(2022) What Are Physical NFTs? Everything You Need To Know

julian canlas -

If you love NFTs, then there is a chance that your wallet has several pieces of digital artwork. However, you may be surprised to know that you can purchase NFTs that are linked to physical items. At Token Page, we have been monitoring the emergence of physical NFTs and we think there is an incredible opportunity over the next few years. Here’s a look at everything that you need to know about physical NFTs.

Physical NFTs include actual items along with a non-fungible token. An example is the Adidas and Bore Ape Yacht Club collaboration.

What Are Physical NFTs?

Physical NFTs are like the digital NFTs that you are already familiar with. However, these NFTs are linked to physical items. Therefore, you can use the NFT to take possession of the item. Think of a physical NFT for a futures contract for gold or oil. You buy the contract and then you can take possession of the gold or oil that the contract represents. Physical NFTs are a great way to authenticate that you are the owner of that physical item. Physical NFTs are great for both branding and marketing purposes.

Why Would You Want Physical NFTs?

There are several good reasons why you would want to consider physical NFTs. Here’s a look at some of the top benefits that physical NFTs have to offer.

1). Authenticates the product

Let’s say you want to purchase an expensive pair of sneakers on the secondary market. Well, you want to make sure that you are purchasing the real thing. With a physical NFT, you can be sure that the sneaker is authentic and not some second-rate knock-off. This can also help you when you want to resell the sneakers. You can demonstrate to the potential buyer that you have the real item.

2). Provides a chain of ownership or possession

It’s good to know who had ownership of certain items. For instance, let’s say that you want to purchase an artwork. You will want to know the artwork’s journey from the creator to each buyer. This will also prevent you from purchasing items that may have been stolen.

3). Makes it easier to buy and sell

When you are dealing with expensive items, it can be a process to try to sell them. For instance, if you want to sell a piece of art, you have to get it authenticated and then put it up for auction. With a physical NFT, all buyers will know that you have the real thing. Also, you don’t have to deal with a traditional auction. You can simply sell the items on an NFT marketplace. Physical NFTs should be popular with any NFT community who wants an item with physical scarcity.

4). Creates a royalty for the physical item

If you are looking to create physical items whether it be a pair of sneakers or a piece of art, you can be paid each time the item is sold. Just like a digital item, you can create a royalty structure for the physical item. This will allow you to have an ongoing stream of income.

5). Fractional ownership

Finally, you will be able to create fractional ownership opportunities on physical items. For instance, you can sell fraction shares of a piece of real estate, a historical item, or a piece of art. If you are looking to sell your home to a group of buyers, now you can do so with physical NFTs.

This home in Florida was recently sold as an NFT for $653,000

How are Physical Objects Turned Into NFTs?

Now you may be wondering how physical objects can be turned into NFTs. The answer has to do with a little technological innovation. Today, some companies will allow you to implant microchips into items that can then be linked to physical NFTs. However, not all items have to be linked to an NFT with technology. Think of a physical NFT as a title to a house or a car. Whoever has the physical NFT can claim ownership of the item. This is a double-edged sword because it can provide the ultimate proof that you are the owner of the item. However, if you lose the NFT or if the NFT is stolen from you, then you can lose legal possession of the item.

Examples of Physical NFTs

Physical NFTs are still rather new. However, there are several examples of physical NFTs being used in several different industries. Here’s a look at five ways physical NFTs have been used in the past 12 months.

Artist Beeple sells physical versions of his artwork

1). Beeple physical artwork

If you have been involved with NFT artwork for any amount of time, then you are probably familiar with the name Beeple. He is one of the most famous online digital artists who is known for creating a piece of artwork every day. In 2021, Beeple started selling NFTs that came with a physical version of the artwork along with a strand of his hair. The physical NFTs have been a hot seller and yet another stream of income for the artist.

2). Florida home sells for $653,000

Tokenized real estate is starting to become a thing. In early 2022, a home in Florida was sold via an NFT for $653,000. One of the reasons why someone would want to buy the home as an NFT is that it can easily be used as collateral. Someone could conceivably use the NFT as a way to get a quick loan against the house.

3). StockX creates a vault for physical sneakers

StockX is an online trading marketplace where people can buy and sell sneakers. StockX is treated more like a sort of sneaker stock market. People buy and sell sneakers like S&P 500 stocks trying to eke out a profit. Now, StockX is offering NFTs that are linked to physical sneakers. The sneakers are stored in their vault and they can be delivered to the NFT owner who wants to take possession of the item.

4). Coachella creates festival collectibles

If you are into music, then you are likely familiar with the Coachella music festival. In 2021, the festival sold NFTs that can be redeemed for collectibles. As an example, one of the NFTs offered gives the owner lifetime access to the Coachella festival. The floor price on this NFT is $1 million. This is the first of its kind in the concert industry and will likely be the start of a larger trend.

Brand Opportunities for Physical NFTs

When we think of NFTs, we think in terms of the collector and the independent artist. However, physical NFTs are a huge opportunity for brands. Some brands have already started working with physical NFTs.

1). Gucci & Superplastic

The luxury brand Gucci and the artist Superplastic have collaborated to create a limited edition of 500 unique sculptures that are paired with an NFT. The way the process works for this collaboration is that the person who owns the NFT goes to the collaboration website and goes through the redemption process.

2). Adidas & Bored Ape

Adidas is one of the most recognized brands in the athletic fashion world. So it makes sense that they would pair up with the best-known brand in the NFT world. The Adidas & Bored Ape collaboration includes a physical item along with digital land that will be available from the Bored Ape web3 project. The collaboration was launched in late 2021 and was one of the largest physical NFT collaboration projects of the last 12 months.

Fashion store brand GAP and artists Frank Ape have collaborated on a clothing line.

3). GAP & Frank Ape

Frank Ape is one of the top NFTs artists. Therefore, it kind of makes senses that the artist would work with a fashion brand. With this collaboration, NFT collectors can redeem their physical NFTs for a Frank Ape/Gap shirt.

What to Know When Buying or Creating Physical NFTs

Whether you are looking to buy or create physical NFTs, there are certain things that you should know to make your creation or investment more successful. Here is what you need to know.

1). Physical NFTs should have a good royalty structure

Make sure that you create or purchase a physical NFT with a good royalty structure. This will create lots of demand for the NFT on the secondary market.

2). Understand the legality of physical NFTs in your jurisdiction

While physical NFTs have been legally recognized in some countries, they may not be enforceable in other parts of the world. Therefore, you should know about the legality of physical NFTs in the region where you are most likely to sell your physical NFTs.

3). Be careful with your physical NFT

Remember that the person who owns the NFT has the rights to the physical object. Therefore, you need to be extra protective of the NFT.

Understanding Physical NFTs

As you can see, physical NFTs have lots of potential. If you are interested in learning about future physical NFT projects, then be sure to bookmark our Token Page Blog. We will be covering the most notable stories in the NFT world.