Exploring the World of Physical NFTs
Although common application areas for NFTs include digital art, collectibles, and in-game items, physical NFTs are gaining more traction in the general public. Popular brands like Adidas, GAP, and Nike have released their NFTs that come with corresponding physical clothing items associated with them. World-renowned artists such as Beeple and Damien Hirsh have also created physical versions of their NFT art. Let’s look in more detail at what exactly physical NFTs are and how they are used.
What are physical NFTs?
In simple terms, non-fungible tokens (NFTs) are cryptographic tokens that represent all types of unique digital assets. Since they are stored on a blockchain, NFTs can act as verifiable proof of authenticity and ownership for all types of assets.
Physical NFTs are digital tokens linked to real-world assets. Also called NFT phygital, physical + digital. These assets combine the digital with the physical and can be used to prove ownership over real-world assets, such as works of art, fashion items, property deeds, tickets, etc.
How do physical NFTs work?
Physical NFTs are made up of two parts. One part refers to the digital asset issued on a blockchain through the use of smart contracts. The other part is the physical asset, usually linked to a corresponding unique identifier, such as a QR code or short-range wireless communication (NFC) tag. For example, owners of the recently released Nike sneaker, CryptoKicks, will also get an NFT tied to the shoe.
While authentication is one of the most important applications of physical NFTs, it can also be useful within the supply chain, where blockchain technology can help provide traceability and certification guarantees.
How are physical NFTs used?
As a prevention for counterfeit products
A big advantage of physical NFTs is that they can demonstrate authenticity and provenance. In a world where many physical goods can be easily counterfeited, physical NFTs can be a valuable tool for both consumers and manufacturers.
Companies can link the serial numbers of their products to NFTs or link the physical item to an NFT using NFC technology or a QR code, which helps verify that the physical product is authentic and track its history. As there is a digital record of the product on the blockchain, tampering and counterfeiting becomes almost impossible.
As a way to add a transparency layer
Sometimes the secondhand collectibles shopping experience can be challenging for buyers. This is especially true when they don’t have a clear understanding of the price history and market value of a second-hand item. Having an NFT attached to those items can give buyers a complete view of the item’s transaction history.
As an improvement to in-person experiences
NFT memberships are already being used as keys to access private online communities, where members can access a wide range of virtual experiences, exclusive information, and unique privileges. Physical NFTs can work similarly, but the value you get from them may be entirely based on the real world.
Event tickets are a great example of how physical NFTs transform in-person experiences. NFTs are not only being used to help solve the industry’s counterfeiting and reselling problems. They are also used to offer ticket holders additional benefits, such as airdropped tickets and exclusive merchandise.
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To help brands reach a broader target audience
In the last ten years, consumer behavior has undergone a great change; Each generation is more digitally inclined than the last. Major retailers like Franck Muller, Nike, and Tiffany’s, among others, are pairing NFTs with their physical counterparts to appeal to digital natives and reach a broader demographic.
In conclusion
As blockchain technology and Web3 continue to evolve, physical NFTs have the potential to easily bridge the distance between our digital and physical lives and change the way we interact with real-world items. For example, in the future, you could purchase a phygital car that you can have both parked at your home and in your digital wallet, giving you virtual access to exclusive privileges. Since the car would be connected to your digital wallet, you could rent it out or use it as collateral in a financial app, all without needing an intermediary to facilitate the transactions. These advantages can increase the value of ownership of physical NFTs, beyond mere resale, for financial gain.
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