Yesterday I wrote about how NFTs could solve a couple of problems for the watch industry and why I didn’t think the technology would be widely adopted any time soon.I immediately started getting more comments than on any of my other posts (including from brands themselves), which led me to feeling like I needed to dive deeper into the nitty gritty, instead of just writing a high level post that was trying to prove my point.
Let’s start with the various issues that blockchain implementations pose:
There is technically no physical link between the watch and the NFT on the blockchain.One could sell the watch without the NFT (although I’d argue that this would be the equivalent of selling the watch without papers and therefore would be worth less) or one could sell a fake watch with the real NFT.In an ideal world, you have something that links the watch and the NFT permanently — this could be anything from a miniscule NFC chip inside the watch (don’t know how purists would feel about this) to crazy technology like spraying invisible diamond dust fragments onto the movement or the caseback so that a hi-res camera can pick it up, but the human eye cannot.Ultimately the only way to truly authenticate a watch without the need for human intervention is to have some sort of technological / physical solution that is controlled by the brand and cannot be faked.This is easier to do with things like handbags and sneakers and much harder to do with tiny mechanical devices like watches.The reality is, we may never get there, not because it isn’t possible, but because we as collectors simply don’t want any “foreign substances” in our watches.
You can forget your private keys / password to your digital wallet, and then your NFT is lost in the ether forever.My solution to this would be that the brand would have the ability to issue a replacement NFT once they physically inspect the watch at a brand boutique or AD.This is no different than some brands issuing papers / extract certificates after the fact, if you send your watch in.In this particular case, the NFT’s metadata would clearly show that it was a version 2 replacement NFT and that the original was still out there in an inaccessible wallet somewhere.Still, it’s kind of a pain in the ass for both the consumer and the brand to deal with.
A true implementation of the blockchain the way it was intended to work, would require buy in from everyone from the brand down to the distributors, retailers, consumers and even secondary markets.That’s asking a lot and I cannot see it happening until and unless there is a strong incentive for everyone to participate.
On the one hand, expecting any business in the world, let alone a luxury brand, to be okay with all their data being public is simply ridiculous.It would be possible for all of us to know exactly how many watches were being manufactured, when they were sold, how many times they traded hands, etc.As enthusiasts we love this, but it simply isn’t the way any company can reasonably do business, especially in a world where scarcity (or at least the illusion thereof) is what drives us to buy the product.On the other hand, as a consumer, I don’t really know if I feel comfortable with a list of everything I own being out there.
While wallets are technically anonymous, it wouldn’t be that hard for someone to figure out who owned a certain wallet based on a particular watch they bought on a particular day and then posted on IG.The world just isn’t ready for that yet.
As a number of brands messaged me to point out, they have already started to implement blockchain solutions — this includes brands like Vacheron Constantin, Ulysse Nardin and Breitling.While I have not had a chance to actually use the products to check their implementation, I’m going to go out on a limb here and say that they are probably very barebones products that don’t allow for the general public to view all the data, and they don’t replace paper certificates at all, they simply complement them.This is not to say that this isn’t a huge step forward already, and I commend all of these brands for being forward thinking in an industry that often times still feels like it is stuck in the 1900s.However, in my mind, either you’re all in on the blockchain or whatever you’re doing can just be done using a regular old database and at that point you’re just using the word blockchain because it sounds cool.Will any of these brands completely get rid of paper certs and implement a fully transparent blockchain where all data is being exposed? I don’t think so and I cannot in my right mind say that if I worked at one of these brands, that I would tell them to do so.
It’s just too risky for business.The whole premise of the blockchain was for transactions to be instant and near free.Unfortunately with current technological limitations and the way they are architected, major blockchains today cost way too much money to complete any sort of transaction.Right now on the Etherium blockchain for example, a transaction of any kind (including minting an NFT of a watch certificate) would cost about $75–125.This is insanity and completely negates all positives of the blockchain.
There are many people working on solutions to this right now, and there are other side chains that are more cost effective, but ultimately I don’t know that the world can support hundreds of blockchains — the expectation is that we will settle on a handful of them that everyone ends up building on.I have no doubt that the brightest engineers will figure this shit out, but right now, it’s really kind of a mess.Part of the allure of buying watches is that they are analog mechanical devices and there is something romantic about keeping them that way.The minute you bring technology into the fold and tell someone they need to download an app to accept the certificate for the $250,000 watch they just bought, well, they could have a little bit of an adverse reaction to that.I do think it’s just a generational thing though and that in 50 years, anyone still buying watches is not going to have any problems accepting an NFT cert with their purchase of any sort of item, but I can see how we might be a ways away from that.
One of the big selling points of NFTs is that you can build a perpetual royalty stream into them.For someone like an artist or a musician, this means that every time that NFT exchanges hands, they would automatically receive some small percentage of the transaction price.This is great in theory as it means that the original creator who may have received very little for his / her work on the primary sale, can continue to take advantage of the item trading on the secondary market for higher and higher prices over time.If anything, this would be one hell of a reason for watch brands to adopt NFTs.It would let them keep making money on the secondary market, without needing to officially participate in it.
However, this is easier said than done from an implementation perspective, as I could easily sell the watch to someone and pay that person using wire transfer / cash / trade and there is no way for the smart contract on the blockchain to know what the item actually sold for in order to take a percentage of that and give it to the brand.I think the royalty concept works well for purely digital products like crypto art, but I don’t think it’s really going to work for physical products until and unless we actually adopt crypto currencies are our primary form of commerce.In closing, I still stand by my statement that there is too much risk for brands to be completely transparent about everything that goes on in their business from production numbers to pricing to who is being allocated what and how they are or are not policing the secondary markets, which is why full blown blockchain adoption simply isn’t imminent.However, I will admit that as a consumer, I too have apprehension about how I would feel if I had to log all my watch transactions on the blockchain.My gut feeling is that I wouldn’t necessarily be thrilled about it.
More importantly, the true promise of the blockchain only works in utopia, and as we all know, that just isn’t how the real world works..
