When people imagine the metaverse today, most probably think of a fully immersive virtual reality universe like the one Steven Spielberg created for the movie "Ready Player One."
But Megan Kaspar, managing director of Web 3 investments at incubation firm Magnetic, believes digital and physical reality will be far more integrated in the future. Far from the pixelated platforms that are popular today and the cartoon PFPs that proliferate on Twitter, Kaspar believes the Metaverse will be a mixed reality, photorealistic experience 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.
A poster child for the trend, Kaspar is a pioneer with a habit of creating world firsts. In October 2021, she became the first person to wear NFT (non-fungible token) fashion on a live television show, flaunting a series of digital costume changes during the interview, including gold earrings programmed to track her head movements to mimic the swing of a real pair.
In January 2022, she was featured on the cover of the Miami issue of Haute Living, wearing a digital outfit by luxury designer Fendi that seamlessly followed her original photo set. Both times she was dressed by DressX, a digital fashion platform Kaspar has invested in that uses 3D software to create and simulate virtual garments that look like real clothes.
Kaspar has been active in cryptocurrencies since 2012 and was an early investor in Bitcoin, Ether, SOL and MATIC. She recently became a founding member of the first decentralized autonomous organization focused on fashion, Red DAO, which purchased the most expensive fashion NFT to date - Dolce & Gabbana's Doge Crown. The crown was purchased for 423.5 Wrapped Ether (wETH, then valued at $1.27 million) from NFT marketplace UNXD and was part of the world's first couture NFT surrendered by a luxury brand. Of the nine NFTs in the groundbreaking collection, Red DAO acquired three.
The Doge Crown was a Web 3 step from a traditional fashion house, where the holder of the NFT received both a digital and physical version of the crown, as well as exclusive access to a range of real-world experiences. However, Kaspar reveals that over 90% of the digital fashion purchased by Red DAO comes from designers who are at home in the digital world. She says this is where Red DAO's mission and purpose really thrives.
In this interview, I spoke with Kaspar about the current immaturity of wear-to-earn business models in digital fashion, how data collection on the chain will allow individuals to take control of their online identities (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 the centralization of Web 2 and the fully decentralized Web 4. She also makes a compelling case for how NFTs can help - not hurt - the planet.
The cover you did for Haute Living was the first time a person wore digital luxury fashion on a cover, right? How did that actually come about?
Maye Musk was on the cover of Czech Vogue in November 2021, wearing a digital T-shirt printed with an image of a galaxy. But if you look at the photos, you can still tell it's digital clothing.
The Haute Living issue came out just a few months later, and the photos turned out great. I was thrilled to do this shoot and be the first to show the world the possibilities of digital fashion.
When we did the photos, I wore some SKIMS pieces that were tight and solid colors, and then shorts. Also, it had to be strapless, because you can't really work that out in Photoshop, and it might look fake. Then you can layer everything. But for the poses I was sitting or standing in, the algorithms couldn't dress me. They had to be perfectly cropped.
On Instagram from Red DAO, we took a photo from the Haute Living shoot and Tribute Brand created a special, huge red dress to put over me. It's amazing how you can make the colors, the dimensions and the shadows look very real.
What are the use cases for digital fashion? What is the biggest challenge in creating it?
The possibilities for digital fashion are very limited today. There are really only three use cases.
One is digital tailoring of existing photos and videos, which would be great for e-commerce. Models can simply take photos and have the clothes digitally tailored, rather than sending boxes of clothes around the world for different shoots and then hiring a stylist to manage the physical items. Influencers can do the same, and they can get 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, and on dedicated apps like DRESSX or ZERO10. For example, I have a pair of virtual NFT earrings that I wear on Zoom calls, and people won't even know they're virtual.
The third use case is dressing your [profile picture]. And I think PFPs will evolve into meta-human avatars. I don't think most people will want to personally identify as Bored Ape or World of Women. I think the majority of the population will want something they can aspire to that represents the human version of them, but is better.
We see that in Web 2 with Instagram and other social media platforms, how people represent themselves, how they share content, and how they use those platforms. Web 3 will provide an enhanced version of digital identity. With that comes proof of ownership and many different ways to make money.
Are there people working to overcome the interoperability barrier for the digital items that you want to wear all the time but that currently only work on certain platforms?
When it comes to interoperability, there are two areas. First, there's software interoperability. For example, if you're using Chrome, you can use the Snap filter and wear NFT's augmented reality fashion, or maybe there's an API that Zoom can plug into, and that can be easily solved.
The other area of interoperability is the digital asset itself and the components of how a pixelated object looks in Decentraland versus something created in Unreal Engine that looks more photorealistic.
This is something that projects like Glamhive and Meta Closet are trying to solve, where each item has its own nested file. You have a pair of earrings, and those earrings can have many different files that can work on different platforms. Time will tell if the market actually wants that.
What do you think about skeuomorphism? Why are artists, designers and architects of the metaverse still designing objects that resemble the physical world when they could literally create anything imaginable in digital spaces?
Some traditional designers working in Web 3, like Rebecca Minkoff and Jonathan Simkhai, are skeuomorphic, and I attribute that to recognizability. For the same reason that not all of us want to be represented by cartoonish avatars for our digital identities, we want to see and wear fashion that is comparable to our physical human experience. RTFKT and D&G are examples of bridges between replicas of physical reality and completely fantastical fashion and clothing.
Some of D&G's Collezione Genesi couture pieces are incredible photorealistic equivalents to their real-life counterparts, while others, like the impossible jackets, cannot exist in reality. D&G also offers digital ready-to-wear and digital runway fashion that you wouldn't wear every day in the real world.
Others include fantastic 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 mentioned sell for millions of dollars. Some people think that's crazy. Is that crazy?
In terms of value, people use certain expensive luxury items as a sign of wealth or status. But we see that in the digital world as well, right? If you have one of those special CryptoPunks or a Bored Ape that's worth millions, you're instantly validated. It's like going digital for validation.
The other day I was talking about engagement rings and how I really don't want one unless it's connected to an NFT. And then I was thinking about what a ring can signal, depending on what community you're in, how it can signal a certain social status. And I realized that the same thing is going to happen in the digital world.
Still, a lot of people don't seem to really understand the concept of NFTs and the importance of digital ownership." Do you think digital fashion will be popular even without blockchain?
When I have questions like this, I always look to China first because they are always ahead of us. In China, they have an app called Little Red Book, or Red. It's their version of Instagram, where they buy a lot of digital fashion and wear it in augmented reality.
These items are actually NFTs, but they're not called NFTs, they're called digital assets because of regulatory concerns. They are on a centralized blockchain that I believe was created by Alibaba and a couple of other companies in China. And while these digital assets don't offer 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 consumers care about.
Will consumers care that digital fashion is an NFT? Will these items be NFTs? I hope they will be. I want them to be, because that's the only way we can live in a fully decentralized, interoperable environment.
I think that will come in Web 4, because Web 3 will be a bridge between the centralization of Web 2 and the full decentralization of Web 4. I think we will look back in history and see that Web 3 was a distributed space. We're in the process of bringing a lot of consumers to Web 3 because fully decentralized environments are not easy to use and consumers want fast, cheap and easy.
What are some examples of business model innovations that NFTs can bring to the traditional fashion industry?
Web 2 captures only a tiny fraction of the data from our daily lives. It is difficult to highlight the incredible amount of data that is being generated and captured through the use of Web 3 devices, such as eye-related wearables that enable augmented reality. With tracking and tracing on blockchains, digital fashion can also be geographically tagged. Brands could track when or how often you wear a garment. Your clothes can tell your life story through data collection.
In terms of our personal data, our online identity on Web 2 was mostly about capturing fragments of our lives, whereas on Web 3 we have the ability to own property and an online identity that can be larger than our physical identity.
At the same time, the unlimited environment can lead brands and designers to create micro collections for scarcity. NFT fashion can be stacked or rented. Or "wear-to-earn" can also lead to higher brand engagement, loyalty and retention. Future "wear-to-earn" models may even leverage components of "move-to-earn" and "play-to-earn," and this may be a way to generate income in the future.
What are some examples of wear-to-earn projects?
There is the DAVA project and 10KTF, although 10KTF was not a specific wear-to-earn project, just a PFP project. But the business model, the roadmaps, are ultimately aimed at a wear-to-earn model. These are still very young. There are no companies adopting it or using it yet, because I think the NFT environment has to evolve before that happens. Similar to how [decentralized finance] had to evolve before play-to-earn, we will see DeFi and NFTs evolve, and then wear-to-earn models.
You could perhaps argue that Stepn and Space Runners are "wear-to-earn," but it's more like "move-to-earn" or "act-to-earn." Ultimately, these "to-earns" will come down to using some form of digital fashion or wearables. It may not be an avatar, but it will most likely come down to accessories, fashion, and clothing. And that's an incredible capability that will be unlocked.
What do you plan to do with the items in Red DAO's collection? Have you tried renting them or putting them to use?
We haven't put our items to use or rented them out yet. There just aren't really any sophisticated platforms right now that allow us to do that. But we're looking at that. I think we will do those things in the future.
How does Red DAO work as a DAO?
To join Red DAO, you need to be invited. New members are accepted through a voting process that involves all 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. This keeps the DAO private and secure. It is actually a Delaware LLC, so it is not a DAO in the sense that it is completely decentralized. It is decentralized in the sense that we use the blockchain for voting and decision making, but that's the extent of it right now. The units that everyone receives are not tokens that are publicly traded. They are not traded on a [decentralized exchange] or a centralized exchange.
All decisions are made in a Discord channel, which is locked. You can only enter it with the wallet you use to contribute to the DAO. Everyone evaluates things together in different channels and then a vote is taken on the DAO's blockchain platform. The vote on the blockchain is weighted based on how much ETH the member has contributed to the DAO.
Many people are concerned about the energy consumption of blockchain technologies and the resulting climate concerns. Do you think this will stand in the way of mass adoption of Metaverse wearables and other NFT-based digital apparel and accessories?
Many large companies inside and outside the fashion industry use the argument that blockchain is a mechanism that consumes a lot of energy, which is not true.
If you look at the data on the energy consumption of global bitcoin mining, it is 189 terawatt hours compared to 162,194 terawatt hours of total global energy consumption, which is only 0.117% of the total annual energy consumption. And in the last two years, Bitcoin miners have become increasingly energy efficient by using sustainable sources such as wind, solar, hydro, geothermal and nuclear power. Bitcoin is 56% powered by sustainable energy, 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 will result in 99.95% less energy consumption within the Ethereum ecosystem. In addition, all of these blockchains are designed for fast, large-scale transactions.
I see Web 3 offering tremendous levels of energy efficiency across all major industries globally. Especially the fashion industry, which is one of the biggest polluters in the world, responsible for about 10% of annual global carbon emissions. That's more than all international flights and shipping combined.
The environment is polluted every day by wasteful practices in the production, transportation, distribution and disposal of unsold or unwanted clothing. About 40% of Western clothing is not worn, and 40% of garments produced in factories are not even brought to market, but are incinerated.
According to the United Nations Environment Program, it takes nearly 3,781 liters of water to make one pair of jeans, from the production of the initial product to the final product in the store. Emissions amount to nearly 33.4 kilograms of carbon equivalent.
So the impact of the fashion industry's shift to a digital model cannot be overstated. Wearable NFTs that dematerialize fashion will play a very large [environmental, social and corporate governance] role worldwide.