How fashion will navigate the world of crypto wallets
For brands that don’t want to delve into the technical side of interacting with crypto and digital assets, custodial wallets may be the way to go.
Brands with crypto on e-commerce platforms could potentially benefit from a simpler interface and a trusted custodian in case of account mishaps, such as being banned.
“Users interacting with an escrow wallet can expect a simplified user experience similar to what you would experience on traditional retail websites,” says Duncan Cock Foster, co-founder of popular digital art platform Nifty Gateway, which uses escrow wallets.
On the other hand, non-custodial wallets are those where owners are personally responsible for assets and access. These can be in the form of either hot or cold wallets. For companies, this means that they are responsible for security considerations and for who has access to the private key. Some wallets are structured so that multiple people have access, or multiple people must confirm a transaction before it can be completed. This can be a useful security measure for brands, says Cassatt.
Non-custodial wallets can accommodate the growth of the industry “because they allow users to continue to explore and experiment with new projects and platforms in the space,” says Holly Wood, head of creator relations at NFT marketplace Rarible. “Let’s say a new user starts by buying a digital fashion NFT. Then they become curious about buying specific cryptocurrencies. Non-custodial wallets give them the opportunity to experiment with different facets of Web3 while keeping all their assets in one wallet.”
User sovereignty is an inherent characteristic of Web3. This makes non-custodial wallets a long-term consideration for companies planting roots in crypto with future plans for Web3 expansion. Adidas’ recent decision to have custody of its own wallet reflects this sentiment, in what Erika Wykes-Sneyd, Adidas VP of brand communications, described as “an important step, so we are fully participating in building the future versus outsourcing key infrastructure.”
However, full control over wallets and their tools is sometimes too complicated for users who only want to engage with brands or personalities and not the fintech aspect.
Companies are still trying to find a happy balance between custodial and non-custodial, although in some ways this is like seeking the perfect balance between freedom and security. Third parties often provide some security, but also have the ability to limit the user’s freedom to withdraw their funds and spend them in an undetected peer-to-peer manner.
While Cassatt advocates housing wallets regardless of cost-saving purposes, she says decisions should be made on a case-by-case basis. “It’s just a balance for each company based on how much crypto they have; their own level of belief in their ability to defend their crypto; if other people depend on the funds – and if there are legal ties there.”
Brands are catalysts for mainstream adoption. Rarible’s Wood reminds creators and brands that with power also comes responsibility to learn about the technology behind the assets. “Brands need to educate fans properly,” says Wood. “It is important to provide clear and concise instructions on how to interact with crypto wallets. Assume each fan is new to crypto and has never interacted with a wallet before.”
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