Nike CryptoKicks Concept Battles Counterfeits with Blockchain

Need to Know

• Nike has been granted a patent to create CryptoKicks, a blockchain-compatible sneaker designed to effectively track ownership and legitimacy.
• When the shoes are purchased, the customer would receive a “digital asset” linked directly to the buyer and the shoe, effectively creating digital scarcity.
• Blockchain-tracked sneakers fight the counterfeiting market, as Nike loses up to 10% of its revenue due to counterfeited goods—10% in 2018 totals well over $3 billion.
• The sneaker resale market is growing incredibly quickly, projected to hit $6 billion by 2025, up from $2 billion in 2019.
• Nike is the largest shoe producer in the world, holding more than 27% of the market share.

Analysis

After filing a patent earlier this year, Nike has started its blockchain journey by being awarded a new patent to design and create CryptoKicks, a blockchain-enabled shoe.

When a customer purchases a pair of shoes, the CryptoKicks will be attached to a blockchain that tracks digital assets tied directly to that unique set of sneakers. The customer will receive a 10-digit shoe authentication token, tracked on the Ethereum network.

“When a consumer buys a genuine pair of shoes, a digital representation of a shoe may be generated, linked with the consumer and assigned a cryptographic token, where the digital shoe and cryptographic token collectively represent a ‘CryptoKick,’” the patent reads.

The goal is to track authenticity and ownership for the shoes, as high-end sneakers have become a massive market over the last decade.

Earlier this year, a pair of Nikes from 1972 became the most expensive sneakers ever sold, going for $475,000 at auction. “Sneakerheads,” as they’re called, have become massive collectors and resellers of both new and vintage shoes. By enabling legitimate sources of authenticity and scarcity, Nike is likely hoping to further cash in on a shoe resale market that will jump to $6 billion by 2025, up from $2 billion in 2019.

At the same time, counterfeiting has been a huge problem for Nike and other leading fashion brands. In fact, Nike Shoes are one of the most counterfeited goods in the world, with stories surfacing every few months about how tens of thousands of pairs are seized at shipping ports.

The situation is so bad that it’s reported Nike is losing as much as 10% of its revenue due to counterfeited goods—that would be over $3 billion dollars in 2018 alone. Tracking ownership via blockchain is one more way to combat fake versions of products hitting the resale market.

If a CryptoKicks owner wants to sell their pair to another person, they can transfer the assets. Those assets get stored in a “digital locker,” which is comparable to a cryptocurrency wallet.

One of the most interesting and slightly confusing aspects of the patent involves the ability to “intermingle or breed the digital shoe with another digital shoe to create ‘shoe offspring’ and have the offspring made as a new, tangible pair of shoes.”

This aspect closely relates to another recent crypto-related hit: CryptoKitties. Sometimes described as a game and sometimes described as art, CryptoKitties allows users to purchase digital blockchain-tracked cats, breed them, and then sell them. Right after launch, one of the most expensive CryptoKitties sold for over $100,000.

There’s no doubt that Nike wants to appeal to Sneakerheads by offering a way to securely track the ownership and authenticity of desirable shoes, but as this is just a patent without any firm release date or creation plans, there is no indication Nike will follow through with CryptoKicks.