What Is Phygital?

Without a doubt, we are witnessing a true revolution in the way consumers buy products and services. As technology becomes more and more advanced, everything is becoming digitized. From news reports and grocery shopping to dating and collecting artwork, the digital age is marching full steam ahead.

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A term you may have started seeing around is phygital. What is phygital, though? And what does phygital mean? This new-age term is meant to describe things that bridge the gap between the physical and digital.

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In this guide, we’re answering the question, “what is phygital?” and exploring its meaning in more depth as well as seeing how it’s shaping our world today. As phygital NFTs rise to acclaim, let’s explore this new world of opportunities for investment and collecting together.

What Does Phygital Mean? Physical + Digital

What is phygital? And what does phygital mean? This increasingly-popular term describes an experience, product, or service that merges digital technology with physical elements.

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We experience “phygitalization” on an almost day-to-day occurrence. For example, QR code restaurant menus, app-assisted grocery store pick-ups, and targeted ads on Instagram. Remember the extremely popular game Pokemon Go? This game is another excellent example of a phygital experience in which players hunt for Pokemon in augmented reality at various physical locations.

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The term phygital isn’t limited to these examples, however. When businesses use a phygital strategy for marketing their physical store through digital push notifications, that’s another version of “phygitalization.” These can come in the form of geolocation examples, as well, like when receiving a coupon to visit a brick-and-mortar store when they’re within a certain proximity. 

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Stores aren’t the only entities making use of phygital experiences these days, either. The global pandemic skyrocketed museum offerings for fascinating VR (virtual reality) tours and art in XR (extended reality).

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Undoubtedly, however, one of the most exciting forms of these phygital experiences have arisen as physical asset-based NFTs (also called phygital NFTs). This is all thanks to their endless variety of use cases giving investors and collectors new ways to own unique items, add to their digital collectibles, or gain access to unique experiences.

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Put simply, phygital NFTs are phygital assets consisting of two parts: digital assets coming from metadata (a smart contract encoded into the NFT) and physical assets (like a 3D model, tickets, and more).

How Long Has Phygital Been Around For?

The term “phygital” was invented by the Australian agency Momentum, which claimed the copyright for the word in 2013. It was part of its motto: “An agency for the Phygital World.” While they may have coined the term, the word phygital is used widely today across the globe.

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A major reason why the digital world has expanded so rapidly can be attributed to the smartphone boom and society's desire for instant gratification. Since the dawn of the digital era, the widespread use of these online connections has also come to guide the offline, real-world routines of consumers.

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For brands looking to offer all the latest experiences, phygital assets represent the perfect opportunity to improve customer experience by optimizing consumer preferences, adapting to their habits, and boosting customer satisfaction.

What Utility Can Phygital NFTs Provide?

When it comes to phygital NFTs, their real-world bonus perks are part of what makes an NFT valuable. Instead of simply being a unique digital asset on the blockchain, phygital NFTs offer utility. NFT utility refers to the amount of value an NFT has in relation to any physical assets and perks the token comes with. Some examples of what utility phygital NFTs can provide are:

• Proof of provenance
• Verifying authenticity on the blockchain
• Unlocking digital value
• Proof of ownership history

Proof of Provenance 

NFTs give artists, creators, and collectors full transparency regarding the art's supply chain (whether it's physical or digital artwork). This proof of provenance is essential in determining the value of NFTs. For example, if buyers know that an NFT was minted by Beeple (a famous digital artist), that drives the price up.

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Likewise, artists can create digital certificates of ownership and provenance (via NFTs) to guarantee transparency with their physical paintings, sculptures, films, or other art forms.

Verifying Authenticity on the Blockchain

By proving authenticity through unique ownership certificates, phygital NFTs can play a key role in adding more value to real, tangible goods (especially artwork and collectibles) where authenticity is essential to buyers.

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For example, storing all the relevant details of a bottle of aged whiskey's provenance on the blockchain (which cannot be removed, edited, or hacked) provides the buyer with instant confirmation of the whiskey's authenticity. This available, immutable proof mitigates the risk of fraud and thereby increases its perceived value.

Unlocking Digital Value

Phygital NFTs offer the perfect solution to bridge the gap between the physical and digital worlds when it comes to adding value. As an NFT is entirely digital, the value users gain from it can be based entirely on the physical experience.

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Take event tickets, for example. Aside from eliminating scams and fake tickets, NFTs can also be used for a range of programmable perks like behind-the-scenes content or even some kind of complimentary digital art that can easily be monetized or transferred.

Proof of Ownership History

A massive benefit of using NFTs to back physical items such as fine artwork, memorabilia, or even toy collectibles is that there will always be a record of the transaction and its ownership on the blockchain.

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For example, by using NFTs, art collectors can trace every owner a certain piece of artwork has ever had. This is especially advantageous if an artwork was owned by a notable person, which may be a contributing factor to what makes an NFT rare, notable, and therefore more valuable.

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Having access to these records on the blockchain makes it a lot easier for buyers to verify both the true value of a physical object and its authenticity, mitigating risks and driving up confidence in phygital NFT sales.

Examples of Phygital NFTs

Now that you know what phygital means and are familiar with what these types of NFTs can provide, let’s look at some examples of phygital NFTs.

Physical Versions of Digital NFTs and Collectibles

Physical versions of digital NFTs and collectibles are NFTs that are directly linked to tangible objects that can be purchased. This is most commonly seen with fine art. These physical NFTs can be traded for the same value as the real, physical artwork that they represent. Additionally, they can be redeemed for physical art at any time in the future.

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Many artists that have already had success through selling their traditional artworks are now using digital art sales (NFTs) to reach a much larger audience all around the world and attain even greater levels of success.

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Confidence in phygital NFTs is also attributed to the unique metadata stored via blockchain technology that ensures artwork cannot be counterfeited, copied, or faked. In the same vein, a buyer that has made a purchase can very easily provide proof that the NFT belongs to them.

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Linking physical artworks to digital NFTs is an excellent way to cut out the middleman, allowing the artist to deal directly with buyers and receive the full profit off of their work.

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Lastly, another perk for artists utilizing phygital NFTs is that most NFT marketplaces ensure that each NFT sale generates royalties. This includes resales, meaning creators can continue earning income from the same piece of work each time it is sold (unlike with physical art).

Digital Versions of Physical Items

Conversely, phygital NFTs can also be used to provide digital versions of tangible items. Some examples of physical assets that can be represented through NFTs include the following: 

• Movies, films, music, and other creative works
• Fine art, like sculptures, paintings, illustrations, and photographs that you would find being stored in an art gallery
• Multimedia files
• Real estate
• Stocks

The digital NFT versions of physical assets are uniquely identifiable, meaning they are an excellent method of online verification for a large range of valuable assets in a variety of different industries and markets.

Metaverse Fashion and Merch

Fashion brands have also jumped on the phygital NFT bandwagon, taking their customer's online shopping experience to the next level.

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A virtual sneaker powerhouse called RTFKT, recently purchased by Nike, allows their NFT owners to purchase real, physical footwear, while they call the NFT the "blueprint" to these awesome real-world designs.

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Other brands have created virtual stores that look identical to their physical stores, creating the opportunity for them to offer their products to a broader market. Virtual fashion houses like The Fabricant are being developed to make exclusive virtual clothing that can be worn and traded within the metaverse.

Can NFTs with Physical & Digital Components Be Separated?

What about separating the physical and digital components of phygital NFTs? Is such a thing possible? The answer is that it depends. Whether or not phygital NFTs that combine both physical and digital worlds can be separated really depends on the specific use case.

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For example, it's not feasible to buy physical art separately from its NFT pairing (with that NFT going to a different buyer) as the physical piece of art would then be devalued without the accompanying NFT.

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On the other hand, a digital experience can easily be separated from its physical components when it comes to buying physical assets like real estate, creative works, and multimedia files, for example.

The Future of Phygital NFTs

With all the excitement surrounding the rise of phygital NFTs, what does their future look like? The bottom line is that in today's technology-driven world, every business should definitely consider going phygital, even if it's just implementing a phygital marketing strategy.

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Industries have already been highly successful at utilizing these innovative digital elements including the real estate, baking, and automotive industries. Engaging with the digital world has enabled them to create personalized user experiences, providing instant gratification, convenience, and genuine involvement between brands and their followings. Virtual reality allows users to take a stroll around their dream homes, take a drive in any car they fancy, and even bank online.

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Some critics believe that the phygital space will lose traction as soon as the global pandemic ends, but with so many incredible use cases and established benefits of implementing phygital elements in real-life products and services, these theories seem rather short-sighted.

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In fact, phygital marketing strategies have been used to influence consumer behavior for years. The ways in which we eat, rest, shop, communicate, study, work, and entertain ourselves almost always involve a digital element of some sort. Therefore, the concept of a physical NFT, virtual catwalk, phygital retail store, and VR home tours aren't quite as new as some might think.

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Throughout this guide we’ve answered the question, “what is phygital” and shown you a wide variety of ways it may already be integrated into your daily life. As the possibilities continue to grow as more users, brands, and creators make use of the phygital world, we expect to see it building to even greater heights.

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