The following article is an op-ed by Tyler Adams, CEO & Co-Founder at COZ.
For the last two years, crypto developers and venture capital have been hyper-focused on supporting infrastructure projects to the detriment of consumer-facing applications. If you look around this industry, you will see a plethora of tools for developers to integrate privacy features, decentralize information, and scale platforms, but a lack of applications where these tools can be used. We’re not beating the allegations that blockchain is a solution in search of a problem.
It doesn’t have to be this way. Crypto and the underlying blockchain technology have the potential to revolutionize the way we interact online and in the real world. In particular, blockchain as an authentication tool could address a growing crisis in the market for consumer goods, providing an immutable source of truth to verify information.
More folks in the space just need this type of integration with the physical world, what I would call Non-Fungible Items – NFIs.
Cheer Up, the Crypto Winter Is Over
The collapse of the NFT market and the failure of the metaverse to take off, combined with the onset of the crypto winter, caused many developers to retreat from consumer-facing applications and instead focus on improving decentralized infrastructure.
Keep in mind, in this same year media coverage of the FTX bankruptcy severely damaged the reputation of the industry. It didn’t feel like a good time to onboard mainstream users. Instead, developers put their heads down and focused on tackling issues like scalability, user experience, and security.
Now we have seen improvements on all these fronts. Zero Knowledge (ZK) rollups have improved speed and efficiency on layer 1 protocols, account abstraction has enabled a web2-like user experience, and there was a decline in hacks from Q1 to Q2 this year.
Not to mention, Bitcoin price has reached an all-time high, bolstered this year by Bitcoin and Ethereum ETF approval and mainstream interest in stablecoins and real-world asset tokenization. There is no better time for builders of decentralized applications to reach out to web2 users and businesses. We just need to demonstrate that blockchain is more than just a platform for speculative assets.
Counterfeiting Crisis
As a transparent and immutable source of truth, blockchain can be used as a tool to authenticate information in the digital and physical world. The second-hand apparel market alone was worth roughly $230 million this year, with the pre-owned collectibles market estimated to be worth $134 billion alone. One would expect that as the industry for second-hand goods grows, from Ebay to Depop, The Real Real, and beyond, opportunities for counterfeiting are growing.
Indeed, the market for counterfeit goods is set to be worth almost $2 trillion by the end of the decade. Imagine if there was an onchain authentication solution that could verify the origin of goods. This could unlock unprecedented opportunities to integrate blockchain in the fashion and luxury goods market.
In the digital realm, the growth of decentralized finance (DeFi) means more people are trading assets without centralized actors. While privacy is a core value of DeFi, there needs to be a method of identity verification to protect against scams. Once again, blockchain authentication tools can be used here.
Blockchain and AI can be integrated to improve methods of verification. Currently, authentication is done by individuals. But AI enables image and pattern recognition, and object detection at a larger scale. Blockchain can then be used to store information collected by AI tools to provide a secure record.
Enter NFIs
NFIs bring real-world utility to NFT technology. By linking a physical asset cryptographically to a “digital twin” on the blockchain, NFIs can be used as a powerful authentication tool. For example, if you were creating a luxury watch, you could embed a private cryptographic key that could be used to verify the origin of the watch in case it makes its way onto the second-hand market.
Why would brands invest in this technology? Because it brings greater value to the asset if purchasers can guarantee returns on the second-hand market. This isn’t just limited to watches – shoes, jewelry, and collectibles could all be verified onchain.
Keep in mind that fashion and luxury brands haven’t given up on NFTs entirely. 9dcc’s NFT-linked fashion collection debuted at Paris Fashion Week this year with designs inspired by digital innovation. Younger generations are also more concerned with the environmental impact of manufacturing. Seeing brands embracing the circular economy through blockchain-enabled authentication could be beneficial for their marketing.
Blockchain’s Killer Application
For too long, developers in the crypto industry have looked inward, focusing on problems that do not concern the general population. The industry is maturing and we need to embrace use cases beyond finance.
Authentication is a prime area where blockchain can provide a better solution than existing technology. The crypto winter is over, now’s the time to call back the normies.
