Drops meets Adam Bomb Squad — an interview with Stamford and Daniel

We sat down with two of the smart, talented folks we have on the team at Legitimate: Stamford and Daniel. Stamford is our multiple-hat-wearing Chief of Staff; he helps manage the numerous incoming requests of brands and artists that want to collaborate with us, plans events such as NYFW, and leads the discussion for what a Web3 retail protocol might look like. Daniel leads the engineering efforts; not only does he own part of the product direction, but he also manages technical projects, writes code, helps establish processes, and ensures the team has the best engineering tools for the job.

We discussed LGT’s upcoming Drops platform, the future of the LGT marketplace, what the transition between Web2 and Web3 might look like, and more!

(This interview was edited for length and clarity)

What problem is the LGT marketplace trying to solve?

If you look back a few years ago to the founding of LGT, there was a problem with counterfeit goods being listed on marketplaces. LGT had the technology to authenticate the digital identity for any physical good that existed, and we wanted to make that accessible to our brand partners.

Along the way, we realized that the problem was much bigger. People want to be able to transfer their physical good’s digital identity along with its physical existence. We came up with a solution: attach a physical product to an NFT, thus creating a physical NFT that then can be transferred on a blockchain. Customers then asked us for a place to sell the physical NFT, and that’s where the marketplace came in. Essentially, the marketplace is a place for our brand partners to have a Web3 presence. LGT provides a white-glove service, which means we handle all the logistics: shooting the photos, facilitate social media promotions, managing the sale auction of the NFT, and ultimately sending it out to the winning bidder. It’s basically the Web3 version of Sotheby’s or Christie’s. We’d love to build an open platform like eBay for Web3 one day, and this is just step one in our journey.

NFTs allow us to establish the digital identity of any given item. We want to provide consumers, our brand partners, and creators with a way to buy, sell, and transfer digital certificates of authenticity and ownership in tandem with the physical goods — a physical NFT.

There are many companies that solve Web2 needs, such as Shopify. Shopify lets you create your own online store and brand identity, you can list your goods for sale, you can even ship it to their warehouse, and they’ll send it out for you. But in the Web3 space, there is no Shopify, there is no Squarespace, there are none of these small business solutions to help sell physical items online. The problem that LGT is uniquely here to solve is the marriage of the sale of physical goods and blockchain technology.

So, connecting an NFT to a physical good is uniquely Web3; what is the Web2 equivalent?

The closet comparison would be a physical “certificate of authenticity” or ownership certificate, the kind you get when you buy certain luxury goods like Rolex watches or Gucci bags. As many are well aware, these aren’t terrifically hard to fabricate.

Why should people be excited about physical NFT’s?

Drops is making the physical digital. The artist or creator can attach an LGT tag to a physical item. Then, anyone can scan the tag with their phone, allowing them to see the NFT while simultaneously authenticating the item.

In the future, we’ll be able to consume the physical NFT or the “story” of the garment in the same way that we consume social media. Think about reading an Instagram post and clicking to learn more about the creator. The physical item could store unique information about the creator or previous owners. I think it really opens a lot of different avenues and ways to interact with physical goods, all by tapping the NFC chips. I think there’s going to be a lot of different implementations that we simply cannot imagine today.

Why should the average consumer/creator care about the ability to issue NFTs?

It’s become headline talk in the mainstream media, with people touting their NFT riches, but that doesn’t translate to understanding the intricacies of NFTs.

In terms of fashion, there isn’t a brand today that has a lead in the Web3 space. I think there will one day be a “Supreme” of Web3, whether it’s Supreme or some other brand. But for them to have a chance to be that Web3 collectible fashion brand, with NFT’s and physical goods, the market potential is huge.

You mention the potential for utilization in the fashion industry. What’s the biggest difference between, say, Web2 Supreme, and a possible Web3 Supreme?

Resale. The Web2 space has so many resale platforms, like Poshmark, RealReal, GOAT.com, StockX, Grailed. They’re all trying to solve similar problems: how to reuse clothes, resell at the right price, guarantee authenticity, and present it in a way that makes people want it. The profits from resale go to resale platforms and the original creator of the item receives nothing.

We could fix all this in Web3 and create financial incentives for the creators themselves. For example, say I bought a hoodie today and tomorrow I want to resell, but because the hoodie might be made of low-quality materials, it won’t have a long lifespan past maybe one resell. But what if we change the financial model, so that the retailer is incentivized to use better quality, longer-lasting material that may not go out of style? We can be more sustainable and use less materials and labor to create fewer new pieces of clothing. The aim is to incentivize companies like LVMH, or even fast fashion brands like H&M, to create more sustainable clothing on the basis that they can earn money not just on the initial sale to the buyer, but from subsequent resales too. This has the potential to change how we make clothing.

The recurring revenue from resale for brands and creators could be enforced through smart contracts in web3 so that they are entitled to a percentage of all resales of the physical NFT much like how digital only NFTs work today. Because enforcing royalties on the smart contract is done on the blockchain, it requires no human intervention once it has been set up. This allows the creators to focus on what they do best, create goods that are long lasting and have potential for reuse.

Your first Drops feature is streetwear brand The Hundreds. What can you tell us about that?

The Hundreds is one of the OG streetwear companies, founded in the early 2000’s; it’s on par with the likes of Supreme, Undefeated, and others. Adam Bomb Squad is The Hundreds’ recent profile picture project that allows people to purchase one of 25,000 unique bomb icons inspired by The Hundreds’ iconic bomb logo. The Hundreds was one of the first streetwear brands to really dive into the NFT space. If you purchase an ABS NFT, you’ll also get a physical shirt. That shirt is one of the items that will be listed on Legitimate’s marketplace. It’s an exciting collaboration for us, and just one of the ways that Legitimate will propel Web3 adoption.

We wanted to work with a brand that could showcase our marketplace and the value of Web3 in a way that would really resonate with consumers. Through trial and error, we realized that pushing Web3 and NFTs on people cold turkey doesn’t work. It’s a difficult concept for people to grasp. The hope is that this will help bridge the Web3/NFT knowledge gap and give people a familiar context in which to understand the potential of Web3.

What are some challenges with Drops?

The cost, firstly. There’s a lot that happens behind the scenes.

We’re trying to figure out what the Web3 retail landscape looks like. To do that, we have to be the primary retailer/auction house. We’re handling everything for the creator/brand, and we face the same challenges the creator would face if they did it independently. We’re test subjects, too!

There are a lot of Web2 and Web3 tools that we need to figure out for ourselves, such as marketing. Emails and social media are technically Web2, so the question is, should we use them, or try to invent something new just for Web3?

There are also a lot of Web2 and Web3 problems that we need to work through from a technical perspective. Even something as simple as, say, “Where do we house the image?” or “How do we notify winners of an auction?” is a pretty difficult decision. Ultimately, we’ve settled on utilizing some Web2 standards and hosting some data on our own servers.

Eventually, we hope to get to a place that will empower any creator to use the same tools that we use so that they could potentially handle sales on their own. With the unique space we occupy, identifying these problems and their solutions will lead to a polished user experience, so that even someone with limited technical abilities is able to transact on our platform.

So when Drops takes off and is adopted by everyone, what do you think that world looks like?

More people are going to own crypto and transact only in crypto. That’s going to be a big change.

Once people have physical NFTs in their hands, we’ll be able to start introducing additional features, such as resales and/or built-in experiences, whether they be digital, digital plus physical, or access to events. These are all technically possible with Web2, but it’s much easier and frictionless in the Web3 world. Hopefully, we’ll also be able to empower creators to take ownership and put out community-building campaigns directly through the NFC chip.

But the first step is Drops by Legitimate, allowing people to see that a physical item could have a digital counterpart. Once they’ve interacted with it and come to understand that the connection is unique and secure, that it’s different from a QR code, then we will be able to start introducing new ways to allow the user to consume the physical product.

What does the future of the LGT marketplace look like?

Allowing this protocol to be more self-service will be huge. It democratizes the way that people can sell and access items because the LGT marketplace is global. There are so many different brands out there that want to showcase and sell their work, but don’t have the means to do so efficiently. Incorporating what we do with their physical products allows people to do that. With LGT, all you do is chip the product and then you’ll have access to a marketplace as well as a global audience.

In the future, we want to leverage smart contracts into the marketplace. Smart contracts are great for escrow, ie. if someone deposits a fund into a smart contract, the fund is only released once all agreed-upon conditions are met — for example, that an item has been delivered, and when a buyer has verified that the item is received in the promised condition. There are myriad ways to utilize smart contracts with NFTs. This would allow us to put our trust in the code to carry out the execution, versus humans, who are easily prone to errors.

In terms of where we want to be as a company, there are two main aspects. One is the NFT side, ie. creating and integrating the digital experience with physical goods. We’re thinking about helping our creators create communities around their goods; when they tap a chip, maybe some custom integration in the future can be added so that it brings them a website, AR experience, or the like; stuff that other digital NFT projects are successfully utilizing but has yet to be extended to physical NFTs.

The other side is the marketplace. We will be using our own protocol to create our own marketplace. Eventually, we want this protocol to be open to everyone; say our marketplace is not exactly the right fit, or maybe somebody wants their own. They can utilize our protocol and platform, take whatever pieces they deem useful, and create their own custom version of what we originally built. Open-source code and an open protocol will give everyone the chance to create what they need without having to start from scratch and have it shared and decentralized on the blockchain.

At the end of the day, the NFTs’ capabilities should be up to their respective creators. Much of this technology is still available in the marketplace today. We see NFTs on OpenSea and other platforms that allow you to transact and unlock access and digital experiences; our NFTs are no different. It is totally up to the creators/brands to figure out what it is they want to create, what kind of community they want to build, what kind of utilization they want to implement with this physical NFT. The sky really is the limit!

Catch the launch of Drops by Legitimate on May 16th.

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