On The Brink with Castle Island - Bennett Collen and Stephanie Howard (Endstate) on building a web3-native fashion brand (EP.346)

Episode Date: September 6, 2022

Ria and Nic from Castle Island sit down with Stephanie Howard and Bennett Collen, cofounders of Endstate, a web3 footwear and fashion brand. We cover the merits of the redeem-and-retain NFT model and the vision for Endstate. Bennett's prior crypto startup and how he decided to unite his passion for sneakers with web3 How Bennett and Stephanie met and cofounded Endstate Stephanie's career in sneaker design to date  Why creators and athletes are jumping at the opportunity to issue merchandise-linked NFTs Why Bennett and Stephanie chose to launch a web3 native brand How redeem-and-retain NFTs allow manufacturers to reduce inventory risk Why fashion is getting more targeted and niche Why Endstate is able to release new iterations of their sneakers so quickly Endstate's rationale for manufacturing in the US Endstate drops to date Endstate's new drop with Eagles wide receiver DeVonta Smith How web3 brands should think about which metaverse to build for Endstate's thinking around Solana vs Ethereum and the impact of gas fees How to link physical products with NFTs – from NFCs to QRs to visual scans What should we call physical NFTs? Aside from shoes, what merch is amenable to the Endstate model? What product sectors will be NFTed? How developed are authenticated third party marketplaces for physically linked NFTs? Physical-linked NFTs as a trojan horse to onboard mass markets into web3 The future state of Endstate Other web3 drops Bennett and Stephanie enjoyed The future of entangled NFTs  Read more:  Nic Carter on Medium: Redeem and Retain NFTs are the future of Luxury Goods Vogue Business: How the crypto bear market is resetting fashion's Web3 strategy Drops and more at endstate.io Intro and outro music: Daniel Allan's Collage #344 

Hello and welcome back to On the Brink. This is Nick Carter. Today I sit down with my colleague, Gria, and we talk to Bennett Collin and Stephanie Howard, the co-founders of NState, a Web3 footwear and fashion brand. They have done some pioneering work in the footwear space, working on physical NFTs. It's a model where you mint an NFT and you can redeem it for physical merchandise. They are a few drops deep into their existence now and have really pioneered the Web 3 footwear model, which is taking off with other mainstream brands as well. This is a rapidly growing space and a large number of luxury and streetware brands are getting into it pretty aggressively. The model is super flexible and the possibilities of what you can do with merchandise linked NFTs have barely,

been explored yet, but the N-State team are super forward thinking on the topic. As a reminder, Castle Island is an investor in N-State. Let's jump right into it. Welcome back to On the Brink. You have Nick and Rhea here from Castle Island Ventures, and we're joined today by Bennett and Stephanie for the co-founders of N-State, which is a Web3 brand that's pioneering the concept of redeem physical and retained digital NFTs. N-State is also a sister. portfolio company. Welcome, Bennett and Stephanie. Excited to have you here. Thank you. Thanks for having us. So to kick it off, could you just start by giving us an introduction? Tell us about how you met and ultimately decide to tackle the digital twin NFT space together. And then in your own words,

how would you describe end state as it stands today? Yeah, kind of a long backstory as to how we met and how end state came to be. It starts really with my first business venture, which was a company called Cognite, which was a trademark protection platform. And what we did there was use blockchain to help businesses protect their trademark rights. So we were essentially taking smart contracts and representing trademark rights on chain. And this was before ERC 721 was even codified. So we had to create our own version of NFTs. And eventually, you know, obviously NFTs became very well known and mainstream. But at the time, we were thinking that this could be a great place to help people enforce their rights, but also a way for them to sell them in secondary marketplaces and license them.

And so I had always thought that that tech for that company would apply really well to sneakers as a lifelong sneakerhead. There's a lot of characteristics that sneakers actually share with intellectual property in terms of, you know, non-fungibility, scarcity, secondary market that I think would make it really interesting to associate NFTs with apparel. So I always kind of had that idea in my head of it being something that would work well together. And given that, I had never, you know, designed a sneaker or manufactured a sneaker, despite how many sneakers I owned, I needed a co-founder who brought that to the table. And I was actually lucky enough to go to a webinar where Stephanie was speaking. This was in 2020 when everything was webinars and there was no

in-person events anywhere. She was speaking on a panel and I just sort of added her on LinkedIn afterwards and bothered her for like three or four months about NFTs. And then in the middle of my, you know, pestering her about this idea of sneakers and NFTs, top shot took off. And, you know, crypto punks really started hitting the mainstream and NFTs started, you know, entering the mainstream consciousness a little bit more. And it just became really evident that now was the right time for this type of business. And I, you know, Stephanie and I left our jobs in May of 2021 to co-found and stay together. Stephanie, how did Bennett convince you to jump into the ring here and do a Web 3 startup?

He did a great job. So I, you know, I've been in this industry. in the sporting goods design industry mostly in, you know, sneaker design for over 25 years, having worked as a design director at Nike and New Balance. And I, you know, I was doing a lot of innovation work, right? You know, when he met me, I was consulting for brands, such as like Timberland, the North Face vans, almost entirely thinking about the future, right? What's on the emerging future? How can we make products differently? How can we, you know, understand. understand insights into what people are going to want and need in the future. And I had not yet

at all heard about NFTs or this technology in Web 3. But when Bennett brought it up, I thought it was really interesting. Like the idea that I could pack a lot more value into a product. Like all we think about as product designers is how can we make something that somebody will covet and somebody will delight somebody and make their life. lives better and problems solved for them. And this idea that a product could be so much more than the physical product itself, but could have all this utility. And utility, you know, in this case, you know, through like really meaningful,

inspirational events that, you know, people could attend or, you know, connections to, you know, people that we collaborate with that they're a super fan of. All of that just really got me excited. As a person who was very much interested in innovation, I loved the idea that a product could be so much more than the product itself in the physical world. I think that's a good segue for another question I had, which is, you know, in your experience operating in this space and maybe through conversations that you've had with brands and creators that you've collaborated with or hope to work with, what do they highlight as the biggest reasons that they're leaning into this, this category? You know, what activations or experiences are they excited about that they see this model

unlock? The idea of being somebody, a creator or an athlete who has a big fan base and often, you know, some ways disconnected from their community, I think they get really excited about this idea of having that deeper connection and, you know, and building their own personal brands, you know, beyond what they do now, right? So, you know, in an athlete's perspective, a lot of these amazing, you know, athletes are also amazing people in their own right. And they have, you know, an audience that they'd like to kind of continue to talk to beyond what they're doing on field, if you will, or on the court. And so that's, it's exciting for them to think

about, you know, how they can make a difference and, you know, getting to know their fan base in a new way is one of the ways that they can make a difference. We also, you know, participate, all of our drops have a charitable component to it. And so whoever we're collaborating with gets to, you know, choose how they're going to have an impact through selling a product. And a lot of these creators and athletes, you know, don't have a, you know, foot in the door in, sneakers, right? It's a very, very coveted space for them. And it's also very complex. It's very complicated to make sneakers. We could spend an entire podcast just talking about the product development experience. But it's complex. And so, you know, we're offering them, you know,

an entrance into the ecosystem of not just Web 3, but also into, you know, this coveted world of sneakers. I'm sure Bennett can add to, you know, beyond that. But I feel like, You know, there's a lot of exciting ways that they're, we are building our brand and helping others kind of build their own personal brands at the same time. What was it that motivated you to launch a sort of first party brand, which I, you know, is obviously a huge challenge in terms of differentiating yourself as opposed to just creating, you know, enabling technology for any of these existing brands, footwear brands to make their way into the Web3 space?

going back to the genesis of the idea a platform was one of the first things that crossed my mind making tooling that would allow the existing brands to enter the space and for lack of a better word, tokenize their inventory or create these NFT product experiences. But the more I thought about it, the more it became apparent that the biggest and most exciting opportunity was to create a Web3 native brand that incorporated NFTs into the product ownership experience instead of trying to shoehorn. NFTs into an existing brand because it creates such an open space for us to innovate and try new products and try new, you know, new activations and new perks for the NFT holders and different

go-to-market strategies, whereas the traditional brands are sort of pigeonholed in by their decades of branding and positioning within the market. They're not able to as experiment as freely as we are. And so the idea of just being able to do things like throw a tailgate for holders of a particular NFT ahead of a football. game or airdropped and cheese steaks based on, you know, something, something that happens inside of a football game or, you know, give a free pair of sneakers to, you know, people who supported this in our first drop just seemed like way more fun and a lot more exciting than, you know, trying to teach, you know, legacy companies about the space and get them excited about it.

And from like a very literal physical perspective, it also helps to own the whole supply chain, you know, the whole manufacturing. I mean, I guess you have to reexamine your assumptions if you're an established brand and now all of a sudden you have to embed NFC chips in your products. Yeah, we're incredibly nimble, right? I mean, Stephanie can speak to our timelines a little bit and how they compare to traditional companies, but we're able to address so many opportunities, or really fat tail of opportunities for collaborations that would just be completely unavailable to bigger companies because they have to get their whole organization. to shift and move quickly, which is obviously not their specialty.

So, I mean, Stephanie, you want to talk a little bit about the timelines that we're operating on versus what's typical? Yeah, yeah. It typically takes a legacy brand about 18 months to get a product from design all the way to the market. We're doing that in a third of the time. And we are like really nimble as Bennett mentioned. You know, we are depending on, you know, the,

the constraints of the project, we can move very, very quickly just within a few months. And, you know, from talking to somebody, getting, you know, design on the table, working together with them and having a product, you know, for sale and into manufacturing very, very quickly. And yes, we, you know, we definitely are, you know, have amazing partners that we're working with on the manufacturing side that, you know, luckily I've had a lot of experience, working with many of these people in the past, and so have been able to use that network to not only just enable us to kind of move quickly, but also to do some challenging things, like our first drops were all made in the U.S., and that means the sole and the upper were both

made in the U.S. very, very complicated to do. We did that and moved fast. So, yeah, we're operating in a different sort of development timeline than what you see at the big brands. Beyond owning, you know, manufacturing and having it be domestic, can you talk about specifics of how you actually structure these drops that allow you to ship on this, this faster timeline and more efficiently? So far, we've structured them so that we sell the NFT component first, and then there's a separate event where the holders come and redeem their NFTs for the physical pair of sneakers. So this does two things. Well, going to market through NFTs really does two things. One is that it allows us to not take an inventory position.

So essentially, you know, pre-selling demand. And then we have this redemption event where they give us their shoe size. And then we can make the exact size run that our customers require and not take on a bunch of inventory, which is great from a business model perspective. But it's also great, you know, from an environmental perspective and gives us more flexibility to, know, do these super small targeted drops because we don't have to, you know, say, okay, this person has X following or X size fan base and X percent of them are going to buy. So that means that, you know, we roughly want to make however many thousand pairs of sneakers. And then we have to put this amount

of marketing dollars into it to, you know, sell out that, you know, that run and have it work for us. We know, you know, all those numbers up front and, you know, the percentages of people who are buying and whatever, we're still figuring out as we go through these drops. But in terms of what order we're putting into the manufacturer and how many pairs to make. We know that exactly ahead of time. There's no excess inventory, which also lends itself really well to just sort of the whole vibe and ethos of the NFT ecosystem, right, where there's scarcity and a limited supply. And there's no excess, you know, inventory out there floating out there that you don't

know where it came from or there's no provenance of it because each pair is tied directly to an NFT. It's a closed system. even though the word fungible is being used a lot here it occurs to me that you're actually defungibulizing sneakers by creating smaller and smaller more targeted drops having each sneaker have these unique traits including physical traits it seems to me that you're taking these big production fixed runs and making them more targeted more custom more tailored to a specific influencer Yeah, and that's the way the world's moving in general, right?

I mean, there used to be, you know, five cable channels that everyone watched. Everyone watched all the same shows. Everyone watched all the same news programs. And now everything is very targeted and niche and people are able to select, you know, very slim, narrow interests that they choose to engage in. We've seen the same thing in sort of, you know, brands and, you know, with the direct-to-consumer stuff. I think that everything is moving towards, you know, more targeted, serving the, you know,

needs of particular populations. What's great about our model is that we're able to work with anyone who has an audience or really a story to tell that, you know, would be interested in a sneaker drop for that collaborator, right? So we're able to work with a bunch of different audiences based on who we're collaborating with by nature of, you know, who their fans are, which is a really great spot for us to be in. It's also really fun because we get to work with, you know, we're having conversations with athletes, artists, musicians, other brands. you know, sports teams, you know, just a huge variety of people who are interested in this type of, you know, crossover between physical and digital.

And it helps that sneakers are cool, right? To Stephanie's point, like it's a culturally relevant product that people like. They like talking about, like the idea of having your own signature sneaker is just really exciting. Stephanie, is there anything you can point to in the product development process that you've streamlined that allows you to facilitate these customizations so quickly and so efficiently. Yeah, there's a few things. 100%, you know, we're small and we're lean and we make decisions very, very quickly.

That's, you know, so that gets the design ready to go much faster than in a, you know, typical program. But definitely the, you know, the redemption part of this where we're making to, order is a big reason why we can move this quickly because, you know, we can plan ahead and we can order some materials ahead because we have a general idea. But, you know, we make the shoes right when those size orders come in. We're not holding a big volume, just waiting to figure out what stores we can get them to. And yeah, I think it's the business model mostly that that's doing it. we again have these great connections with factories and the people who are making our products.

So we're able to prototype. So after design, there's the prototyping phase where you have to make a few different versions and refine them before you get to that final one. We're able to move quickly there. And I think that's mostly relationship-based. Like we have factories that are just as excited about what we're doing as we are. And so they're moving quickly for us, which we're happy to have those partners. Was the decision to manufacture domestically ideological, or was there also sort of a pragmatic element to that?

I think a combination of the two. I mean, certainly it was happening during the supply chain, you know, the worst of the crisis. But that wasn't the reason why we did it. I just said if I was, you know, to Bennett, you know, I've been in this for a long time. If I'm doing something new and creating a brand, I want to have like all of it feel good, you know, not just like the message on the outside, but what we're doing on the inside. And so some of it's about made in the USA. It's mostly just about feeling really connected

to the factories that are making our products. So if they're in the US, fantastic, because there's a story to be told there that a lot of people get excited about. And so that's, we're happy. And it helps us with development. Certainly, it's easy to get to the factory and make these revisions in person.

And we love doing that to help us move quickly. But it's mostly about just, I really want to know who's making the product and that this you know whatever we're doing we're doing it good we're not just doing it to you know make a quick buck was there something that changed in the domestic manufacturing environment that actually made this possible recently or has it always been possible it's just a cost issue no i mean they're there you know our first product was made at a brand new factory so they were opening the factory at the same time that we were creating our first product so you know, we were experimenting together as a team, I guess. So, yeah, so that helped move that one

along. That fact, you know, there's not a lot of footwear factories in the U.S., which, you know, I'd love to see more of for sure. There's just, there's, there is a limited capacity to do it here. Hopefully that changes, you know, we'll see that I think that, you know, we're working with a couple different factories and both of them have a lot of volume coming through and a lot of new customers coming through. So I do think that there's a lot of interest and when there's a lot of interest that ought to drive more more to open. So, and State has curated a number of drops over the last few months. Some of them have been proprietary and then some of them have been in collaboration with other brands or creators. Could you guys expand on the collections that you've launched so far?

Happy too. So the first one was drop zero, which happened in November of 2021. And this was really our testing the waters, right, and making sure that our systems all worked. So it was really tempting, especially I'm sure you all remember November 2021, to like put out 10,000 of these things because it probably would have minted out with very little marketing, just given the nature of the market at the time. But we wanted to make sure that we could deliver on the product, right? And to Stephanie's point, this was, you know, all new systems we had to put in place from, you know, supply chain manufacturing partners, you know, the manufacturing partner themselves were getting their systems online. We didn't want to overextend and overpromise and under-deliver.

So that drop was 115 pairs total. So it was very limited drop. But we were able to nail the manufacturing and the product delivery, right? So our customers were really thrilled with the packaging, the quality of the sneakers. You know, they came, you know, within the time frame we projected, we're embedding NFC chips into the sneakers so that each physical sneakers tied one to one to the corresponding NFT and you can authenticate the pair of sneakers just by tapping your phone to it. And that's complex to manage, right? So we wanted to make sure that we could do the things we were saying we were going to do. So that was drop zero. The next one was the Ukraine drop, which was really interesting. It came together over a weekend. So the war broke.

out, I think, on a Thursday, I believe we launched the NFT the following Tuesday, right? And we had, you know, the idea was just to donate everything, not just the proceeds, but the entire sort of mint amount to this organization called Direct Relief, which was providing humanitarian aid in Ukraine. And the really interesting part is that we were able to donate through the giving block, which facilitates donations in crypto to various nonprofits. And we really like the idea of us still being a new company, but people being able to trust us that we're going to do the right thing because we'll post the Ethereum transactions once the donations go through.

Right. So we were going to say, you know, as a new company, you know, whatever we were at the time, five months old, if we said, hey, you know, trust us buy this thing. We'll donate it. I'm sure a lot of people would have been skeptical. But the fact that we, you know, sold the NFTs and then, you know, whatever was a day later posted the, you know, ether scan link to show here's the donation. and we made to the Giving Blocks address in this amount.

To me, it was just a really exciting use of blockchain and crypto to be able to tell that story. Let's see. The following drop was with the BlitMap NFT community, which is a really fun and exciting product or project. I think it's the Marvel of the Metaverse, right? It's this whole character ecosystem, and the founder is this guy, Dom Hoffman, and he also did the Lute project, and he founded Vine, the social video sharing. So he's just got a really interesting and creative mind.

And I really like the way he's thinking about building out this ecosystem. So we did a sneaker specifically for the holders of blit maps and sort of called back to some of the original iconic designs from that NFT collection. So that one was really fun too. And then Stephanie, why don't I let you talk about drop two? Yeah. Yeah. So we just finished with the drop two mint, really excited.

Right now, it's open. for our drop zero holders. So it's a brand new design. This one's cut and sew leather where first design drop zero and the Ukraine and the blit kick shoes. Those are all knitted. So very different technologies in terms of how they were made. And so the drop two is more like what people think of traditionally and when they think about sort of collecting sneakers that they think often about these leather shoes. And so we kind of broadened our scope in terms of aesthetics and what we're putting out there. The drop zero holders, they didn't know it was a surprise.

We rewarded them with a freemint of drop two. So that's what's happening right now. And we created four colorways of this. Really, really great design. We hired an amazing designer named David Filar. And together, we kind of created this very new, you know, interesting silhouette based on our DNA, our DNA in terms of design language is about kind of being both physical and digital.

So we play around a little bit with asymmetry in our designs. And yeah, so it is just, you know, we're really happy to have a whole new kind of aesthetic look out there of what we're providing. Again, made in the USA. It's a high-quality sneaker. They have the NFC chips in them. You know, we have some in real life events play. token-gated, you know, experiences planned in terms of what, you know, what the holders of these will be able to, you know, have in real life as well as in digital experiences that we have

planned. We also did some physical rarities, right? So we, people are very used to having an NFT with digital rarities. We had that included in the NFTs, but those translate in real life onto the shoes. So there's certain accessories and laces and details that were in the NFT verities that you would get upon mint. And now we're going to deliver those in person, you know, along with the shoes. So really exciting stuff there. I haven't seen that done before. I think we're, you know, the first, if not one of the first, doing something along those lines. And then, you know, of course, on the digital side, you know, if they get the 3D sneakers, they'll have future integrations to wear in the metaverse,

those six tiers of rarities that I was talking about. And then, you know, as people kind of enter the, you know, become citizens of the end state, we like to call them, and enter our Discord, you know, then they get access to sneak peaks of future drops. You know, certainly we're happy to hear from them about what they would like to see on the future drops. And, you know, they can participate in, you know,

all of our sort of innovative thinking, we'll definitely have some future surprises for them. Like we surprised the drop zero holders with a free mint of this. And then, you know, again, always innovating on these token-gated experiences that are the most exciting thing to me about the NFTs. You get the physical, the digital, but then this experiential piece to it too. Then the next drop we have coming out is with Devante Smith. So wide receiver for the Philadelphia, Eagles, Heisman Trophy winner, two-time national champion, and most importantly, incredibly stylish dude. He wears custom suits to every game he goes to.

It really has great personal style. So we're really excited to be doing a signature sneaker for him. So he worked with Stephanie and Dave and the team to come up with not only a silhouette, but a few colorways that are custom to him. And we'll be launching that shortly here. So we actually just dropped the first teaser video of our photo shoot with him today. We got a lot more content coming out around that. And then obviously the sneaker drop coming up early fall.

So on the Metaverse side, I think it's very easy to envision how you would be able to wear a digital pair of sneakers authenticated to you in, you know, whichever Metaverse wins or ends up being dominant. How do you think about crafting that render? because they're not all under the same standard and determining which Metaverse to build for? Or is that something which can actually just be updated later? Right now, it's all arms and legs, right? I mean, we have to identify the environments that we want to integrate with and then understand their requirements and build bespoke assets for them. I'm not aware of a better way right now.

It's really fragmented, especially within some of the, you know, quote-unquote, Web 3 blockchain decentralized, you know, metaverses, it's still surprisingly siloed and walled gardens where, you know, if you want to use your NFT sneaker in this environment, you have to build our specs. And, you know, part of that's just a function of, you know, the rendering and the quality or the fidelity that, you know, the metaverse supports. But part of it, too, is just some more, you know, legacy like, hey, this is our environment. You got to play by our rules. I think we do need some sort of standard or protocol to facilitate sort of this interoperability, which is the utopian future that NFTs provide, right?

Like we can see a future from the asset side where I can bring them from place to place because it's on the same protocol, but then where it's rendered locally has to match, right? And that's the part that's missing right now because I can obviously connect my NFT to multiple, or my wallet to multiple different, you know, decentralized metaverse environments and they can see the NFTs I have, but that doesn't mean that they're usable or wearable yet. So I hope that that's sooner rather than later, but we're still looking for a good solution there. Does the standard that you're building on, does it actually permit updating the rendered objects? Yeah, there's a couple ways to do it. So we've looked into

updating the metadata of the NFT or having a pointer in the metadata that can be then updated like with IPFS or RWeave right where you know inside the nfti there's a pointer to either an ENS name or an IPFS address and then you can update the metadata and we might be able to add additional file formats or you know useful files that they can use in different environments but still a lot of these ecosystems are looking for the correct file in different places too right so like as simple as like naming or the title of the file or where it's located within the metadata might differ from place to place too.

So even if you have the right digital asset, you know, that is going to be able to render properly in that environment, structuring the data so that environment can read it still isn't standardized either. Just piggy-walking kind of off of that question. You've launched, you know, the initial, I think three, four collections or three collections on Solana. And then this latest one you launched on a theater. What are the pros and cons as it relates to, you know, this idea of being able to have flexibility around updating the metadata or, you know, having certain tools at your disposal that allows you to curate these drops and gives you more flexibility or the enthusiasm of the communities of each of these respective networks? What are the pros and cons between?

the two that you've seen so far. Salana, well, it's interesting because I probably would have answered this differently, you know, six months ago from now and even four months ago from now. Ethereum gas fees have gone way, way down. So initially, when we were making a choice and looking at, you know, Solana versus Ethereum, deploying, minting, you know, testing, all of that was way easier on Solana because it was faster and cheaper. Now Ethereum is, you know, for all intents and purposes, about the same as Solana.

But putting the cost aside for a second, just sort of the speed and what we thought was like the facility of the user experience was a big factor in choosing the first drop for being salana based. But for subsequent drops, it's really going to depend on the collaborator, right? So if it's, you know, an athlete who's sort of relying on us to help them think through the Web3 side will probably make a suggestion. And, you know, maybe we have a, you know, a marketplace partner or someone else we're working with that, you know, has a particular, you know, preference for a particular blockchain that will accommodate. Or if it's an NFT community, for instance, will, you know,

obviously release on the chain that the NFT community is based on. So the blit map collaboration was actually Ethereum based, because the blip map project is based on Ethereum. So I, you know, chain agnostic is obviously like a buzzword and people have been talking about it since like 2017 and interoperability and all that stuff. Still have miles and miles to go there. But I really believe that a lot of these chains have use cases or valuable use cases in different verticals or at different times or even from collection to collection. So we're not maximalist by any case.

And I think each of them has their tradeoffs. And again, you know, speed transactions and. transaction fees were sort of the main factors that we were making in the initial decision-making process. There's a bunch of different ways that we've encountered that you can link physical products with NFTs. So there's just simply putting QR code on the product or even putting a QR code on a piece of paper in the box when you get it. There's obviously embedding a NFC chip, which seems to be the emerging sort of most popular way. But not everything can accommodate. an NFC chip necessarily. And then there's the methods whereby you visually scan the device,

the object with your iPhone camera and you detect small imperfections and that creates a unique signature and that way you know you have a unique object. So you guys have gone, I guess, for the NFC model. How do you think about the sort of the different ways that you would validate that this physical product is linked to the digital one. It's an interesting question. I mean, initially the first thought was just QR codes because that's the simplest thing to do. But for a wearable, that's tough from both a durability standpoint, a flexibility standpoint of where you put it within the shoe or the sneaker.

And then just in terms of the actual process of getting them made and having unique QR codes and having to have a different label put on every sneaker. would be really, you know, A, expensive to make, you know, a new mold for every, you know, for every label to have a unique QR code if you wanted to make it in a really durable way. And then B, having to have the manufacturer match up a specific QR code that goes to a specific pair gets really complex and tedious. So NFC chips, you know, are programmable where, you know, they can, you know,

put the NFC chip indiscriminately into the sneaker and then we can program it based on the size. and the person that it's going to and the corresponding NFT. So there was more sort of logistical reasons than anything else for choosing NFC chips. You guys have also really championed or pioneered this concept of redeem physical item, but continue and retain the digital item, whereas some other teams in the space or brands have have chosen the route of redeem and burn. Talk about the advantages that redeem and retain model unlocks over time, both for the brand or the creator and then the end user.

One of the initial visions for end state was that your digital and your physical apparel or sneakers would feel like the same object, right? So the line between the digital and the physical would really blur. the same pair of sneakers I'm wearing on my feet, I'm wearing wherever I'm going online. And just like in the real world, I don't have to change my sneakers when I leave the grocery store and go to the gym because they're two different environments, right? I just walk from one place to another. We really like that idea on the digital side as well. So the way we like to think about it is that, you know, that asset is sort of the digital embodiment of the physical product. And so it wouldn't make sense

to burn what we think is, you know, half of the product experience. And then in terms of what we want to do in terms of, you know, engaging our customers and having a good connection with the people who are buying end-state sneakers and end-state products is create experiences for them. And being able to tell who your customers are, you know, a traditional e-commerce company can always look at email addresses and there are ways to sort of have an inkling of who your customers are, but really difficult to validate and know exactly who they are and, you know, what of their, you know, of your product they own, that's really easy through NFTs. And so having

the user retain the NFT and then be able to offer these token gated experiences for our customers is really compelling. Token gating is, is nothing new on the digital side, but on the physical side, we really think there's so much interesting stuff to be done there, especially because we have the NFC chip inside the sneaker. So if we want to have a physical token gated event, for instance, at Art Fausal in Miami, we don't have to say, okay, pull out your phone and, you know, bring this up and, you know, sign a transit, connect your wallet to some site and sign a transaction. We can just scan the sneaker and say, yep, this is an authentic pair. And then further, we can have the user connect their wallet to the authentication site.

So not only are you wearing an authentic pair, but you're the owner because we see the corresponding NFT in your wallet. So all of that is only possible if they still have the corresponding NFT. So this kind of brings up a nomenclature question, which still isn't settled. I mean, what do we call, you know, merchandise that comes with an accompanying NFT? Digital Twins, somewhat popular, fidgetal, which I don't like. Bennett, I think you mentioned Entangled when we were talking. I sometimes call them full stack. What should we call them? We like entangled. We think it just sort of hits the, hits what we're going for here, right? Like two things that even across great distances have knowledge of each other and they can't be described, you know, described independently of one another. We think that that concept that we, you know, stole from particle physics applies really well here. I like Digital Twin, too. I definitely don't like Fidgetal. It just sounds so gross coming off.

We're open if the industry goes towards digital twin, but we use entangled internally. So we've talked about sneakers as, you know, a really good use case for entangled NFTs. Are there other categories in meat space, either, you know, physical goods and items or experiences, other than footwear that you see as low-hanging fruit or right for transitioning to this entangled model. Yeah, definitely apparel is, you know, easy translation for us, right? To continue growth. People love all different types of, you know, I guess I think of apparel and footwear as a self-expression, right? So people are, you know, love this idea of something that's custom.

or, you know, specific to, you know, whatever they, you know, they love. And that's why they're wearing it because it's helping them express who they are and what their story is. So, so starting with anything on the wearable side for sure because that is, you know, it just really fits our model and the, you know, the customer base that we're building now. But, you know, we do believe that all products of value in the physical world will have a digital counterpart in the future. So it does open up the concept to even broader ideas. So one thing that got me pretty excited was the anti-counterfitting properties that come with this. It's pretty hard, if not impossible, to really counterfeit a physical product that has an entangled or associated NFT. And you can see the application in marketplaces.

I think as far as high-end sneakers are concerned, if you want to sell them, you have to sort of send them off to third party, mail them off, and they get authenticated, and then you can, you know, arrange a sale through one of those third-party marketplaces. In theory, with this model, you could, it would be trivial to verify that you actually own the object itself, and you could engage in a peer-to-peer secondary marketplace, potentially even with royalties for creators. How far along are those ideas? I haven't really seen any of that developed yet, but is that also part of the thesis here? Yeah, absolutely. I mean, part of the reason why NFTs are exciting for physical products is for resale, right? And, you know, in terms of, you know, making sure that the original creators are compensated, but then also facilitating trusted transactions without an intermediary. So I think there's some infrastructure work that needs to be done and maybe some oracles that need to be created or improved in order to get data like condition of the sneakers, match in. the way the seller described it in the original posting.

And even if you're using, let's say, your UPS tracking number as an Oracle for confirming that the buyer received the pair, what happens if the UPS person scans it it's delivered and then jacks it or someone else steals it off their porch, how does that work when there is no intermediary and it's completely peer-to-peer? All of those are solvable, but there's some work to be done on the infrastructure side. that's definitely where we see all of this gone. So digital only NFTs initially faced a lot of criticism or pushback maybe from mainstream audiences that is criticism of right click download. You know,

it was hard for them to wrap their heads around the value of having, one, there being a scarce digital object that's, you know, whose providence is tracked on chain. And I guess the question is, do you see entangled NFTs where there is this tangible physical or experiential aspect as being a Trojan horse that that onwards more people into Web3 and gets them to understand the longer term vision and trajectory of Web 3? Yes, for sure. We, you know, we were just talking about today as we think about how we're communicating outward, our messaging and a lot of what we need to do is do some education there and explain, you know,

you're getting, you know, if you're a sneakerhead, right, and you're not as, you know, deeply interested in sort of what NFTs are yet, we can explain to you. You're getting a sneaker, but you're also getting rewards and perks with that, right? And, you know, it's not necessarily about, you know, what people think of as, you know, maybe what the very little that they've heard of them in terms of what NFTs are, we have to do some education there and messaging to help people understand, like, you're getting a physical product packed with a whole lot of value, rewards, perks that are going to keep coming at you over time, really exciting stuff. I don't think it's going to be hard to explain that to people, but, you know, we definitely need to

focus on it. And anybody who's doing sort of the physical digital combination in the NFT space, you know, really needs to help, you know, kind of get the word out because I do see. see a lot of people that don't understand all of the promise of Web3. There's so much to it. It's a lot to explain, but to simplify it and to help onboard them through physical products with way extra value. I think that's a good way to do it. Looking ahead, what can you tell us about the future state of end state in terms of partnerships

or what you'd like the product to look like, what you'd like the digital experiences to look like. Yeah. Like I said earlier, one of the things we're most excited about is just the broad swath of potential collaborations that would make sense and fit within our brand. So, you know, we have a big pipeline of athletes who we're talking to about doing signature sneakers for, but also artists, musicians, other brands, you know, even, you know, sports teams, you know, venues. Really, you know, there's a lot of, there's a lot of green space here. for us to experiment with. But our immediate roadmap is going to be working through these collaborators and releasing,

you know, some really exciting collaborations across sneaker culture, sports and music, and then also facilitating experiences related to the collaborators. We are working on some marketplace features, like you mentioned. We're working on some other token-gated NFT experiences and actually some technology to support and improve token gated IRL experiences. Also have some metaverse environments that we're working on. So to your point earlier, there's no real Metaverse winner yet. So we're building out a couple of what we call embassies

and multiple different virtual environments to build out our presence in those ecosystems and we're doing some experimentation there too. So we also actually, one of the things we do with the physical sneakers is we have a QR code on the side launches an AR experience and an AR version of these other shoes. And we really are fascinated by AR in fashion in particular. So we're experimenting with some things there around geofense AR experiences and,

you know, have a roadmap that we want to execute on the, on the physical and the digital in terms of like your physical location and proximity to certain events that we're doing or certain monuments. So got a lot, got a lot on the roadmap. happen. Turning to focus away from end state. Are there specific drops that you found very tasteful or compelling from other luxury or collectible brands? I thought the punk's Tiffany collaboration was genius. I thought they did a great job with that. Like the way they marketed it, the way they priced it, the sort of combining the punk with the Tiffany voucher, whatever they called it to, you know,

actually get the pendant created. I thought that was really well done. And, and just a great fit. Super cool. I wish I had a punk so I could have gotten one of those. Stephanie, were there any that you really liked? Actually, I was going to say the Tiffany one as well.

Yeah, yeah, I really adored what they did. And what a great brand to do it. So one last one from me. Since we started talking to you guys, maybe it was December last year, December 2021. Compared to where we are now, there are a lot more players in this category. So what aspects of this category of this process do you see becoming commoditized?

And how do you see companies and projects that are playing in this space differentiate themselves over time? Yeah, I think there's going to be two main categories in the environment. immediate future. One is entangled to traditional brands products, right? So brands who are tokenizing their inventory or attaching NFTs to products that they already sell. And then there's going to be Web3 native or brands that started for the purpose of incorporating NFTs into the product ownership experience. I think the latter are going to have a big leg up in creating new and interesting experiences. But in the short term, you know, you would be able to get some hype around a traditional company all of a sudden offering an NFT six months ago,

maybe that's not the case anymore right now. And I think actually one of the reasons why the Tiffany Punk drop was so great is because it's a combination of the two, right? Incredible, you know, blue chip brand in the physical world and incredible blue chip brand in the NFT world and brought them together. It just made a ton of sense. So I think that differentiation in the space will come from the actual product offerings, right? Because that's, I mean, for right now, everything starts with the physical if you're doing physical and digital. Because if that's not an object of desire, it's not, you know, the design isn't good. It doesn't have, you know, cachet with the people who are supposed to be buying it, then it's less interesting. And it's kind of a nice to have. And so I think we've seen this with a lot of the NFT communities actually that have done merch drops where, you know, people are so excited. And then they get this, you know, T-shirt or hoodie that came off of T-spring. And it, you know, it's thin and whatever. And it feels like something you would get.

you know for you know at a playoff baseball game but said like you know bank of america across the back or whatever right and and people have like these really disappointing merch experiences because it's not it wasn't native to sort of the the experience that was intended initially right and so i think that um you know having that forethought and really thinking about the whole product experience from front to back is going to be really important in differentiating brands um especially as more people enter for the space. Well, I think we'll leave it there for now. Really excited to see what directions you take this. Really impressed at the pace of the iteration, the drops, the different profiles we've seen from you. Super, super psych to see what future directions you take it and where you go

with the digital counterpart too. And excited to be backers as well. So Stephanie Bennett, thanks so much for coming on. Thanks for having us.