebrity endorsements (Lindsay Lohan auctioning a canine NFT and Snoop Dogg performing as his PFP) followed wild acquisitions (Jay-Z buying a CryptoPunk and Justin Bieber a Bored Ape) and meant that understanding digital assets became essential “cultural capital.”
With online searches for the term “metaverse” increasing 7,200% in 2021 alone, the everyman was faced with a need to plug in. Put simply, if you couldn’t discuss an NFT at dinner you couldn’t sit at the table.
Look Hard at the Motivations of These “Early Adopters” and It’s Clear Why We Crashed
The growing group of digital asset “trendsetters” with a “risk appetite” and “strong influence on the success or failure of our product” were actually a group who, while prophesying around a Web3 world:
- Fundamentally misunderstood NFTs—at its core, an NFT is simply a technology that allows you to own a digital good just as you would a physical one. But, as anyone who's been to a flea market could tell you, just because something can be owned, does not mean that it's valuable.
Hence why the digital asset market of 2021–2022 was a bubble characterized by valueless artworks, and poor UX consumer products selling for thousands, if not millions, of dollars. And, yes that’s also why those decrepit Goblins you bought on OpenSea for $5K are now worth less than $500. - Were not actually “here for the culture”—in the early days of crypto, everyone talked about the values of culture and community, chanting “WAGMI” and “GMing” on Twitter to such an extent that there’s even a dictionary of terms. Yet, in reality, this “community” and “culture” were simply synonyms for cash.
As novelist Thomas Wolfe puts it “culture is the arts elevated to a set of beliefs.” If you look at the majority of art produced in the 2021–2022 under titles like “Wyn Lambo” and “Crypto DickButts” it’s evident that the beliefs which trickled down during the crypto boom weren’t all that tasteful…
Similarly, the common lexicon revolved around “pumping your bags” (making your project more famous so the price increased), “shilling work” (aggressively selling) and of course “aping in” (buying a project you have little to no conviction in, in the hope you’ll get cash).
With community support in the form of gargantuan Discord servers, tribal behaviors like “Punk follow Punk” (where if you owned the same project you followed each other on Twitter) and even “cultural moments” like “Suits On For Christie’s” (when a cohort of Bored Apes donned virtual suits when the project was auctioned) seemed like connected collective experiences. But in reality, for most, they were little more than a collectively coordinated pushes for financial gain. - Did not care how our toilet worked—2021 and 2022 saw the fetishization of complex mechanics. Be it airdrops, tokenomics, or the value attributed to the complexity of code in generative art, people placed value on projects that were hard to execute and to understand.
While the surge of interest in conferences, hackathons, and XL explanatory Twitter threads was initially taken as a sign of interest in building, the reality is that FOMO and financialization were again the mass motivators.
In August 2021, a project called LOOT set a standard for technical knowledge as alpha (the way to make early money) with a technically trickly free claim. Starting as a set of 8,000 digital assets which were free for anyone with the tech-chops to claim them, in less than four weeks a single LOOT piecewas selling for between $60,000 and $954,000.
As put so perfectly by Keith Grossman in his piece Nobody Cares How Their Toilet Works “simplicity and value exchange is what is required for mass adoption of these Web3 technologies,” yet the last cycle was characterized by projects rolling out features to show that they could, with little consideration for whether they should. The fact this seemed to attract a mass consumer base, should have given rise to questioning. Why would a population with an ever-decreasing attention span, who send back a Latte if it’s not aesthetic, spend days learning how to “mint from contract”?
FOMO & finance of course.
Thus, looking out at our landscape at the end of 2023 and seeing ghost town Discords, user-less tech stacks, and floor-less projects, it’s clear that digital assets’ early adopters DID NOT have wants and needs aligned with our own, particularly when it came to digital fashion.
What we thought could be our early majority, was in fact a group feigning interest in our field because they’d seen a splashy headline in their favorite newspaper and their 14-year-old cousin had made $50K flipping Cryptoadz.
The Year Ahead
Driven by this false start, sparked by financialization and FOMO, digital fashion as a “trend” could be said to be over. We’ve already cycled through our “Introduction” (2020), “Rise” (2021), “Peak” (2022), and now “Decline” (2023), which implies “Obsolescence” is just around the corner. However, this is not where we’re heading.
Because digital fashion is not a trend, it’s an industry.
A trend forecaster friend once told me that a trend becomes successful when it stops being a trend. Implied here is that trends are supernovas defined by their own demise. An industry, on the other hand, strives to be eternal Whilst the lifecycle of an industry can also be broken down into stages: “Introduction,” “Growth,” “Maturity,” and “Decline,” unlike trends (which are grown out of like the adolescence that defines them) an industry’s goal is to reach the stage of “Maturity and remain mature forever (e.g. fashion)— constantly evolving to fit new forms.
Earlier this year SYKY founder Alice Delahunt said of her own company “I’m not building SYKY for the next three years or the next bull run, I’m building SYKY for the next 50 to 150 years.”
And indeed, this is my view of digital fashion.
I’ve expressed many times that digital fashion is an inevitability. Society has shown an increasing proclivity towards digital existences and digital fashion—the digitization of our primal need to self-express—is a necessary tool in this future.
So, while digital fashion post 2022 might seem like it’s declining, in reality we’re just being introduced.
To be continued…
