Despite crypto winter, non-fungible tokens (NFTs) continue to attract interest. This has become evident as many brands and retailers have started offering it. Digital NFTs attached to physical productsKnown as “phygitals”, these products allow real-world products to relate to digital NFTs.
For example, RTFKT (a digital fashion and collectibles company) recently launched a project called Cryptokicks iRL. According to sources, RTFKT creates digitally designed sneakers backed by physical products.
RTFKT’s official Twitter account recently tweeted that Lace Engine NFT owners will now be able to reserve a pair of Cryptokicks iRLs. It can be redeemed for a physical version starting May 1, 2023.
1/ All race engine owners can reserve their sneakers at the RTFKT Interdimension Hub. This will provide US shipping addresses for owners through May.
To get the Race Engine NFT on the secondary:https://t.co/PoPwbooYqG
—RTFKT (@RTFKT) December 12, 2022
Redeeming physical NFTs can be difficult
While the concept behind phygitals may be attractive to brands and consumers, redeeming physical NFTs has proven difficult. For example, in some cases, an NFT holder may simply provide a wallet address to redeem a digital NFT linked to a physical item. However, this makes it difficult to collect personal information, such as shipping details, from her NFT owner.
Jacob Ner-David, CEO of wine marketplace Vinsent, told Cointelegraph that he ran into such a problem after launching two NFT drops tied to physical bottles of wine.Ner -David explained that Vinsent will launch both public and private NFT drops at the end of 2021. This allowed consumers to purchase a tokenized bottle of fine wine and redeem it for a physical bottle after a year.
The project was a success, but only a fraction of NFT owners have come forward to claim physical bottles of wine, Ner-David shared. According to Ner-David, this is due to issues with the redemption process and poor communication to NFT holders that the wine is ready to be picked up.
“Discord, Twitter, and Telegram are the only ways to communicate with NFT holders. We need to collect shipping information,” he said.
these days: How time-weighted average prices can reduce the market impact of large trades
Ner-David elaborated that 15% of NFT holders involved in private drops claimed the actual bottle of wine, while nearly 30% involved in public drops exchanged bottles.
“Before we started doing physical NFT drops, we learned we needed a redemption mechanism,” he said. added, pointing out that these continue to be stored at the Israel-based Jezreel Valley Winery.
Issues like these have led companies launching physical NFT drops to take different approaches. For example, Jeff Malki, a strategic advisor to NFT firm NXTG3NZ, told Cointelegraph that he helped Lil Dark, a 7220 NXTG3NZ NFT digital sneaker drop rapper, launch in March 2022.
Malki explained that physical sneakers associated with these digital NFTs will be available in the first quarter of 2023. He pointed out that this particular drop is aimed at non-Web3 natives and gives users the option to submit a physical shipping address at the time of purchase.
“We expect 80% of our users to be non-cryptocurrency holders. If you want to send data, you can send it. would ideally be delivered automatically,” he said.
Additionally, Malki pointed out that NXTG3NZ may implement a first-come, first-served system. This means that the top group of NFT holders can claim physical sneakers, but must redeem the item immediately by selecting it. If this is not properly facilitated, another user may claim the physical item. Mr Malki said:
“NFTs are cutting edge and we are all trying to innovate. There is no blueprint for this process. Brands and companies are interested in working on phygital projects, but there are still many risks involved.” .”
While this may be true for some phygital projects, others claim to have found successful strategies. For example, Charlotte Shaw, chief marketing officer of Blockbar (a digital and physical wine offering NFT project founded in 2021), told Cointelegraph that the company will be able to store, insure, and resell NFT owners. and offers a marketplace for global shipping.
“Each BlockBar NFT corresponds to an actual physical bottle of wine or spirits, which the owner of the bottle can resell, collect, gift, or ‘burn’ at any time in exchange for the physical bottle. ‘ she said.
Shaw explained that the actual bottles will be shipped from BlockBar’s facility in Singapore and can be redeemed on BlockBar’s website. “When you redeem the bottle, you’re ‘burning’ the digital version to receive the physical version. [one is exchanged for the other], that is, there is one less digital NFT. When redeeming, you will also be asked to enter your shipping address and must fully comply with your jurisdiction,” she explained.
According to Shaw, there are no challenges associated with redeeming physical BlockBar NFTs. However, collecting user information when purchasing NFTs does not create much of a decentralized platform. But when it comes to ensuring that NFT holders receive physical items, this may be the norm: Polygon studios Metaverse he leader Brian Trunzo told Cointelegraph that the phygital project does not capture user information. says that it is necessary.
Fortunately, solutions have been developed to enhance the privacy of NFT owners who disclose their personal information. For example, Justin Banon, co-founder of his Boson Protocol at the Web3 commerce layer, told Cointelegraph that “exposing” himself is a big concern for his Web3 natives.
To solve this dilemma, Bannon explained that the Boson Protocol has created a decentralized application that serves as an end-to-end encrypted messaging solution. “This allows the buyer to only share personal information with the seller and not with any other party,” he said.
Ner-David also noted that Vinsent is currently working with cross-chain NFT minting platform NFTrade to come up with a solution to the two previous phygital drops. For physical wine bottle storage, for example, Ner-David said a period of time is included in the cost of his NFT to cover storage fees. “That way, we can communicate to the NFT owner that there will be costs if the NFT remains unclaimed. All of this he will be built into the NFT metadata.”
Establishment of physical NFT
Challenges aside, industry experts believe phygitals will play a major role in moving brands and consumers forward. For example, Banon believes his physical NFTs will lead his Web3 loyalty program.
these days: What is institutional DeFi and how can banks benefit?
companies like Starbucks have already started implementing Regarding NFT-based loyalty programs, Bannon said physical NFTs will be part of these models.
“NFT and Web3 technology will enable brands to create ‘programmable loyalty commerce’ applications and programs. When a customer receives her NFTs to perform targeted behaviors such as purchases, engagement, and loyalty retention, these Loyalty NFTs unlock access to digital, physical, and experiential assets I can do it. ”
While innovative, Akbar Hamid, co-founder of the Web3 diversity project People of Crypto Lab, told Cointelegraph to solve the challenges and logistics involved in providing physical NFTs in fashion, retail, and luxury goods. said there is a long way to go.
“If we are talking about physical items that are digitally connected, there can be challenges in achieving much larger drop utility. This also applies when someone other than the consumer redeems the utility for physical goods, many brands don’t have the infrastructure or teams to oversee this, but to ensure the utility gets to the end user. This is important because we need to be able to
Because of these concerns, Hamid explained, it might be best for companies doing NFT drops to work closely with brands and buyers to ensure utilities are efficiently redeemed. did.
