Redeemable phygital NFTs with co-ownership incentives
Crowdmuse
0xb38b
October 11th, 2022

Clothing is no longer something that you buy, wear, and then hide in your closet.

With the introduction of “phygital” editions like RTFKT, fashion consumers can buy their clothes as NFTs that provide transparent product provenance, royalties, and resale features.

Music NFTs unlock a similar opportunity on platforms like Royal, where consumers can participate in the journey of the creator as their investment entitles them to a share of the song’s future royalties.

A new paradigm is emerging around the concept of consumer ownership as the blockchain presents us with the mechanisms to empower consumer decisions:

  • Consumer ownership through redemption of NFTs tied to physical products

  • Product co-ownership through fractionalized and collaborative IP

  • Regenerative supply chain incentives for distributed access

Rather than trying to change deeply ingrained habits to buy more consciously, this new technology is redefining consumer incentives by introducing the concept of regenerative purchasing decisions.

At Crowdmuse, we are building the infrastructure for direct-to-consumer supply chains that provide equitable value to contributors and better access to consumers.

As consumer access to phygital products improves, more opportunities emerge to invest directly in the products that consumers believe in rather than having to pay generic greenwashing brands for “conscious consumerism”.

Similar to how music NFTs enable fans to own a share of the artist's future royalties, the shift from conscious consumerism to consumer ownership will unlock unprecedented upside for better consumer purchasing decisions in the form of future product royalties as the product value chain grows.

Redemption of NFTs for physical objects is nothing new. Nike, for example, has been churning out limited edition items with RTFKT for some time now.

At Crowdmuse, we are taking this to the next level to empower human-centric consumer buying decisions. We provide scalable infrastructure for increased transparency on individual contributions to incentivize cooperative creation, while the collective subculture incentivizes sourcing and ownership models for ethically sourced products from localized communities.

Prior to the blockchain, social coordination tools did not exist to enable contributor incentive models at scale. Several companies have crafted clever models for community members to submit designs and collaborate on the final design of products, such as Fluevog’s “Open Source Footwear” project or Threadless’ Design Challenge. However, outside of cash, prizes, or being recognized as a talented designer, incentives remain somewhat thin, even nonexistent in some cases as certain companies have been known to appropriate independent designer IPs via a fixed upfront payment with no future buy-in and convoluted legal terms.

Value alignment is the main priority for modern employees: 75% would rather work for an organization that makes a difference in society, and 37% of Gen Zs and millennials rejected a job because it was not congruent with their personal ethics. Few companies, such as Patagonia, have successfully fostered a sense of belonging and emotional identification in both contributors and consumers through actively living their values.

Patagonia is making waves through their movement to ensure an ethical business model, supply chain responsibility, and a regenerative Purpose Trust to which they allocate 100% of voting stock transfers. Although it is obvious that a similar shift in values is needed to deal with the mounting metacrisis, most corporations are forced to operate in value-extractive, zero sum models in order to avoid losing market share to competition.

At Crowdmuse, we believe cooperatives are better incentivized to coordinate stakeholders across the supply chain. Intrinsically motivated top talent will gravitate towards cooperatives that are in alignment with their values. Consumers will resonate with brands that holistically reflect meaningful subcultures.

Publicly verifiable ownership of contributions and exposure to potential upside through licensing of IP is needed to ensure contributors are aligned and able to capture the value they create across the supply chain.

Blockchains have unlocked the ability to iterate and ship rapidly in the tech industry—a group of coders at a hackathon can ship a product 100x faster than web2 companies because the open source composable building blocks that form the base layer of a protocol act as the autonomous infrastructure that they are able to use for leverage.

Similar infrastructure already exists for physical products, where demand for made-to-order and Minimum Order Quantities (MOQs) from micro-factories has increased to avoid fast fashion production cycles. The only problem we face is social coordination—incentives do not exist to encourage contributors along the value chain to share their trade secrets, and data is fragmented across the supply chain. If independent fashion designers, for example, were able to license and gain royalties from sharing their techniques, designs, or supplier networks, this would serve as a base layer for other small businesses to leverage and access.

Data portability of creator contributions would create a collaboration hyperstructure that lowers the barrier to entry and provides the means for greater self-expression of fashion creators, similar to how Instagram enables more photographers, and Figma enables more designers.

However, Crowdmuse’s programmable human-centric incentives enable contributors to actually own their data. Open-sourcing and licensing of intellectual property and permissionless access to supply networks provides greater opportunity in scalability of supply and production.

As designer collectives and micro-brands bring their products and suppliers on-chain, they transform their individual supply chains into a supply web with multi-directional interconnections. By sharing supply and production risk, the collective capacity can scale sustainably without the need to push manufacturing costs down in vertically integrated supply chains.

With increased sustainable product supply options in the market, on-chain product provenance and certification provides transparent sourcing standards and footprint insights, while consumer ownership incentives serve as a market demand signal to larger brands.

Collaborative IP licensing between designers and micro-brands accelerates iteration to keep up with market demand while reducing production waste.

The evolution of supply chains into value webs as transactions become multiplayer and dynamic. Source: Deloitte.
The evolution of supply chains into value webs as transactions become multiplayer and dynamic. Source: Deloitte.

We are demonstrating this in practice by bringing together a collective of fashion designers, microbrands and microfactories through our decentralized fashion collective, Made with Love.

Our Crowdmuse protocol facilitates collaborative product creation on-chain by attributing value and IP equitably to contributors all along the supply chain. Value is tracked through our $MWL token on the blockchain to encourage collective growth of the ecosystem.

Once the data exists on the blockchain, incentive models can be extended to provide consumers with better access to sustainable purchasing decisions—66% of whom already consider sustainability when making a purchase. Take the “phygital” experience (Nike x RTFKT) and synthesize it with consumer ownership models which provide exposure to the potential success of a product value flow (Royal music NFTs) to unlock incentives beyond just “voting with your wallet” for making sustainable purchases. Instead of merely being buyers, consumers are now also able to be investors in regenerative business models through the Crowdmuse protocol marketplace.

As more enterprises recognize the demand for co-owned sustainable products, Crowdmuse will provide scalable infrastructure to help bootstrap their go-to-market strategy. Existing organizations that are already integrated with the Crowdmuse protocol will not only be able to leverage their industry expertise through licensing their IP but also grow their capacity with lowered risk through the supply web. Transparent ethical frameworks and co-ownership models that provide fair value to contributors will attract top talent of future generations. Creator-led brands living through stories nested in meaningful subcultures will attract consumers that resonate with their values. And thus the flywheel spins.

If you resonate with this article, we are onboarding fashion designers, brands and micro-factories to the first decentralized sustainable fashion collective.

Due to increased interest, our genesis collective application deadline has been extended to 10.31.22. Submit your interest here and one of our Stewards will follow-up with you.

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Special thank you to Michael Lewkowitz, Jess Sloss, and Toby Shorin for the insightful feedback on this piece.

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