Augmenting Culture: The Emerging Field of Digital Fashion

Originally published in 1kxnetwork

Digital fashion enables infinite self-expression unbounded by physical constraints. From digiphysical offerings to fully immersive virtual content, experimentation is flourishing; and we expect this industry to significantly grow as virtual economies and environments proliferate.

Digital fashion fundamentally changes our perception of online identity while simultaneously building on previously innate cultural artifacts. As more of our interactions take place within social media, games, and virtual worlds, our online identity becomes key to how others perceive us.

Now is the time for digital fashion and it is larger than you might think:

Online Presence:

  • 60% of Gen Z and 62% of Millennials believe how you present yourself online is more important than how you present yourself in person (SquareSpace).
  • According to a recent Roblox report:
    – Half of respondents change their avatar’s appearance weekly
    – 47% say that their cosmetic appearance helps express their individuality; 43% say it helps them feel good about themselves
    – 70% dress their avatars similar to their IRL style; and 70% say they are inspired to dress IRL similar to their avatars


  • IRL fashion artifacts are being commoditized through online secondary marketplaces like StockX (StockX)
    – 60% of GenZ males reported using the platform in 2020
    – The projected size of the secondary market for fashion items relative to the primary market by 2025 is 15–25%
  • Within gaming, players are interested in trading their skins as evidenced by primary sales and gray markets
    – Of core U.S. gamers who are aware of in-game skins, 81% would like to get real-world money for their items and are therefore interested in skin trading (NewZoo)
    – Additionally, 75% of the players that are interested in skin trading say they’d spend more on skins if they had a monetary value outside of the game (NewZoo)


  • Consumers want to interact, belong, influence and be the brands from which they buy. The vast majority of consumers use digital channels before, during or after making their purchases. (Deloitte)

Acceptance of Virtual Cosmetics:

  • survey of MMO players in the United States found that 91.3% of respondents spent money on in-game cosmetic items.
  • In a 2018 study, 68.6% of the 1,307 respondents said that they did not object to cosmetic microtransactions while 22 percent said they strongly disliked pay-to-win microtransactions.
  • Nearly 3 in 4 Roblox respondents said they would spend money on fashion items and 1 in 4 spent over $20 on a single cosmetic item
  • In-game purchases worldwide are projected to reach $75B in 2025

A Push for Sustainability:

  • Fashion production makes up 10% of humanity’s carbon emissions and 85% of all textiles are discarded each year. This has resulted in significant pushback and efforts to reduce the fashion industry’s carbon footprint by reigning in supply and returns while looking to digitize where possible (Bloomberg).
Image from RTFKT

The Emerging Field of Digital Fashion

What was once seen as a niche experiment is now becoming a vibrant market a major consumer market with broad adoption across small and large fashion houses alike. The state of digital fashion today can be segmented into three primary movements: DigiphysicalAugmented Reality, and Direct-to-Avatar Wearables. Many projects cross-over between these domains to increase the total utility of assets within their ecosystem, so they are by no means mutually exclusive.

All three segments emerge from distinct layers:

  • Communication: Comprised of digiphysical tools like NFC chips and dynamic QR codes and blockchain primitives such as smart contracts and data feeds. Together these serve as an ownership and authentication database, and a way for fashion to communicate with the digital world.
  • Creation: A layer for coordinating labor markets and tools for the development of both physical and digital pieces.
  • Distribution: Distribution origination can stem from marketplaces or custom sites. This layer also includes tools that enable virtual distribution across platforms, such as avatar infrastructure, and the logistical operations of shipping physical products.
  • Augmentation: Physical assets or entirely virtual objects are augmented via AR, in-game utility, token-gating of events or experiences, or even play a role in the future governance of a brand.


Digiphysical fashion pairs digital fashion items with physical delivery of real-world goods. In its simplest form, a physical piece of merchandise, such as a hoodie, is linked to a digital counterpart, such as an NFT or avatar wearable.

Given demand for virtual worlds is still in its infancy, digiphysical fashion benefits from consumer demand of physical products today while simultaneously preparing for increasing virtuality going forward.

Instead of clothing being an identity primitive locked away in a closet or siloed to IRL interactions, it becomes a utility-based digital asset that doubles as a key to immersive online experiences. These experiences can range from games and token-gated community hubs to AR overlays and IP tooling. Your physical hoodie might get you access to a local event or virtual concert, or double as a vote within a decentralized fashion house converting your desires as a verified consumer into future releases.

Digiphysical experimentation was popularized by brands like RTFKT and Metafactory within web3, and Chloma within web2. Other popular brands include 9dccCULT & RAIN, and Rags.

Digiphysical is the most complex of the three domains due to the use of additional infrastructure outside of NFTs, including Near Field Communication (NFC) chips, decentralized escrow platforms, and value chain distribution services.

NFC Chips

Near Field Communication (NFC) chips connect real world assets to the blockchain. These chips are embedded within the physical item and can be scanned with a phone to access additional content. While similar to static QR codes, NFC chips utilize cryptography and/or dynamic links to ensure access is only possible by someone in proximity to the physical asset. KONG Land is the primary provider of these chips and has seen significant adoption by a variety of digiphysical projects.

Image from Azuki

KONG has two versions of their chips: SiLos and HaLos. Both versions self-generate their own key pair and store the public key in the KONG registry contract. By scanning the chip using a smartphone, anyone can verify the private key and unlock access to a tokenized asset stored in the contract or verify the authenticity of the item. KONG’s HaLo chips use Ethereum’s native elliptic curve (secp256k1), which means they can directly sign transactions and messages compared with typical NFC tags that cannot generate signatures.

Today, KONG’s chips have been embedded in various projects, such as Metafactory, Rags, Mattereum, IRL Art, and Azuki.

Image from Kong

The NFC chip stack can be extended through infrastructure like IYKwhich offers custom modules for digiphysical projects to plug into. Projects can mix-and-match IYK’s no-code tools, modules such as POAP claims, templatized websites for viewing the digital item, and analytics around NFC taps. The emission of dynamic, single-visit links at 30 minute intervals as part of their NFC integration ensures proof of proximity and helps with location-based analytics. Projects using IYK include 9dcc, Index Coop x Bankless in a hoodie drop, and POAP cards.

Recently, Azuki and KONG wrote an EIP for physically-backed tokens, showcasing the potential of these chip integrations. Under the PBT proposal, each NFT is conceptually linked to a physical chip and can only be transferred to a different owner if a signature from the chip is supplied to the contract. If you trade the physical, the new owner can scan the chip to transfer the NFT from the previous owner’s address to their own, maintaining a connection between the digital and physical copies at all times.

Decentralized Escrow Platforms

A core infrastructural need for most digiphysical brands is an escrow-like service for holding physical assets prior to NFT holder redemption — this stems from a need to submit orders to their manufacturers to have the physicals created regardless of if it has been redeemed. While escrow can be circumvented through the use of defined periods for when the owner of an NFT can claim the physical asset (e.g. RTFKT’s forging windows), not all projects adopt this method. For example, 9dcc embraces vaulting as part of the value proposition of the asset, and it makes sense — an unclaimed physical-digital pair would have greater value than a claimed item as was seen with the Unisocks phenomenon in 2021.

Projects can elect to build their own infrastructure for this, but it is likely easier to plug into existing solutions like 4k Protocol and Courtyardor use futures-like contracts through protocols like Boson.

Both 4k and Courtyard use a model in which a physical asset is shipped to a storage provider, and once received an NFT redeemable for the underlying is minted. 4k leans into a decentralized approach, using a tokenomics incentive model to bootstrap a network of storage providers (“Guardians”). These Guardians are managed via a stake-and-slash mechanism in the event of degradation or loss of an item with the NFT holder receiving the slashed tokens. Guardians are compensated for this risk through token inflation and protocol fees. Notably, 4k highlighted the potential of their physical-backed NFTs by working with Arcade to provide a collateralized loan on a Rolex. Additionally, 9dcc executed their ITERATION-01 drop in collaboration with 4k, showcasing how airdropped 4k NFTs can be used as part of the distribution process.

Courtyard takes a more centralized approach, relying on the security company Brink’s for shipping and storage. They’d like to extend their current operation by also establishing a network of dealers to assess the authenticity of an item before representing it on-chain. To help with creating supply of on-chain assets, Courtyard is also looking at adding a 1% royalty kickback to initial minters of an item for all subsequent secondary sales of that piece.

Boson, however, takes a different approach to accomplish the escrow challenge. Instead of escrowing the physical assets in a vault until redemption, buyers and sellers come together to create a futures contract whereby both deposit an equal sum to guarantee fulfillment. This approach doesn’t directly solve the order submission problem, but it does allow individuals to take custody of the physical item during the redemption period with the ability to resell later on.

Supply and Value Chains

Physical and virtual product development results in a highly distributed supply chain of designers, suppliers, manufacturers, and 3d modelers, resulting in a need to distribute value from the final sale across multiple parties. This opens the door for web3 infrastructure projects specializing in profit redistribution and contribution management like Hibiscus and Crowdmuse.

Hibiscus recently created the first ever on-chain profit redistribution contract built specifically for garment production — redistributing profits from FWB merch sales to supply chain participants. They want to expand on this by onboarding sewers, pattern makers, printers, and other workers from the garment industry to create a decentralized supply chain that cryptographically redistributes profits to the creators. In addition, they are building a forkable asset library from which creators can quickly build on or remix existing designs in what could be considered an example of composable fashion legos.

Crowdmuse is similarly tackling value chain flow infrastructure. Their model allows brands, designers, and manufacturers to co-create digiphysical collectibles on-chain with contributions transparently tracked and revenues automatically distributed. Alongside the on-chain database is a reputation primitive tied to a contributor DID based on the number of contributions made and products created on the protocol. Creators can also contribute to design specs which can be licensed out for a share of revenue, allowing smaller indie creators a chance to reach broader distribution for their models. Additionally, realizing the impact of minimum supply orders with manufacturers, creators can plug into Crowdmuse’s pre-order functionality to help with upfront costs of a new drop.

Image from Crowdmuse

AR x Fashion

Augmented reality (AR) overlays digital objects onto the real world. This functionality is already prevalent throughout social media, with a majority of users on applications like Snap and TikTok using AR filters for their content. Software technologies like ARKit and ARCore have further improved AR delivery, making it easier and cheaper than ever for brands to produce immersive AR experiences. Excitingly, hardware adoption for full-scale AR is expected to substantially increase over the next couple of years as consumer-grade solutions come to market.

Image from The Fabricant

With AR, fashion can be extended in unique ways in the physical world that aren’t limited by physics itself. All of this can take place through the lens of a smartphone with no need for expensive hardware, making an AR fashion piece just as ubiquitous as a smartphone.

AR fashion is typically done through virtual fittings and filters. For the former, owners of the asset send in a high quality photo of themselves and digital artists apply the item using 3D modeling and rendering software. Filters on the other hand tap into available AR delivery applications like Snap, TikTok, Instagram, and Zoom to produce a digital rendering of the asset on the person in real-time.

The first on-chain fully AR clothing item to be sold was Iridescence by OG digital fashion house The Fabricant in 2019. Since then, they’ve launched their own marketplace and co-creation studio that allows end-users to create and remix the designs each season and sell their pieces to collectors. Each season, a designer creates combinations of patterns and designs which end users can tailor to their own preferences before minting. This collaborative process opens the door for novel forms of multiplayer creation.

DressX is another leader in the AR scene offering 4k rendered stills, AR dressing via their app for live streaming, and ‘metawear’ which follows the virtual fitting model depicted above. To date, they’ve secured partnerships with leading web2 social platforms including Snap for instant AR, Meta for their avatar store, and Roblox where they’ve become the first pure-play digital fashion brand to design layered clothing for the Roblox marketplace. DressX offers both digital-only clothing and NFTs, with some of the NFTs being usable in crypto-native virtual worlds like Decentraland. Recently, DressX announced a change where they would offer a subscription-based service for users which would allow them to experiment with all of the various AR fashion looks on the platform for a recurring monthly fee.

Image from RTFKT

Direct-to-Avatar Wearables

Direct-to-avatar is a business model that sells cosmetic wearables to players in social or gaming environments for their player avatars. Direct-to-avatar cosmetic economies flourish in settings where players spend a large amount of time. The more authentic a game world is to a person and the more time they spend interacting in that world, the more likely they are to purchase cosmetics as a way of filling their social role in-game.

The direct-to-avatar model has been proven out by some of the most successful games, such as Fortnite and Roblox where 77% and 54% of active US players have used in-game skins respectively. However, these models typically do not include a direct ownership layer, although consumer research suggests it would increase player spending.

Image from Epic Games

Web3-enabled avatar economies are well-positioned to benefit from the aforementioned preference for real world trading, a desire for asset ownership external to the in-game environment, and growing acceptance of virtual cosmetics.

The main challenge, as with any virtual good that attempts to cross digital borders, is interoperability. Different virtual environments have different restraints on aesthetics, polygon counts, and more. While cosmetic items do benefit from not having direct utility in a game or world, which would lead to balancing issues between environments, they still require tweaking.

Some of the current approaches to solving interoperability include:

  • Developer tooling and cross platform SDKs: Avatar infrastructure that virtual worlds and games can easily plug into like Ready Player Me is one way of selling cosmetics to an ever-growing player base while helping address these challenges. Ready Player Me is a cross-platform avatar system that provides an avatar creator and SDK for developers to easily fetch user-generated avatars in-game across web, mobile, Unity, Unreal, and other applications. Digital fashion brands can look to sell items on these platforms, using their reach for distribution — DressX and Artisant are two notable brands doing this today.
  • Standardization: RSTLSS takes a unique approach to the interoperability challenge by standardizing 3d asset models via seasonal drops. Users receive a model for each virtual world integration and creators can mix and match IP and designs into preset placements to customize their wearables. These designs are then applied to all other applicable models as a 2d texture wrap. A smaller set of base models that are added over time plus a stream of new texture designs should quickly lead to a large library of components for use in a variety of virtual environments.
  • Public datasets: Another interesting interoperability effort is being explored at Metafactory via their VR/Metaverse Crew. Using Ceramic as a data layer, they are looking to create a single ‘master’ NFT of each clothing item that can link to multiple file format types within the metadata. As new platforms are integrated, the metadata can be updated with the appropriate file type, future-proofing their wearables as more virtual environments launch.

Outside of interoperability, there is also the issue of fitting a wearable to a specific avatar which can range in shapes and sizes both intra- and inter-platform. For an avatar following the VRM/gLTF standard, owners would be required to customize the fitting of the wearable on the avatar via Blender or Unity + UniVRM. Some tools like Marvelous Designer / Clo3d can do this automatically, but it still requires a user to go through these additional steps. This would be a large friction for a majority of users, so alternative solutions have been sought.

Roblox introduced one of the best solutions on the market — albeit limited to their platform — called Layered Clothing. The technology combines Skinned Meshes with a Cage Mesh Deformer, effectively shrink-wrapping a 3d object onto a 3d model so that clothing can be easily applied without additional user steps.

Within web3, use of meta-NFTs like those stated above might be one of the best solutions, especially when paired with interoperable file format standards. Ideally, standards are created across multiple environments through the efforts of interoperability working groups (see: M3OMIMetaverse Standards Forum) to make this all more seamless for end-users. Until then, further experimentation will be required.

Fashion DAOs

Fashion-focused DAOs are still an emerging area, but there are existing DAOs today that serve as vehicles for grants or investment funding, tool/infrastructure development, and general purpose collectives for experts and beginners alike.

Red DAO is arguably the most well-known of the fashion DAOs. They are an investment DAO within the Tribute Labs ecosystem that has used the 4,000 ETH they’ve raised to support, purchase, archive, collect, and invest across the emerging world of digital wearables and fashion. Red DAO was founded by Megan Kaspar and now has 43 initial members from across the industry. They made waves last year by winning at auction The Doge Crown, a jeweled crown with a physical version included in the purchase, for 423.5 ETH during the UNXD Dolce and Gabbana fashion event.

DAOs can also be used for establishing broad creator networks and creating open source tools, as is the case with Digitalax. Digitalax bills itself as a collection of prompt-writers, style designers, and code writers building open source tools for the web3 fashion economy. Through a variety of sub-DAOs, their mission is to educate, onboard, and collect fashion designers specifically within the realm of CC0. One of their main communities is the Global Designer Network, a community of designers helping one another to build new and interesting virtual fashion primitives.

We expect more fashion DAOs to emerge in the coming years as projects continue to innovate in organizational design. Outside of decentralized brands like Metafactory, opportunities exist for creator collectives that help bootstrap supply for brands and games, grants-giving organizations that help accelerate the pace of the industry, and open source asset and software creation organizations.


We anticipate further experimentation as projects continue to innovate around integrations, frameworks, and operating models both inside and outside of web3:

NFT financialization:

  • NFT financialization has many applications within the world of fashion. Whereas PFPs have been quieter than expected within the rental market, potentially due to their unique relationship with personal identity, fashion seems well-suited. A decentralized Rent-the-Runway or renting to capture wear-to-earn incentives is not far off.
  • Furthermore, collateralization of high-dollar NFT and IRL fashion collectibles for use in lending unlocks fashion as an asset class. As noted above, financialization is already here through platforms like StockX, so extending this to lending and borrowing is a logical next step.

Wear to Earn:

  • With the increased interest in x-to-earn models popularized by Stepn, wear-to-earn seems viable. Decentral Games’ wearables standout in particular as an example of this with players of the Decentraland casino earning multipliers on token incentive mining when donning their branded wearables in-game.
  • Draup, a platform set to launch in the coming months, wants to incentivize more usage of virtual cosmetics by building a set of protocols to allow for renting, resale, and — most interestingly — wear-to-earn.
  • Wear-to-earn is not limited to the virtual either — through the use of NFC chips, it is possible to extend this into the physical via a hybrid form of tokenized incentive based affiliate marketing, letting collectors earn from wearing branded merch.


  • Gamification in its basic form likely looks similar to loyalty programs, earning XP or tokens to level up a dynamic avatar for example. This could evolve into a cross-brand social application or integrated into virtual world interfaces — the latter stands out as another way to engage and prompt more focus on avatar customization as a go-to-market strategy.


  • As noted with Fabricant and RSTLSS above, co-creation is an emerging area within web3 fashion (and elsewhere) that seeks to bring the collector into the creation process. Whether via a minting experience colored by the collector’s preferences or through tokenized curation-based governance, we expect co-creation to play a larger role as brands and communities engage with each other more thoughtfully.

Alternative Licensing Models:

  • Some projects have begun experimenting with alternative licensing models. For example, Digitalax enforces a strict CC0 policy — any wearables or goods in the ecosystem must be created under a CC0 license to increase remixability and composability of their assets.

Emergent Fashion from NFT-Native IPs

  • One of the more promising developments has been the use of crypto-native IP in the development of merchandise (e.g. Nouns glasses or the Nouns x Dopamine collab). We anticipate further exploration of fashion by the largest NFT collections.

AI Fashion

  • Creative AI is making its mark on a variety of sectors, and fashion will benefit from its use as well. Neural Style Transfer, which combines objects and styles to synthesize new ideas, and StyleGAN, which creates a generated output after being trained on a specific data set such as a designer’s previous work, are two applicable methods.
  • With creative AI output, curation plays an ever more important role. Deep Objects is experimenting on this front, using an AI algorithm to generate shoe designs which are then curated by the community until a final 1 of 1 is created.
  • Other ideas could include:
    – Decentralized brands that use governance to curate AI-generated clothing
    – Combining NFTs with trained models to create ownable, tradeable, or fractionalize-able artificial designers
    – AI tools for converting 3D models between different virtual environments, making interoperability more seamless and less reliance on partnerships
    – Social apps that analyze collected clothing to create recommendations for other assets, both real and virtual

Crossover with Virtual Influencers

  • Virtual influencers can come in two major forms for digital fashion: models (e.g. Lil Miquela, Shudu Gram) or personified AI fashion designers (e.g. an anthropomorphized StyleGAN). For more on virtual influencers and applications, check out my previous work here.

We believe:

  • Collectibles and clothing will be increasingly connected using NFC chips and blockchains as consumers demand more from the brands they wear.
  • Augmented reality and avatar wearables will become a commonplace extension of most luxury fashion items.
  • Cutting edge experimentation, like co-creation and collector curation, will be born from crypto-native applications and infrastructure as traditional brands are slower to innovate. This will lead to high value acquisitions — as was the case with RTFKT and Nike — and the emergence of new crypto-native luxury brands.
  • For avatar wearables and AR projects, adoption will be slower pending more mass consumer education and interest. Projects should consider using digiphysical as a showcase for what can be done within the higher-level augmentation layer.

If you are building applications, brands, or infrastructure within the digital fashion space, please reach out to me. We would love to help you build.

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