NFTs have become mainstream and have grown in popularity recently, disrupting various industries, including real estate, gaming, art, sports, and many more. NFTs are digital certificates stored on the blockchain that bind ownership to a unique digital asset. However, as NFT becomes more widely adopted, its applications have moved beyond the major areas of digital art, collectibles, in-game assets, the metaverse, and so on. As a result, NFTs' applications have expanded to include physical NFTs.
What is Physical NFT
In simple terms, Physical NFTs are digital tokens of ownership tied to a real-world asset. These assets combine digital and physical components and can be used to establish ownership of real-world assets such as artworks, fashion items, property deeds, tickets, and more. Physical NFTs are called Phygital NFTs because they combine digital elements stored on a blockchain with physical elements in real life. Thus, physical NFT is an in-person application of blockchain technology.
How Does It Work
Physical NFT refers to any product, service, or experience that aids in integrating digital technology with various physical assets. As such, Physical NFT consists of two parts; physical and digital assets.
A physical asset is a valuable item such as real estate, jewelry, or artwork linked to a corresponding unique identifier, such as a QR code or near-field communication tag (NFC). On the other hand, the digital asset is metadata, smart contracts kept on the blockchain that contains the link between the documents, indicating ownership of the physical asset.
Therefore, Physical NFT is a method of authenticating your ownership of a physical asset while keeping a record of the asset's history on the blockchain. Physical NFT is useful for more than just physical asset authentication; it can also help with supply chain management, where blockchain can be employed for traceability and certification assurance.
Advantages of Physical NFT
In a world full of counterfeit products, Physical NFT can be a valuable tool for both manufacturers and consumers, as the product's serial number can be connected to the physical asset, allowing buyers to check the validity of the goods and the pricing history. Physical NFT has a significant benefit in terms of proving authenticity and provenance because tampering or forgery becomes nearly impossible, as the digital record of the product is stored on the blockchain.
Extra Layer of Transparency
Second-Hand sales of valuable goods can be difficult to manage, as the item's price is frequently higher than its value. Buyers can now have a thorough overview of the item's pricing history and market value, avoiding being a scam victim, thanks to the record of transactions provided by physical NFTs.
Improves In-person Experience
Physical NFTs function similarly to NFT membership, which is a key to gated online communities where members can enjoy full virtual experiences. The distinction between Physical NFT and Virtual NFT is that the experience is not virtual because it is entirely based on reality. Event ticketing is an example of how Physical NFT is revolutionizing in-person experiences, as they are used to offer extra rewards such as air-dropped tickets to events and exclusive merchandise.
Secondary Sale Royalties
In the ideal scenario, when you sell a physical item, you can only profit from the first sale, even if the buyer resells it at a greater price to someone else. However, with Physical NFT, you may set a proportion of royalties and earn recurring profits each time that item is resold. As a result, Physical NFT allows you to generate a continuing income stream from your physical asset.
Examples of Physical NFT
Although physical NFT is still a new phenomenon, there are several examples of Physical NFTs across different industries.
Adidas is one of the most popular athletic fashion brands. Adidas entered the metaverse in 2021 when it released an NFT collaboration with the famous Bored Apes Yacht Club. Having an original Adidas NFT unlocked exclusive redeemable physical merchandise such as beanies, sweatshirts, and tracksuits.
GAP, a major fashion retailer, entered the NFT market after teaming with Frank Ape's artist, Brandon Sines, to develop its first NFT collection with only 100 limited editions, which offers and unlocks physical hoodies. According to GAP, to redeem a Frank Ape collectible hoodie, users must collect Common and Rare level NFTs.
WENEW is an NFT platform that sells "iconic" historical and cultural moments as NFTs. Beeple, one of the most prominent online digital artists recognized for creating a piece of artwork every day, co-founded WENEW. Beeple began selling NFTs that included a physical rendition of the artwork and a strand of his hair.
Physical NFT bridges the physical and digital worlds, transforming how we interact with physical assets. As blockchain and web3 technologies continue to gain traction, linking NFTs to physical assets has emerged as the most important use case for NFT. However, physical asset tokenization raises various legal concerns, particularly in the real estate business. As a result, before investing in physical NFT, conduct relevant research and comprehend the pros and cons associated.
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