How can NFT change the world of luxury brands?

Maciej Zieliński

02 Sep 2022
How can NFT change the world of luxury brands?

Luxury brands and NFT are a great combination that is growing in popularity. Interestingly - fashion designs and companies are implementing NFT faster and more enthusiastically than in other industries. There seems to be a consensus that Web3 will undoubtedly play a huge role in their future. Both fashion and NFT operate on a model of exclusivity and rarity, which may explain how receptive this field is to the technology. At the same time, other "classic" companies are reluctant to engage with Web3 and its derivatives.

Fashion digitizes projects 

Nearly 2.5 billion people have already participated in one way or another in the virtual variety of the broader economy, which is the direction of the world's evolution. There is no doubt that brands need to find their way in the online parallel world, just as they do in the real world. With the advent of digital transformation, luxury has slowly entered this change. Unlike mass companies that have quickly adapted to e-commerce and social media, there are many reasons why many luxury brands are still lagging. Perhaps the biggest challenge facing luxury fashion brands today is how best to recreate the luxury experience in a non-physical form.

What opportunities do the Metaverse and NFT present for luxury brands?

The merging of the physical and digital worlds through the Metaverse platform is quickly becoming an important opportunity for luxury brands. To meet the expectations of luxury goods consumers, brands with such characteristics need to ensure the highest quality of their online experience - for example, personalizing or customizing it through interactive chat or technical support. In addition, luxury goods consumers are accustomed to acquiring tangible goods through shopping. The advent of coins has broken the long-established model of single ownership of exclusive items while ensuring the rarity of virtual things. NFTs prove ownership of assets to their owners and register them in open-source blockchain technology. In this way, the tokens represent a new system for tracking ownership while preserving the notion of exclusivity that the luxury industry has historically used. The entry of exclusive brands into the NFT market is part of their digital strategy, with the introduction of NFT creations expanding their virtual presence and boosting digital creativity.


Brands have gradually entered the Metaverse to showcase their virtual representatives and NFT products. Prada announced that it had partnered with Adidas Originals to launch a "first of its kind" NFT project. Balmain has partnered with Barbie to offer three unique avatars of the famous doll, with NFT deals in their case costing around $2,000. But while most brands have largely abandoned digital characters or virtual fashion elements, Louis Vuitton has entered the virtual world more engagingly - as it created its own video game.

Examples of luxury brands implementing NFT

Luxury brands are aware of the market, as their advisors have followed consumer interests for years. So it's no surprise that global giants are getting into NFT. Below are companies that have expressed broad interest in blockchain technology and have implemented, implemented, or plan to implement NFT! 

Gucci uses NFT 

Gucci is no stranger to the concept of NFT. The brand first entered the digital market in May 2021, when it released a token film inspired by the Aria series as part of Christie's prestigious Proof of Sovereign sale, headlined by Lady PheOnix. The film was co-directed by Gucci creative director Alessandro Michele and award-winning photographer Floria Sigismondi. The extraordinary piece showcases Michele's Aria collection. Gucci's next NFT project occurred on January 18, 2022, when the company partnered with vinyl toy manufacturer Superplastic to sell 10,000 NFTs called SUPERGUCCI. It's a three-part limited series of digital NFT characters co-created by Michele and Janky & Guggimon of Superplastic - digital characters whose adventures were described initially in CryptoJankyz from Superplastic at Christie's. The NFTs in the collection allows owners to unlock handcrafted white ceramic sculptures 20 cm tall to accompany their digital counterparts. Gucci then launched the 10KTF: Gucci Grail Mint Pass collection in March 2022. The project is a collaboration between digital creator Wagmi-san and Michele to create custom PFP digital apparel based on 11 of the NFT community's most famous designs. Only those who own a PFP from one series will receive a designed mint pass that can be used to purchase a personalized NFT. Moreover, Gucci recently announced a partnership with SuperRare for Vault Art Space. After purchasing $25,000 in RARE tokens to join the SuperRare DAO, Gucci plans to use the Vault Art Space to host exhibitions of NFT artists. 

Yvel - digitizing jewelry  

On June 13, 2022, jewelry company Yvel introduced INFS (independent non-transferable securities) for trading between consumers and businesses. To do so, the company has taken a slightly different approach to the NFT space, creating digital securities that act as non-functional financial products. These NFT-like tokens are physically backed by 24,000 gold coins worth $10,000, decorated with diamonds and other precious stones. The idea is that security backed by physical assets will give digital assets stability, even when the market fluctuates. During the launch of the pre-sale platform in early June, 2,500 coins were issued to accredited investors. These coins will serve as a model for how INFS will operate in the future, driving financial products on the platform. Notably, the tangible guarantees of stablecoins are configurable. This means that investors or companies using the INFS Yvel platform can customize the guarantees according to the market and trends that are currently taking place. Therefore, instead of supporting their non-transferable securities with gold coins, they can support their non-transferable deposits with real experience, products, and profit sharing. The idea is relatively fresh and is slowly gaining more and more supporters.

Clubhouse Archives, Inc - NFT range for a select few 

Club Archives Inc, a blockchain-based NFT luxury apparel brand, recently announced the launch of its marketplace to allow users to purchase a select assortment of luxury apparel. Starting July 13, 2022. Genesis Mint is shortlisting 1,880 digital tokens that will serve as lifetime memberships. Pass holders are gifted with certain amenities, including administrative capabilities, access to exclusive events, and a perpetual share of sales and royalties. By linking NFT to physical goods, every luxury collection launched on the Clubhouse Archives platform will feature 3D clothing made in Italy. The collections that will appear on the platform will be created by designers and voted on by the community, allowing them to play an active role in the development of the brand. The Clubhouse Archies team includes designer and artist James Costa, NFT creator Greg Mike, former Golf Digest fashion director Marty Hackel and more. The platform's first collection will focus on golf sportswear, which is "infused with countercultural luxury streetwear." The forum will use Crossmint as its official trust wallet and payment platform.

Balmain leverages NFT for consumer relations.

French fashion house Balmain recently announced its entry into the NFT game with the announcement of Non-Fungible Thread, an NFT-based fashion ecosystem for those who own Balmain clothing. Collection tools are still under development. Some candidates include digital apparel converted to physical and shipped to their door. Consumers get exclusive collector invitations to future Airdrops and cocktail parties with digital fashion designers. One of the driving forces behind Non-Fungible Thread (still in development) is James Sun, founder and CEO of MINTNFT, an organization dedicated to building Balmain's Web3 vision. Sun believes that for Balmain to distribute NFT on OpenSea or Rarible is a poor way to create a unified community around NFT. The luxury brand seems more focused on building long-lasting relationships with its customer base and creating interactive and engaging experiences for the community, whether digital, physical or a combination of the two. As for the project and how Balmain will implement it, there is much more to come.

Prada - joining forces with Adidas and NFT 

Prada has already made some attempts in the NFT field this year. In January 2022, the company partnered with Adidas Originals on a token project involving 3,000 community-created artworks. These pieces were used to create a unique 1-of-1 NFT by artist Zach Lieberman, which included more than 3,000 images and was sold for 30 ETH. On June 2, 2022, Prada went a step further and released 100 NFTs to coincide with the launch of its latest Timecapsule clothing line, which consists of 100 unisex button-up shirts designed by artist Cassius Hirst. Customers who purchase the collection will automatically receive a free Airdrop NFT, which includes the token serial number and the number of the physical T-shirt it comes with. Details on the availability of the coins are sparse, but the brand's Discord will be revealed to Prada Crypted members in time. The company also mentioned exclusive offers, experiences, and access to future issues.


Luxury brands are immersing themselves more and more in the NFT space. They have generally done a great job using technology to interact with their celebrity watchers creatively. While other non-Web3 industries may be less adept at implementing and utilizing blockchain-based technologies, they should still closely examine how the brands we mentioned in this article can fit in and consequently flourish. By the end of 2025, about 40% of consumers will own digitized luxury goods. Hopefully, this direction of NFT is the future of many exciting projects. 

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Applying Game Theory in Token Design

Kajetan Olas

16 Apr 2024
Applying Game Theory in Token Design

Blockchain technology allows for aligning incentives among network participants by rewarding desired behaviors with tokens.
But there is more to it than simply fostering cooperation. Game theory allows for designing incentive-machines that can't be turned-off and resemble artificial life.

Emergent Optimization

Game theory provides a robust framework for analyzing strategic interactions with mathematical models, which is particularly useful in blockchain environments where multiple stakeholders interact within a set of predefined rules. By applying this framework to token systems, developers can design systems that influence the emergent behaviors of network participants. This ensures the stability and effectiveness of the ecosystem.

Bonding Curves

Bonding curves are tool used in token design to manage the relationship between price and token supply predictably. Essentially, a bonding curve is a mathematical curve that defines the price of a token based on its supply. The more tokens that are bought, the higher the price climbs, and vice versa. This model incentivizes early adoption and can help stabilize a token’s economy over time.

For example, a bonding curve could be designed to slow down price increases after certain milestones are reached, thus preventing speculative bubbles and encouraging steadier, more organic growth.

The Case of Bitcoin

Bitcoin’s design incorporates game theory, most notably through its consensus mechanism of proof-of-work (PoW). Its reward function optimizes for security (hashrate) by optimizing for maximum electricity usage. Therefore, optimizing for its legitimate goal of being secure also inadvertently optimizes for corrupting natural environment. Another emergent outcome of PoW is the creation of mining pools, that increase centralization.

The Paperclip Maximizer and the dangers of blockchain economy

What’s the connection between AI from the story and decentralized economies? Blockchain-based incentive systems also can’t be turned off. This means that if we design an incentive system that optimizes towards a wrong objective, we might be unable to change it. Bitcoin critics argue that the PoW consensus mechanism optimizes toward destroying planet Earth.

Layer 2 Solutions

Layer 2 solutions are built on the understanding that the security provided by this core kernel of certainty can be used as an anchor. This anchor then supports additional economic mechanisms that operate off the blockchain, extending the utility of public blockchains like Ethereum. These mechanisms include state channels, sidechains, or plasma, each offering a way to conduct transactions off-chain while still being able to refer back to the anchored security of the main chain if necessary.

Conceptual Example of State Channels

State channels allow participants to perform numerous transactions off-chain, with the blockchain serving as a backstop in case of disputes or malfeasance.

Consider two players, Alice and Bob, who want to play a game of tic-tac-toe with stakes in Ethereum. The naive approach would be to interact directly with a smart contract for every move, which would be slow and costly. Instead, they can use a state channel for their game.

  1. Opening the Channel: They start by deploying a "Judge" smart contract on Ethereum, which holds the 1 ETH wager. The contract knows the rules of the game and the identities of the players.
  2. Playing the Game: Alice and Bob play the game off-chain by signing each move as transactions, which are exchanged directly between them but not broadcast to the blockchain. Each transaction includes a nonce to ensure moves are kept in order.
  3. Closing the Channel: When the game ends, the final state (i.e., the sequence of moves) is sent to the Judge contract, which pays out the wager to the winner after confirming both parties agree on the outcome.

A threat stronger than the execution

If Bob tries to cheat by submitting an old state where he was winning, Alice can challenge this during a dispute period by submitting a newer signed state. The Judge contract can verify the authenticity and order of these states due to the nonces, ensuring the integrity of the game. Thus, the mere threat of execution (submitting the state to the blockchain and having the fraud exposed) secures the off-chain interactions.

Game Theory in Practice

Understanding the application of game theory within blockchain and token ecosystems requires a structured approach to analyzing how stakeholders interact, defining possible actions they can take, and understanding the causal relationships within the system. This structured analysis helps in creating effective strategies that ensure the system operates as intended.

Stakeholder Analysis

Identifying Stakeholders

The first step in applying game theory effectively is identifying all relevant stakeholders within the ecosystem. This includes direct participants such as users, miners, and developers but also external entities like regulators, potential attackers, and partner organizations. Understanding who the stakeholders are and what their interests and capabilities are is crucial for predicting how they might interact within the system.

Stakeholders in blockchain development for systems engineering

Assessing Incentives and Capabilities

Each stakeholder has different motivations and resources at their disposal. For instance, miners are motivated by block rewards and transaction fees, while users seek fast, secure, and cheap transactions. Clearly defining these incentives helps in predicting how changes to the system’s rules and parameters might influence their behaviors.

Defining Action Space

Possible Actions

The action space encompasses all possible decisions or strategies stakeholders can employ in response to the ecosystem's dynamics. For example, a miner might choose to increase computational power, a user might decide to hold or sell tokens, and a developer might propose changes to the protocol.

Artonomus, Github

Constraints and Opportunities

Understanding the constraints (such as economic costs, technological limitations, and regulatory frameworks) and opportunities (such as new technological advancements or changes in market demand) within which these actions take place is vital. This helps in modeling potential strategies stakeholders might adopt.

Artonomus, Github

Causal Relationships Diagram

Mapping Interactions

Creating a diagram that represents the causal relationships between different actions and outcomes within the ecosystem can illuminate how complex interactions unfold. This diagram helps in identifying which variables influence others and how they do so, making it easier to predict the outcomes of certain actions.

Artonomus, Github

Analyzing Impact

By examining the causal relationships, developers and system designers can identify critical leverage points where small changes could have significant impacts. This analysis is crucial for enhancing system stability and ensuring its efficiency.

Feedback Loops

Understanding feedback loops within a blockchain ecosystem is critical as they can significantly amplify or mitigate the effects of changes within the system. These loops can reinforce or counteract trends, leading to rapid growth or decline.

Reinforcing Loops

Reinforcing loops are feedback mechanisms that amplify the effects of a trend or action. For example, increased adoption of a blockchain platform can lead to more developers creating applications on it, which in turn leads to further adoption. This positive feedback loop can drive rapid growth and success.

Death Spiral

Conversely, a death spiral is a type of reinforcing loop that leads to negative outcomes. An example might be the increasing cost of transaction fees leading to decreased usage of the blockchain, which reduces the incentive for miners to secure the network, further decreasing system performance and user adoption. Identifying potential death spirals early is crucial for maintaining the ecosystem's health.

The Death Spiral: How Terra's Algorithmic Stablecoin Came Crashing Down
the-death-spiral-how-terras-algorithmic-stablecoin-came-crashing-down/, Forbes


The fundamental advantage of token-based systems is being able to reward desired behavior. To capitalize on that possibility, token engineers put careful attention into optimization and designing incentives for long-term growth.


  1. What does game theory contribute to blockchain token design?
    • Game theory optimizes blockchain ecosystems by structuring incentives that reward desired behavior.
  2. How do bonding curves apply game theory to improve token economics?
    • Bonding curves set token pricing that adjusts with supply changes, strategically incentivizing early purchases and penalizing speculation.
  3. What benefits do Layer 2 solutions provide in the context of game theory?
    • Layer 2 solutions leverage game theory, by creating systems where the threat of reporting fraudulent behavior ensures honest participation.

Token Engineering Process

Kajetan Olas

13 Apr 2024
Token Engineering Process

Token Engineering is an emerging field that addresses the systematic design and engineering of blockchain-based tokens. It applies rigorous mathematical methods from the Complex Systems Engineering discipline to tokenomics design.

In this article, we will walk through the Token Engineering Process and break it down into three key stages. Discovery Phase, Design Phase, and Deployment Phase.

Discovery Phase of Token Engineering Process

The first stage of the token engineering process is the Discovery Phase. It focuses on constructing high-level business plans, defining objectives, and identifying problems to be solved. That phase is also the time when token engineers first define key stakeholders in the project.

Defining the Problem

This may seem counterintuitive. Why would we start with the problem when designing tokenomics? Shouldn’t we start with more down-to-earth matters like token supply? The answer is No. Tokens are a medium for creating and exchanging value within a project’s ecosystem. Since crypto projects draw their value from solving problems that can’t be solved through TradFi mechanisms, their tokenomics should reflect that. 

The industry standard, developed by McKinsey & Co. and adapted to token engineering purposes by Outlier Ventures, is structuring the problem through a logic tree, following MECE.
MECE stands for Mutually Exclusive, Collectively Exhaustive. Mutually Exclusive means that problems in the tree should not overlap. Collectively Exhaustive means that the tree should cover all issues.

In practice, the “Problem” should be replaced by a whole problem statement worksheet. The same will hold for some of the boxes.
A commonly used tool for designing these kinds of diagrams is the Miro whiteboard.

Identifying Stakeholders and Value Flows in Token Engineering

This part is about identifying all relevant actors in the ecosystem and how value flows between them. To illustrate what we mean let’s consider an example of NFT marketplace. In its case, relevant actors might be sellers, buyers, NFT creators, and a marketplace owner. Possible value flow when conducting a transaction might be: buyer gets rid of his tokens, seller gets some of them, marketplace owner gets some of them as fees, and NFT creators get some of them as royalties.

Incentive Mechanisms Canvas

The last part of what we consider to be in the Discovery Phase is filling the Incentive Mechanisms Canvas. After successfully identifying value flows in the previous stage, token engineers search for frictions to desired behaviors and point out the undesired behaviors. For example, friction to activity on an NFT marketplace might be respecting royalty fees by marketplace owners since it reduces value flowing to the seller.


Design Phase of Token Engineering Process

The second stage of the Token Engineering Process is the Design Phase in which you make use of high-level descriptions from the previous step to come up with a specific design of the project. This will include everything that can be usually found in crypto whitepapers (e.g. governance mechanisms, incentive mechanisms, token supply, etc). After finishing the design, token engineers should represent the whole value flow and transactional logic on detailed visual diagrams. These diagrams will be a basis for creating mathematical models in the Deployment Phase. 

Token Engineering Artonomous Design Diagram
Artonomous design diagram, source: Artonomous GitHub

Objective Function

Every crypto project has some objective. The objective can consist of many goals, such as decentralization or token price. The objective function is a mathematical function assigning weights to different factors that influence the main objective in the order of their importance. This function will be a reference for machine learning algorithms in the next steps. They will try to find quantitative parameters (e.g. network fees) that maximize the output of this function.
Modified Metcalfe’s Law can serve as an inspiration during that step. It’s a framework for valuing crypto projects, but we believe that after adjustments it can also be used in this context.

Deployment Phase of Token Engineering Process

The Deployment Phase is final, but also the most demanding step in the process. It involves the implementation of machine learning algorithms that test our assumptions and optimize quantitative parameters. Token Engineering draws from Nassim Taleb’s concept of Antifragility and extensively uses feedback loops to make a system that gains from arising shocks.

Agent-based Modelling 

In agent-based modeling, we describe a set of behaviors and goals displayed by each agent participating in the system (this is why previous steps focused so much on describing stakeholders). Each agent is controlled by an autonomous AI and continuously optimizes his strategy. He learns from his experience and can mimic the behavior of other agents if he finds it effective (Reinforced Learning). This approach allows for mimicking real users, who adapt their strategies with time. An example adaptive agent would be a cryptocurrency trader, who changes his trading strategy in response to experiencing a loss of money.

Monte Carlo Simulations

Token Engineers use the Monte Carlo method to simulate the consequences of various possible interactions while taking into account the probability of their occurrence. By running a large number of simulations it’s possible to stress-test the project in multiple scenarios and identify emergent risks.

Testnet Deployment

If possible, it's highly beneficial for projects to extend the testing phase even further by letting real users use the network. Idea is the same as in agent-based testing - continuous optimization based on provided metrics. Furthermore, in case the project considers airdropping its tokens, giving them to early users is a great strategy. Even though part of the activity will be disingenuine and airdrop-oriented, such strategy still works better than most.

Time Duration

Token engineering process may take from as little as 2 weeks to as much as 5 months. It depends on the project category (Layer 1 protocol will require more time, than a simple DApp), and security requirements. For example, a bank issuing its digital token will have a very low risk tolerance.

Required Skills for Token Engineering

Token engineering is a multidisciplinary field and requires a great amount of specialized knowledge. Key knowledge areas are:

  • Systems Engineering
  • Machine Learning
  • Market Research
  • Capital Markets
  • Current trends in Web3
  • Blockchain Engineering
  • Statistics


The token engineering process consists of 3 steps: Discovery Phase, Design Phase, and Deployment Phase. It’s utilized mostly by established blockchain projects, and financial institutions like the International Monetary Fund. Even though it’s a very resource-consuming process, we believe it’s worth it. Projects that went through scrupulous design and testing before launch are much more likely to receive VC funding and be in the 10% of crypto projects that survive the bear market. Going through that process also has a symbolic meaning - it shows that the project is long-term oriented.

If you're looking to create a robust tokenomics model and go through institutional-grade testing please reach out to Our team is ready to help you with the token engineering process and ensure your project’s resilience in the long term.


What does token engineering process look like?

  • Token engineering process is conducted in a 3-step methodical fashion. This includes Discovery Phase, Design Phase, and Deployment Phase. Each of these stages should be tailored to the specific needs of a project.

Is token engineering meant only for big projects?

  • We recommend that even small projects go through a simplified design and optimization process. This increases community's trust and makes sure that the tokenomics doesn't have any obvious flaws.

How long does the token engineering process take?

  • It depends on the project and may range from 2 weeks to 5 months.