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Op-Ed | Blockchains Could Upend the Fashion Business

Blockchain will revolutionise the industry in the next 10 years, but a number of systems have to be built to support it, argues Charles Beckwith.
Martine Jarlgaard collaborates with Provenance on blockchain technology | Source: Courtesy
  • Charles Beckwith

NEW YORK, United States — Blockchains, cryptocurrency and smart contracts will change every industry in the next 10 years. Thousands of companies are already trying to sell solutions, but every solution is a prototype or even pre-prototype. "A digital graveyard, complete with metaphorical tumbleweed, characterises the crop of 2017 that decided to take the money and run," writes blockchain analyst Kai Segwick. These are nascent technologies — there are scams everywhere — and fashion companies should proceed with heavy caution.

There are big headlines about blockchain, but it’s really just accounting software. Blockchains allow unparalleled efficiency in tracking process, and the smart contracts tech sits on top of that and issues compensation when a process is completed. Together they automate a lot of things that right now take up a great deal of time and energy in any industry. By taking many of the human factors out of tracking the supply, production and distribution chains, we can eliminate massive waste in all of those areas. No more creative accounting, no more fake data, everything is above board all the time. Think of a poker game, and that there are 52 cards in a deck. The blockchain would tell you if there were suddenly 53 cards in play. That’s what this does.

For the fashion industry, we get the risk mitigation that comes from understanding your supply chain, and you can protect your brand by being able to show with a degree of certainty how your goods were produced. In a one-off experiment, designer Martine Jarlgaard presented garments made from organic British alpaca at the Copenhagen Fashion Summit in 2017. The garments were accompanied by tags which could be scanned to pull up a full history of the supply chain behind each garment, even including names and profile photos of the specific alpacas whose coats were sheared to make each individual sweater. The experiment worked, the transactions were tracked, but a lot of extra time and energy was spent doing it this way, so a test of doing this at scale hasn't happened yet.

We get the risk mitigation that comes from understanding your supply chain.

In jewellery, blockchain combined with other technologies like a chemical fingerprint could completely eliminate conflict zone stones. At a private event hosted by Agentic, Bruno Scarselli, chief executive of Scarselli Diamonds, has stated that they are developing such molecular marking technology. Asked how long until fashion will be ready for this sort of thing, SAP global general manager for consumer industries Lori Mitchell-Keller responded that “the tech itself is so much in its early stages,” but added that the World Economic Forum suggests that in 10 years 10 percent of the global GDP will be stored in blockchains. She says, “I think the more upscale brands are going to use the technology faster than department stores,” and “upscale brands want to use this technology to charge upscale prices.”

All of the fashion blockchain start-ups are building their own separate blockchains, which is counterproductive. A single blockchain can help store something on the order of a record for every grain of sand on the world’s largest beach, and sharing a blockchain allows technologies to work together more efficiently. The start-up company Group Project’s solution involves a patent and trademark pending “Crypto-Tag” chip which talks to smartphones, and Loomia is developing sewn-in sensors which will let clothing send usage metrics back to brands, paying consumers for the data they share. Both propose their own separate blockchain.

At the opposite end of the proprietary spectrum is Berlin-based Lukso. Husband and wife team Fabian Vogelsteller and Marjorie Hernandez launched their fashion blockchain start-up company Lukso at Fashiontech Berlin in January. Lukso is intended to be a platform for many companies to build blockchain applications on top of, making those projects interoperable, leading to a larger network, and greater viability for trust in that network.

A unified blockchain standard looks unlikely for the foreseeable future.

Lukso’s main obstacle at the moment, one shared with everyone else in the field, is widespread adoption of their standard by large fashion brands. For their solution to work, they need a consortium, but they and others in the field have shown little desire to collaborate, which is fairly common in the fashion industry, and with companies that seek to self-fund their technology development using an ICO rather than through traditional types of investors.

Lukso has their public ICO (Initial Coin Offering) with a $20-50M goal slated for the second quarter of 2018, but there is an unusual spin on it. They propose to run the first-ever refundable ICO. Backers will be at least partially reimbursed if the company fails, which is likely unique in the history of blockchain start-ups. “For us it is very important to be ethical. There is a lot of hype around ICOs,” states Hernandez.

Business as usual in the fashion industry — everyone wants their own little empire — so a unified blockchain standard looks unlikely for the foreseeable future. Ten years out, you’ll see cotton growth tracked in the field by satellites being logged into a blockchain, followed by harvest data from tractors, followed by time it took to drive a bale to the gin, and all the way up to who bought that T-shirt in a vintage shop and how many hours has it been worn by each user. But it’s not tomorrow yet, and the number of systems that have to be built to support a total blockchain solution for the fashion industry is mind-boggling.

Just because it’s trending doesn’t mean it’s real.

Charles Beckwith is director of communications at Save The Garment Center and the host of American Fashion Podcast on MouthMedia Network.

The views expressed in Op-Ed pieces are those of the author and do not necessarily reflect the views of The Business of Fashion.

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