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3 reasons why NFTs will go phygital

More and more, NFTs will begin to integrate both physical and digital elements.

9 May 2022by Geoffrey Lyons

As technology develops, and everything from news consumption and dating to interplanetary exploration is digitized, we’ll begin to see the real world and the digital world synchronize in new and interesting ways.

“Phygital” is one way to describe this interplay. The portmanteau word, loosely defined as any experience that combines both physical and digital elements, has seen a steady rise in online searches over the last few years. This is perhaps owing to the pandemic and its forced, shall we say, “phygitalization” (think restaurants and grocery stores shifting to online delivery), but it could also be due to a range of other developments. 

For example, bricks and mortar retail is beginning to use beacons to optimize business. Fields like medicine, aviation, and city planning are developing increasingly sophisticated digital twins, virtual counterparts to physical objects that can adapt in real time.

Supermarkets will start to employ sensor fusion, or what Amazon calls “Just Walk Out Technology”, for check-out free shopping. And the biohack par excellence, Neuralink, is due to launch this year.

But arguably the most exciting applications of these blended experiences will arise thanks to NFTs, whose versatility promises a potentially endless range of possible use cases. 

Let’s look at three reasons why NFTs are bound to go phygital.

1. NFTs will enhance real-world authenticity

A picture of wine bottles.
NFTs are already being used to authenticate wine (Image source)

One of the main arguments for NFTs is that they provide digital scarcity where none previously existed. We’re currently witnessing a renaissance in digital art, for example, thanks entirely to its newfound scarcity.

But there may be a quality deeper and more meaningful than scarcity, and that’s authenticity. While it’s true that a diamond derives its value from being scarce, value is added if it’s proven to be authentic (e.g., with a certificate from a professional), or better yet, uniquely authentic (e.g., it was previously owned by the queen or featured in a major motion picture).

CoinDesk’s David Morris elaborates this point: 

[A]n object’s authenticity is the root of the status it confers on the owner…[T]he deeper and more interesting the history, all things being equal, the deeper that aura of authenticity is, the greater status conferred on the owner – and the more they’re willing to pay for it.

The deeper the aura of authenticity, the greater status conferred to the owner. By proving authenticity, NFTs can play a major role in adding value to physical objects, especially objects whose authenticity matters a great deal to the buyer.

Take wine for example. By storing all the relevant information of a wine’s provenance on the blockchain, manual processes are no longer needed for authentication and the risk of fraud is significantly reduced. In other words, by providing better proof of a wine’s provenance, NFTs can enhance the sense of its authenticity and boost its perceived value. It’s a great example of how the blockchain can have an impact well beyond the confines of its source code, affecting the way people value real, tangible goods. 

2. NFTs will increasingly utilize Augmented Reality technology 

A picture of Digi Dragons.
Digi Dragons is a turn-based RPG in which players battle each other via a mobile AR app (Image source)

AR technology is one of the most striking examples of how the physical and digital can unite in a very real way. Who can forget 2016, when swarms of eager gamers descended on public parks hunting for virtual monsters? Pokémon GO, the mobile game behind this frenzy, enchanted its users by geo-positioning Pokémon in real-world locations. 

Now, NFTs and AR could combine for some interesting applications. “Owning revenue-generating real estate and assets within different AR clouds, AR games, or AR worlds will soon be possible,” writes Shaan Ray of Hackernoon. Ray cites an interesting example: AR billboards. In locations that get a lot of foot traffic, virtual ad space could be bought and sold as NFTs. 

But it will likely be gaming that benefits the most from this marriage of technologies. In fact, some NFT games already employ AR. ZED RUN, for example, has an AR app in which users can summon their racehorses to appear in front of them. A new project called Digi Dragons employs a turn-based RPG-style game where players battle each other via a mobile AR app. More creative applications are bound to follow, and if Pokémon NFTs are just around the corner then maybe an NFT version of Pokémon GO is too. 

3. NFTs will improve in-person experiences 

A picture of a ticket.
“Non-fungible-tickets” could majorly disrupt the event ticketing industry (Image source)

If the physical and digital worlds were playing a game of tug of war, it’s obvious the latter has had the upper hand in recent years. If you take any given day in the last five years, an average of 640,000 people came online for the first time–that’s 27,000 every hour. A fifth of the US population owned a mobile phone in 2010; now, nearly three-quarters do.

Even Web3 enthusiasts can have apprehensions about these trends. What are the long-term tradeoffs in terms of human connectedness and interaction? Are we on a slippery slope to a largely virtual reality?

NFTs offer a way to bridge the divide between the physical and digital worlds so the two don’t have to compete. That’s because while the essence of an NFT is digital (the tokenID stored on the blockchain), the value one gets from it can be entirely based in the real world. 

Take, for example, event ticketing, which is poised to be majorly disrupted by “non-fungible-tickets”. NFTs will not only help eliminate the industry’s scalping and fraud problem, they’ll also be used for all sorts of programmable perks. These perks can then be monetized or traded, which makes the market more efficient and improves attendance. For example, Steve (aka @NFTBark) of dGEN Network writes

If I received regular extra benefits from the [Cleveland Browns], I could have taken advantage of them and sold the ones I didn’t want. For example, if they airdropped me a ticket for a meet and greet with the team, but I had no interest in meeting a team that finished the season without a single win (that happened), I could sell it to someone who wanted it.

These sorts of programmable benefits create a market where none previously existed. The result is that clever applications of NFTs can literally bring people together–here, in the real world.

NFTs just got easy

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