For RTFKT and Nike, NFT Sneakers are just the start

In 2019, Benoit Pagotto, Chris Le and Steven Vasilev were about to launch RTFKT – their brand of virtual sneakers largely inspired by classic Nike silhouettes – when they learned that Nike itself had obtained a patent for shoes related to the blockchain it called CryptoKicks.

The trio, who traveled to Japan for inspiration, wondered whether to keep going but eventually went ahead, starting to ditch digital shoes like the famous “Cybersneaker.” photoshopped on Elon Musk. Over the next year, RTFKT – pronounced as “artifact” – built its brand, mixing streetwear and gaming through items like NFT sneakers and collaborations.

During this period, Nike never released its CryptoKicks. Instead, it acquired RTFKT in December. When the sneaker giant released its first NFT shoes, the Nike Dunk Genesis CryptoKicks, it was with RTFKT, whose founders are now senior directors of the company.

Between the trip to Japan and the launch of the Nike CryptoKicks, RTFKT became one of the biggest brands in the NFT market, which surged for $17.7 billion in sales in 2021, according to data from Nonfungible. Collectors have snagged items like his sneakers with digital artist Fewocious and the “CloneX” avatars he created with Takashi Murakami for sums that regularly run into the thousands or tens of thousands of dollars – and sometimes more.

For these clone owners, who form the basis of the ecosystem he is building, he has “air-dropped” gifts that they can use with their clones to begin assembling a fictional world. What the company is really trying to do is build the metaverse step by step by encouraging its audience to use its products as building blocks.

Fans of the brand on Twitter and Discord are eagerly awaiting news of what’s to come. This year, they spent months eagerly solving puzzles created by RTFKT to unlock one of those parachuted items, a mysterious RTFKT cube dubbed MNLTH. (The opening revealed RTFKT’s CryptoKicks with Nike, a “skin flask” to customize them, and another MNLTH.)

“These buzzwords that we hear in retail and fashion and the consumer culture of authenticity, experience and community, they live where they intersect,” said Brian Trunzo, a veteran of the fashion industry who is now responsible for the metaverse at Polygon Studios, the consulting arm of the Polygon blockchain.

This arguably makes RTFKT a new kind of brand – one that sits somewhere between the streams of fashion, crypto and gaming, and well positioned to capitalize on the growing confluence of the three.

But it must also face the challenges of the NFT market. Overall sales have slowed and the market is plagued by financial speculation. Many NFT projects appear to be cash grabs with little obvious thought beyond a quick profit, tarnishing the image of the space. And most importantly, the space itself is entirely new, which makes its future far from clear.

RTFKT’s vision for the future

The founders of RTFKT met in 2018, when Pagotto, then head of marketing for esports team Fnatic, was looking for someone to create game skins – add-ons that change a character’s appearance or of an element. He found Le, who had a business making skins for “Counter-Strike”. Their paths then crossed with Vasilev, who ran a successful sneaker customization studio in London, and together they produced a shoe for Fnatics’ “League of Legends” team.

If there’s one belief that unites them and drives RTFKT, it’s that the digital signifiers we use to broadcast our identities, tastes, social status and other traits are just as important as the physical signifiers, otherwise more.

“The vision has always been that in the future, all of your digital assets will be far more valuable to you than your physical assets, and that means both economically and emotionally,” Pagotto said.

Virtual goods still have a long way to go before they overtake real-world things at the mainstream level – if that ever happens. But what is clear is that consumers who are online are spending more time there. RTFKT designs for this future, imagining identities, digital products and even homes. He sent “space pods” to clone holders’ wallets that look like futuristic little apartments.

The goal is to make all future releases interoperable, meaning they can be ported by clone, displayed in the space module, or otherwise used with previous RTFKT items. Vasilev said the next phase they are heading in is “to build complete ecosystems and different units where everything will be interconnected.”

In doing so, RTFKT allows its fans to combine its products in different ways, involving them in building its mini-universe. Items like the Nike CryptoKicks are also AR-enabled, so parts of this universe can be overlaid on the real world.

The team is now introduction of the “evolution” mechanic. Owners of the CryptoKicks can use the “skin flasks” that RTFKT publishes to change their appearance, which is derived from the game’s aesthetic. But using a skin flask “burns” it, so as as more are used, the rarity of certain flasks will increase.

Three sneakers representing different states of evolution, where the shoe becomes bigger, bulkier and more pointed with each step.

Build with Nike

How, exactly, this vision sits in Nike’s business is not entirely apparent, at least not yet. Pagotto described Nike and RTFKT as both innovators, just in different worlds: Nike in sports, RTFKT in web3. Although he was initially surprised that Nike wanted to buy their company, he ultimately concluded that it made sense. If Nike was planning to enter this space, the smart approach, according to Pagotto, was to bring in a team that could natively fit into it.

But while the RTFKT team advises Nike, it doesn’t build the company’s NFT strategy, according to Pagotto. His daily goal is still RTFKT, on which he retains his autonomy. The companies work closely together. Nike has an interest in protecting the legacy of products like the Dunk, a style that was instrumental in the birth of modern sneaker culture, and the first of Nike’s classic styles, RTFKT, said it would be modified .

“Especially with the art, we get a lot of feedback from the Nike team about maintaining the traditional, classic look,” Le said. “As RTFKT, we tend to get a little crazy.”

RTFKT, meanwhile, can tap into Nike’s archives, tap into its branding expertise, and access the machinery behind the world’s biggest sneaker company. RTFKT was already a pioneer in what is called “forging”, where an NFT product is transformed into a tangible product.

“We’ve had almost every resource opened up to us, and we’ve got some really cool physical products coming out of the pipeline,” Vasilev said.

Their goal is to gradually bring the digital and physical worlds closer together.

Fighting “FUD” and the way forward for NFTs

After soaring in 2021, the NFT market has cooled recently. The number of NFT sales and average prices felland skeptical analysts have raised doubts on its long-term prospects.

The crypto community generally counters that NFTs are in their infancy and their full uses are still being worked out. They will evolve far beyond the jpeg collectibles that have dominated the space, the argument goes.

“The trend is toward their utility, so they can be used in metaversal virtual worlds or to unlock next-gen loyalty rewards from desirable brands,” Polygon’s Trunzo said. “If they have no use – if they are just collectibles – they will become like what you find in your junk drawer.”

RTFKT agrees with this view, but it is not entirely isolated from what those who use crypto call “FUD” – fear, uncertainty, doubt. When he first revealed his CryptoKicks with Nike, after months of having his fans solve puzzles to unlock the MNLTH containing them, some of his Discord posters weren’t immediately impressed. The price of an MNLTH on the secondary market fell sharply.

It bounced back within minutes, however, as more details about its contents and the CryptoKicks emerged. (Vasilev also pointed out that they gave away the MNLTH for free, so the fact that they were exchanged for substantial value was a testament to their success.)

A metal cube bears the Nike and RTFKT logos.

“What we know for sure, as a general rule, is that there will always be people complaining,” Pagotto said. “There will always be people who try to take advantage of the situation.”

These are common issues in web3. Because creative projects are also financial assets, often with high prices, they are often measured by the profit they could generate for those who buy. The space is also full of scams.

The RTFKT team acknowledged that these are challenges and added that the user experience in web3 is complicated and tedious at this stage. But they and other crypto players see them as the normal issues that come with entering a new frontier in technology.

For now, RTFKT’s interest is to continue working on projects they believe in, with Nike and alone. Perhaps most important is garnering the help they need to achieve their vision.

“You have to be able to build worlds,” Pagotto said, “and also primarily attract a community that’s going to build that world with you.”