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What is the benefit of shoe tokenization for me?

German customs discovered counterfeit shoes worth a good 13.8 million euros in 2020. That was an increase of two-thirds over the previous year. Tokenization of shoes could protect against counterfeiting and offer consumers even more benefits.

The number of counterfeit shoes seized by German customs fell in 2020 compared with the previous year. However, the value of the shoes withdrawn from circulation skyrocketed at the same time. This suggests that product pirates are increasingly focusing on counterfeiting high-priced models. In the case of sports shoes, this high-price segment mainly includes limited-edition models.

Counterfeits – especially Nike affected

Nike brand products are said to be particularly popular with counterfeiters. However, resilient figures are hard to determine here. “Counting the number of counterfeits is frankly impossible,” Peter Koehler, for example, explained about this in the New York Times a few years ago. Of course, the former trademark and litigation attorney for the U.S. sporting goods producer didn’t want to scare off potential buyers either. However, for every two authentic Nike items, there could be one counterfeit one.

Tokenized shoes as a way out

Tokenization of shoes could be a way out not only for the largest US sporting goods brand. To do so, manufacturers in America or England would simply need to link the physical shoes to a virtual token. The token would then enable English and American owners to prove that the shoes are original and not counterfeit. However, this again requires tokens that are forgery-proof or cannot be tampered with.

Consumers should not be naively under any illusion. Same appearance does not mean same quality and security.

Christine Lacroix from the anti-counterfeiting organization Plagiarius

Nike with exciting patent

Similar thoughts seem to have crossed the minds of those responsible at Nike. In any case, the US sporting goods manufacturer received an exciting patent at the end of 2019. “System and method for providing cryptographically secured digital assets,” it says. Issued by the U.S. Patent and Trademark Office. The new patent allows Nike to tokenize shoes.

Shoe NFTs from Nike
Tokenization against counterfeiting: Nike’s shoe NFTs.

Number of shoes seized by customs

The volume and value of counterfeit shoes seized by German customs show a clear trend. Compared to the global market for counterfeit sneakers, however, these figures still seem low. Experts estimate the volume in this segment at around 450 billion US dollars.

Value (euros)
Source: customs – industrial property – statistics for 2020.

How shoe tokenization works

The basis of the Nike patent is to provide certain shoes with identification numbers (IDs). For these, the sporting goods manufacturer in turn creates virtual tokens, known as CryptoKicks. However, the shoe tokens are initially blocked prior to purchase. They are then unlocked during the purchase process. In addition, the ID of the shoe is linked to that of the buyer. The buyer can use the token to prove that the shoe is an original and that he is the rightful owner.

Blockchain prevents manipulation

According to the patent documents, Nike uses the Ethereum blockchain for the NFT CryptoKicks. This prevents tampering through cryptographic processes. In addition, the shoe tokens are based on the ERC 721 standard, making each token unique. In addition, it is not possible to duplicate ERC 721 tokens.

There are numerous buyer benefits

By tokenizing shoes, Nike probably wants to fight product pirates in particular. In this way, the sporting goods manufacturer can protect its own brand and increase sales. But tokenized shoes also offer you as a consumer numerous advantages, namely:

  • Eliminating the risk of authenticity
  • Better quality
  • CryptoKicks as currency
  • Digital goodies
  • Control options

Eliminating authenticity risk with CryptoKicks

Limited sneakers have long been more than just clothing for the feet. They are also increasingly used as an investment. However, if the shoes turn out to be counterfeit, you as a buyer face high losses. Counterfeiting and fraud are practically impossible with tokenized shoes such as Nike’s NFT CryptoKicks. This is because the authenticity of the shoe is guaranteed here. Only the usual market price fluctuations remain as a relevant risk.

Better quality through shoe tokenization

Christine Lacroix from Aktion Plagiarius – which has been educating people about the damage and dangers of counterfeit products for decades – clarifies the differences between original and counterfeit products as follows: “At first glance, counterfeits make a good impression. However, consumers should not be naïvely under any illusions. Namely, that the same appearance automatically means the same quality, performance and, above all, safety.” Studies regularly show that counterfeit shoes are poorly finished and made of inferior materials. Often, counterfeit shoes also contain higher levels of harmful substances. This is not a problem for you as a buyer of tokenized shoes. Because you get high-quality original products instead of inferior counterfeits.

Nike launches CryptoKicks as currency

Nike has successfully applied for the approval of the CryptoKicks brand. This is primarily a fusion of a physical shoe and a virtual token. In the medium term, however, it could also give rise to its own cryptocurrency. This offers interesting opportunities not only for the sporting goods company, but also for you as a consumer. Because in addition to an original shoe, you may also receive a means of payment.

Digital goodies for consumers

The CryptoKicks system can be used in the digital world in several ways. For example, the patent application already hints at the possible transfer to videogames. The purchased tokenized soccer shoe could then appear on the screen in soccer simulations, for example. The advantages would not have to be limited to the special design. For example, the virtual shoe might also give your avatar greater shooting power or dribbling strength.

Breeding and control options for shoes

CryptoKicks is reminiscent of CryptoKitties, and not just in name. The game allows buying, trading and breeding virtual cats. The patent application hints at similar options for tokenized shoes. For example, owners can also “breed” sneakers by combining multiple digital shoes. The patent application also provides various control options for owners. For example, as an owner, you would have the ability to assign design rights or limit production quantities for copies.

HBO Asia also tokenizes sneakers

Tokenized shoes are not the exclusive domain of Nike. For example, HBO Asia partnered with artist SBTG to offer such sneakers for the final season of Game of Thrones. These connected NFC chips to VeChain’s blockchain. This public blockchain has also already been used for tokenized sneakers by Australian shoe manufacturer Chase Shiel.

The current supply of shoe tokens is rather small worldwide. They are mainly available from innovative online stores or directly from manufacturers. This small supply meets a high demand. This often results in high prices. The payment options are usually adapted to the modern lifestyles of the buyers. Thus, payment with cryptocurrencies is often possible. As a result, the blockchain comes into play twice.

Virtual shoes from RTFKT Studios

RTFKT Studios takes a slightly different approach. This is also a shoe brand. However, buyers here can primarily purchase virtual RTFKT shoes. So are these shoe tokens a cheap virtual substitute for expensive tokenized sneakers for you as a consumer? Unfortunately, no. That's because prices are regularly in the four- or five-figure dollar range. Still, there is a market. For example, the collection created by crypto artist Fewocious was completely sold out in seven minutes. The proceeds were reportedly $3.1 million.

FAQ – Frequently Asked Questions

What is the action Plagiarius?

The Plagiarus campaign aims to raise awareness of the damage and dangers of counterfeit products. To raise public awareness of the issue, the company has been awarding an annual negative prize since 1977. Increasing appreciation for innovation and creativity is a declared goal of Aktion Plagiarius.

What does Ethereum have to do with shoes and tokens?

Ethereum is a programmable blockchain. The system is open source and has decentralized servers. Ethereum is suitable for the creation of shoe tokens for several reasons. The most important is the possibility to map different information and transactions in a tamper-proof way.

Why is the ERC 721 standard used for shoe tokens?

ERC 721 is a standard for non-fungible tokens (NFTs). These are programmed in such a way that they cannot be duplicated. Each token is unique and cannot be replaced by another of equal value. For this reason, the standard is also ideally suited for tokenizing unique or limited shoes.

Thomas Grether

Journalist | Editor | Entrepreneur & Environmental Scientist.
Main focus: Tokenization | Digital Transformation Processes in Companies | Internet and Web Publishing | Environment

Thomas Grether

Journalist | Redakteur | Unternehmer & Umweltwissenschaftler
Schwerpunkte: Tokenisierung | Digitale Transformationsprozesse in Firmen | Internet und Webpublishing | Umwelt