In 2021, non-fungible tokens have taken the world by storm. But still, there’s a lot of confusion and uncertainty about NFTs. Why are they so important? Do they matter at all? Will they have any impact on the watch market?
The First 5,000 Days
To answer all these questions, let’s cover the basics without diving too deep into economic theory. We have traditional fungible assets like gold – as we all know, an ounce of gold is like any other ounce of gold, i.e. interchangeable. And then we have fungible tokens like Bitcoin and Etherium, where units of data are also interchangeable and indistinguishable from one another. It means that you can trade one ounce of gold (or one Bitcoin) for another, whereas a non-fungible token is unique and isn’t interchangeable with anything else.
Non-fungible token basically represents a unit of data stored on an Ethereum blockchain, a type of digital ledger which keeps a permanent and unalterable records of all transactions. Using the Ethereum blockchain, creators started making works of digital art and "signing" them, ensuring each token is one-of-a-kind, because this technology allows buyers to verify ownership of a work of digital art, guaranteeing the uniqueness and authenticity.
When a digital collage by the artist Beeple named “The first 5,000 days” fetched a whopping $69.3 million at Christie’s, it started a real craze for blockchain-certified artworks.
Because it is so new, many collectors are skeptical about blowing millions of dollars on an asset that you can’t physically hold in your hand. But if such respectable organizations like Christie’s are involved in this, there must be some security in the investment.
Not just art – practically anything digital can be defined as NFT and traded for Etherium, from images, music and video to tweets, sneakers and watches. And in the case of a wristwatch, Ethereum also provides the provenance, which adds to value of such an asset and encourages the trade of digital “unique pieces”.
With more and more digital works fetching record prices, the virtual securitizations of art and collectibles has evolved rapidly. Let’s see how this trend is affecting the luxury watch market.
So far the NFT market has been mostly about digital art, but the legends of Swiss watch industry as well as smaller indie watchmakers are also willing to expand into the NFT space.
Jean-Claude Biver, the founder of Hublot, has shocked the luxury watch industry once, when he presented his first Hublot Big Bang, sensationally combining gold case with a rubber strap.
In March 2021 he opened a new chapter by pushing a first-ever NFT auction of a luxury watch on the OpenSea platform – the “Sothebys” of NFTs[i]. Biver has symbolically chosen a symbol of success, a watch that has defined the history of the modern watchmaking – a 25 year-old prototype of Hublot Big Bang All Black Tourbillion Chronograph from his personal collection.
A Geneva-based cybersecurity firm called WISeKey has developed the blockchain-enabled cryptographic signature which ensured the provenance and authenticity of the Hublot’s NFT.
Biver claimed that he would never sell his Big Bang All Black Tourbillion Chronograph, and will retain ownership of the physical watch. It makes purchasing an NFT very much like owning shares in a company, when you own a minuscule percentage of an actual watch.
But despite the best efforts of Biver in marketing and publicity of this auction, the digital replica of the iconic timepiece struggled to reach $70,000, and then the highest bidder cancelled his bid on the final day of the auction[ii].
Are collectors really prepared to dip into their pockets for a watch represented by a non-fungible token?
In April 2021 Jacob & Co. also claimed to be the first luxury watch brand to launch world’s first NFT[iii]. And it was more successful than Hublot.
The real-life Epic SF24 Tourbillion by Jacob & Co. itself is special enough: this worldtimer features a spectacular “spilt flap” display of 24 time tones, resembling retro timetables which were used in airports back in the day.
In the digital replica of this timepiece the city names were replaced with 10 cryptocurrency names (Bitcoin, Ethereum, Fantom, etc.). In a 10-second 3D animation one can see the scrolling of these cryptocurrencies on the split-flap display and the tourbillon in action on the watch’s dial.
And while the retail value of a physical Epic SF24 is $210,000, its digital version has managed to fetch $100,000 at an auction on the Artgails NFT platform[iv]. Following this success, Jacob & Co plans to release a complete collection of watch NFTs that will exist only in the digital space, which promises greater creativity.
Bridging the gap between digital and physical worlds is not a simple task. But virtual timepieces by Jacob & Co are already commanding thousands of dollars — and it’s quite possible that they are pointing toward the future of collecting.
We’ve proven that NFTs have a place in the watches and luxury world and I’m especially proud that we’re the pioneer in this new digital field. My hope is that this successful sale will pave the way for other luxury brands to start launching products and collections through NFT[v].
Benjamin Arabov, CEO of Jacob & Co
Watches and Their “Digital Twins”
November 2021. Patek Philippe has also followed the new trend, so if you have problem getting your hands on a physical Nautilus, you can now own it … as an NFT.
Although it should be noted that this story doesn’t directly involve the Patek Philippe brand. The highly coveted Nautilus 5711, which is now rare and discontinued, was embodied in an NFT by the SM-ART platform.
After the auction, the physical watch was broken into non-fungible assets, allowing registered members of the platform to buy and trade shares of the timepiece, while the value of the actual timepiece continues to increase.
Indies are also willing to take up the challenge. The only watch brand that represents Russia at Baselworld, Konstantin Chaykin has successfully auctioned the “digital twin” NFT of his infamous Joker timepiece at Ineichen’s auction in May 2021. Chaykin’s NFT, composed of 42,480 computerized images, went for CHF 42,000 which surpassed the estimate by 40 times[vi]!
Welcome to the Future
So far the big luxury brands have stayed out of NFTs, waiting to see if it’s worth the shot. But such brands as Jacob & Co., Patek Philippe and Konstantin Chaykin have proven that there is a market for high-end digital assets in the NFT space after all.
Unlike a physical watch, the NFT cannot be lost or stolen, and thanks to the Etherium blockchain technology, its owner can be 100% certain that his treasure would never be duplicated or corrupted. On top of that, a timepiece made from pixels that you store on your hard drive can command as much as IRL luxury watches.
But the question is – are NFTs merely stuck as the digital twins of physical timepieces or is there something more to it?
[i] World-first with an NFT auction (2021, March 31). Retrieved from https://en.worldtempus.com/article/watches/auctions-and-vintage/jean-claude-biver-x-wisekey-world-first-with-an-nft-auction-29839.html
[ii] NFT’s and their impact on the luxury watch market (2021, May 27). Retrieved from https://www.esperluxe.com/peresper/nfts-and-their-impact-on-the-luxury-watch-market
[iii] Number One: Jacob & Co. Is Launching The First Ever NFT Watch (2021, April 5). Retrieved from https://www.watchonista.com/articles/novelties/number-one-jacob-co-launching-first-ever-nft-watch
[iv] The first watch NFT fetches $100,000 at auction (2021, April). Retrieved from https://www.highsnobiety.com/p/jacob-co-nft-watch/
[v] The first watch NFT fetches $100,000 at auction (2021, April). Retrieved from https://www.highsnobiety.com/p/jacob-co-nft-watch/
[vi] Chaykin's Joker NFT sold for 40 times the price of the original estimate (2021, May 28). Retrieved from https://mywatch.ru/articles/2021/05/28/NFT-Joker_chaykina_prodan_v_40_raz_doroje_pervonachalnoy_otsenki.html