Luxury goods blockchain-based marketplace 4K announced a $3 million round of funding led by Electric Capital, Crosscut Ventures, Colab+Currency, ConsenSys and IDEO CoLab Ventures. The platform looks to combine physical items with non-fungible token (NFT) technology to create an eBay-like marketplace for luxury items.
Marketplaces such as eBay pose several issues for people looking to buy and sell high value items. Buyers can’t tell whether an item is in good condition or authentic from the pictures, and the website is not liable for false advertisement. Some platforms are tackling this issue by putting a layer of authenticators after the product is sold and before it reaches the buyer. However, this process takes time and adds significant cost.
4K’s solution is going one step further in addressing these concerns. The website will only market items that have been previously authenticated. Customers send their assets to a storage facility where it’s insured and authenticators determine its value. Owners receive an NFT representing the item’s value, authenticity, and ownership that can be used as collateral to take out a decentralized finance loan or sell. If owners decide to save the NFT, they can return it in exchange for the physical item.
“4K adds completely new dimensions to the market for collectibles and luxury items. For example, we give brands skin-in-the-game in secondary-market trading,” said Richard Li, CEO of 4K. “It also adds a completely new dimension to NFTs. The NFTs most people have heard about are for digital assets. We’re enabling NFTs for physical assets. As we spend a larger portion of our lives online, bridging the physical and digital worlds becomes increasingly important.”
The peer-to-peer marketplace startup is working towards being considered a “Web 3 eBay” in the luxury industry and will initiate a closed beta of the service, which is expected to launch in August. The idea is for the redeemable NFT to be safely transacted through any marketplace.
As of now, the startup has launched one product, Provably-Fair Drops. The Drops seem to be discounted luxury items and give an insight into how the marketplace will function. Purchases are made using Ether cryptocurrency and bidders have to have the value in their wallet to participate.
It’s an innovative idea for the commercialization of luxury goods in a secondary marketplace and it has strong investors supporting the product. Nevertheless, there are still some challenges to consider. One aspect is that customers are taking a risk when they send the item for authentication and storage, especially during the initial stages of the startup. In addition, the value of the item is determined by 4K’s authenticators, and it may be less than the owner anticipates. Selling the items in crypto also creates a barrier to entry or limits the market. However, the crypto sector is a good match for high priced items and might attract some brands to participate. Finally, the startup claims to be cost effective, but storage and authentication won’t be free. These are all concerns that the closed beta will likely address.
Meanwhile, another solution in the luxury goods industry is blockchain alliance Arianee. The group raised €8 million in March and recently signed a collaboration with IBM. Its technology creates digital passports as NFTs of the assets and has Breitling and Richemont as part of its network.