According to a patent dated December 10th, 2019, Nike is planning to tokenize the ownership of exclusive shoes. When purchased, shoes will become linked to a unique owner, all recorded via blockchain technology. The patent says owners will also be provided with added control of their footwear, with the capability to ‘breed’ custom shoes which can be manufactured to produce a tangible product.

Nike Tokenizing Shoes on Ethereum Explained

Nike, one of the largest shoe manufacturers across the globe, just received a patent to tokenize shoes. The patent stems from the U.S. Patent and Trademark Office and will leverage the Ethereum blockchain.

Here’s how it will work: whenever shoes are purchased, tokens will become unlocked. In order to facilitate this unlocking, a 10-digit shoe identification code will be linked to an owner identification code, effectively linking an owner with the shoe.

The tokens will utilize the ERC 721 non-fungible token (NFT) standard. All ‘linking’ will be recorded on the Ethereum blockchain. According to the patent,

“When a consumer buys a genuine pair of shoes a digital representation of a show may be generated, linked with the consumer, and assigned a cryptographic token, where the digital shoe and cryptographic token collectively represent a ‘CryptoKick.’”

Yet besides signifying shoe ownership, the patent will allow for a number of other features. The NFT tokens will be able to record certain ‘genotype’ information related to each shoe, such as colors, designs, and various style attributes.

The patent suggests owners will be provided with an added element of control over their shoes. For example, owners will be able to set limits on the number of clones or copies that can be produced. They can also grant rights to third parties who will be able to mix shoe designs.

Similar to CryptoKitties, owners will also be able to ‘breed’ shoes. This process will feature actual manufacturing restrictions, where ownership rights in every successive generation will be linked to the original shoe. The patent reads:

“Using the digital asset, the buyer is enabled to securely trade or sell the tangible pair of shoes, trade or sell the digital shoe, store the digital shoe in a cryptocurrency wallet or other digital blockchain locker, intermingle or “breed” the digital shoe with another digital shoe to create “shoe offspring,” and, based on rules of acceptable shoe manufacturability, have the newly bred shoe offspring custom made as a new, tangible pair of shoes.”

Nike’s transition to tokenization is likely an effort to combat counterfeiting. In markets across the globe, luxury and exclusive footwear are booming in popularity. In China for example, Nike reported a 22% increase in quarterly revenue this past September. Secondary shoe trading platforms have also developed in China, where buyers can purchase exclusive shoes and sell them in a secondary market for a profit.

How Shoes are Just One Asset Seeing the Tokenization of Ownership

Shoes are not the first valuable asset which are bought and sold second-hand and benefit from recording ownership via blockchain technology. Regulated financial securities — an industry worth a collective $544 trillion — have seen similar activity for quite some time.

Security tokens — regulated securities whose transactions are recorded on a blockchain — see a number of benefits when compared to their traditional counterpart. With global markets connected 24/7/365 — a stark difference from the constricted hours of U.S. markets — assets see new levels of liquidity and new pools of investors.

Securities trading features settlement periods which typically take days to complete. Yet the incorporation of the blockchain reduces both the length of settlement periods as well as the costs involved. Currently, trusted third parties are paid to provide settlement services, which can be eliminated through the emerging technology.

Certain exemptions from the U.S. Securities and Exchange Commission (SEC), such as the Reg A+, allow companies to compliantly raise funds from retail investors and avoid many of the burdensome registration requirements that are known to accompany a securities offering. Fractional ownership through tokens recorded on a blockchain cuts down the time required to sell high valued assets, such as a luxury real estate development for example.

Though still nascent, the security token industry has seen notable success, raising nearly $1 billion to date. Regulated assets to include equity, real estate, investment funds, and even fine art have witnessed the benefits of blockchain technology through security tokens.

As mainstream companies such as Nike look to incorporate the emerging technology to track the ownership of valuable assets, the future looks bright — for both security tokens and the broader blockchain community in general. Another use-case involving the blockchain to record and verify asset ownership could be just around the corner.

What do you think about Nike tokenizing the ownership of shoes on Ethereum? We’d like to know what you think in the comments section below.

Image courtesy of Nike.