Blockchain: The Next Big Thing For The Luxury Watch Industry?
Simon Schneider14 April 2021 | 6 min read
What is the blockchain?
No technology right now is more in vogue and in equal parts misunderstood than that of the blockchain. Often, incorrectly, used interchangeably with the terms cryptocurrency and Bitcoin the confusion is mainly based on the lacking knowledge of an admittedly complex concept. Attempts by certain companies and individuals to utilize it as a buzzword to appear hip and modern does not help either. The fact of the matter is that while Bitcoin gets all the hype right now a hundred years down the road it will probably be considered as one of the least interesting products that came out of this technology.
In an attempt to demystify this topic and lay bare some of the opportunities that lie in front of us, we will make this the topic of today’s blog. What is the blockchain technology explained in layman’s terms? Who already uses it in the current landscape of watchmaking, and who just pretends to do so to hop on the bandwagon? Finally, what potential remains untapped for the watchmaking industry to integrate this technology into their production in the coming century.
A short history of blockchain technology
Before sprinting into the future, however, we will need to take a step back and look at the, admittedly rather short, history of the blockchain technology to gain an understanding of what it actually is. While the foundation was already built in the 1980s and 90s the real breakthrough was made in November of 2008.
Using the pseudonym Satoshi Nakamoto an individual, or a group of people, released Bitcoin to the world together with a white paper explaining exactly what it does. Hidden behind some mathematical mumbo-jumbo, which is beyond my understanding, lies the concept of a decentralized digital currency which requires only its users to keep going rather than a central bank and police force.
This is achieved with a peer-to-peer network where all the transactions get verified through a distributed ledger, the so called blockchain. In simple terms the significance of this lies in the eradication of the necessity of trust in online transactions as there is no way to fool the system. Since everybody has a record of every transaction that ever happened irregularities of any kind immediately become apparent.
Brands that used this superficially
The watch world is one that tends to be proud of their conservative nature and views changes of any nature rather sceptically. That is understandable considering that the last major innovation to the industry almost killed off the entire industry (Google “Quartz Crisis“ in case you have not heard of this yet). Accordingly, the universal adoption of anything is a rare event only driven by its absolute superiority.
While the watch industry is certainly not one that moves particularly fast on a technological level, they sure are quick to jump on a trend when they see the opportunity to capitalize on it. A prime example of this in relation to today’s topic, and this will not come as a surprise to those familiar with the brand, is Hublot who during the first mania of Cryptocoins in 2018 created the Big Bang Meca-10 P2P.
The P2P is an example of what I consider to be a superficial integration of this technology into a watch. That is to say there is no real integration of the technology. All that happened was that the design heavily leaned on the Bitcoin logo and there was the gimmick that it was only purchasable in cryptocurrency. Hardly the revolution we were promised.
What is NFT and how does it relate to watches?
While payment methods is what everyone connects with the blockchain technology it is just the tip of the iceberg of what is possible. A prime example of this is the NFT based on the Blockchain and the incredible rise of collectibles in association with this.
NFT stands for non-fungible token. Just like a cryptocurrency it is data that is stored on the digital ledger with the key difference being that it is a unique item that is not interchangeable. This technology alone has managed to transform the digital art market in what feels like a matter of days since it allows digital artists to sell verifiable proof of ownership of a piece of media entirely made up of electricity and some zeroes and ones.
While typing this out I can already hear the enraged outcry of salty old boomers that this is exceedingly stupid. Why would you pay for something that everyone can look at for free. Why pay for a piece of nothing? Well, I do agree that there is some merit to this argument. But just because one generation of collectors does not attach any value to it, it does not mean another won’t. After all, what is the inherent value of the Mona Lisa beyond what we as humans attach to it? A canvas and some paint.
An entire generation of kids have grown up with loot-boxes and digital skins for their characters in games. A great example of this is the game Counter Strike Global Offensive. Here players can play the lottery in a chance to win a custom paint-job for their favourite gun. What is special about this game however is that these are tradable, and go for big numbers.
That is to say that the idea of paying real money for a digital good is already deeply established with the younger generation. Once they grow up and start to make some money I do not see them hesitating or failing to appreciate a piece of media sold as a NFT. After all, for the right price I know I would love to own the iconic meme scene in James Bond: Casino Royale. Especially since I own the watch to match.
Vesper Lynd: Rolex?
James Bond: Omega.
Vesper Lynd: Beautiful.
How to properly connect blockchain with watchmaking
The fact that these unique identifiable tokens can be safely store on the blockchain is a revolution which proposes a solution to one of the biggest issues in watchmaking. Just like that watch brands could single-handedly eradicate the question of authenticity forever as each watch can be paired with an NFT.
The Breitling Digital Passport
While this may sound like the future I am happy to inform you that the future is already here. Breitling, an innovator in many ways during the last years, introduced what they call a “Digital Passport“. This passport offers a complete overview of the watches history, a document of authenticity, and allows for easy proof and transfer of ownership. Vacheron Constantin has decided to also use the services of Arianee, the same blockchain startup that set-up Breitling‘s passport system, to forgery proof their watches too.
Moving back to the cryptocurrency aspects of the blockchain technology there are also other clever ways to add some functionality to your watch. There is a saying that a Rolex will always be worth at least a ticket home from wherever you are in the world. The logic being that a watch is useful for its inherent worth, easy tradability, and ready access.
Franck Muller is trying to one up Rolex here in that regard with what they call “the worlds first functional Bitcoin watch“. Dubbed the Vanguard Encrypto, and created in partnership with Regal Assets, it features a Bitcoin logo similarly gaudy to that of the Hublot. Beyond that it also has a QR code laser engraved on its dial which works as a public wallet address allowing you to both deposit bitcoins and check the balance of your account.
Conclusion: what can still be done?
So what can be said about the potential impact of the blockchain technology on watchmaking? I think that just like anything that vaguely relates to this industry we haven’t even dipped our little toe into the waters of the future. One thing that is clear is that questions of authenticity will be one of the past. While I do believe some manufacturers will try to resist this chance, since guaranteed authenticity was always a benefit for ADs over the grey market, it seems inevitable.
Beyond just authenticity I am particularly excited for the potentials of added functionality for watches making them daily companions that go beyond being relics of the past. The Vanguard Encrypto is a great example of this bridging the gap between the mechanical and the digital and acts as a taste of what is about to come in the 21st century. Blockchain has the potential to offer a unique value propositions to horology.