TLDR: A Phygital NFT means a “physical” and “digital” non-fungible token (NFT). These types of NFTs bridge the gap between the physical and digital world through a physical object paired with a digital token that adds a new layer of value and interactivity.
The term "phygital" often provokes strong reactions among members of Crypto Twitter, with some calling it shameless jargon while others find it fun and catchy. Regardless of your feelings, you won't find a more succinct way of describing these hybrid physical/digital NFTs. Some call them "physical-linked NFTs," but see? It doesn't have quite the same ring.
"Phygital" as a term was coined in 2007 by Chris Weil, CEO and founder of advertising agency Momentum Worldwide, to describe building relationships with customers in both the physical and digital worlds. A phygital NFT can be anything from a digital and physical wearable that both you and your metaverse avatar don, to a virtual access pass that comes with physical benefits like beauty products or fancy cognac. In the simplest form, a phygital NFT can claim either a digital or physical twin.
In the fashion world, phygital NFTs often serve a practical purpose and come in the form of technology-enabled garments with an Near Field Communication (NFC) chip. These chips are embedded into a physical garment that connects to a NFC-enabled mobile phone to claim ownership and proof of authenticity. For instance, in August 2023 the web3 vintage clothing brand MNTGE collaborated with San Francisco-based music festival Outside Lands to provide festival-goers with 50 limited-edition vintage jackets with commemorative embroidered patches that provided a digital token and proof of authenticity on the blockchain.
NFC chips provide authentication that the physical garment is real, verified by the creator, and links the physical item with a digital twin. This approach allows physical garments and their digital assets to be vaulted, tracked, moved and/or purchased together or even just kept for personal use. From a supply chain perspective, along with documenting rare or vintage goods, this use case of phygital goods opens up many new, exciting possibilities, inspiring boutique companies and major brands across the globe to experiment with limited-edition phygital drops.
Despite their funky name, phygital NFTs create a bridge between the physical and digital world. Brands are starting to use this new functionality to cultivate more tight-knit communities and reward engagement from their consumer base. While all is still experimental, a common three-step approach is beginning to emerge:
Let's look at some examples:
L’Oreal Group is a global beauty company that has been building Web3 into their brands, including YSL Beauty, L’Oreal Professional Paris and Valentino Beauty, to name a few. YSL Beauty launched 10,000 Golden Block NFTs during LVMH’s Vivatech Paris Conference in June 2022 to catalyze a Web3 fanbase that would eventually have access to future drops. A purchase of a Black Opium product in select markets on YSL Beauty’s e-commerce site rewarded shoppers with an email with a unique link to claim a Beauty Night Block NFT. A total of 2,014 NFTs were available to claim.
The value of the NFT was gaining access to YSL Beauty's allowlist, or a list of guaranteed VIP access, for their next NFT drop. Owning the Beauty Night Block NFT also entitles holders to exclusive content from the perfumer, a gift voucher for their next purchase on the e-commerce site, and a physical Black Opium curated makeup kit.
Later, in June 2023, YSL Beauty launched Golden Block NFTs where the first 2,000 people to purchase a product from the Black Opium received a Beauty Night Block NFT as a gift with purchase (aka GWP — a common term used in the beauty industry).
L’Oreal’s approach for engaging a mass audience with Web3 tools was smart. The brand decided to first onboard customers through a physical item first, rather than expecting them to buy an NFT right away. The question, now, for beauty brands is how to go further — like co-creating a fragrance bottle design, exclusive access to fashion shows where the brand is a sponsor, utilizing augmented reality (AR) filters or filters that match physical products for video calls (like Maybelline Virtual Makeup Looks for Teams). There are so many robust rewards that make this more than Web2 — and the possibilities are endless.
9dcc is a crypto-native luxury house and lifestyle platform created by NFT influencer gmoneynft that gives a real life example of NFC Technology. 9dcc’s first drop ITERATION-01 launched August 2022 with 1,111 Black T-shirts embedded with an NFC chip priced at 0.3 ETH, the native currency of the Ethereum blockchain. Each ITERATION-01 shirt was launched as an NFT while physical shirts were vaulted at a secure physical location with 4K Protocol, a decentralized protocol that brings physical assets on the blockchain. Holders were given a 4K Voucher, a digital token to claim the vaulted shirt. The token could be used in one of three ways: (1) "burned," or destroyed, to redeem a physical shirt, (2) kept in a vault for free or (3) sold/traded together as a Phygital NFT.
Each physical shirt has a 9dcc logo and scannable patch using IYK App for a proof-of-attendance protocol (POAP) to claim ownership of that t-shirt and interact with others IRL (in real life). What gamifies this and makes it interesting is the concept of being able to collect POAPs from other people or share your own. 9dcc is gamifiying and building community by rewarding interaction.
Since the ITERATION-01 launch, gmoney has continued to launch other products including ITERATION-02 a collaboration with Snowfro, founder of the generative art platform Art Blocks and creator of the Chromie Squiggle, and soon after ITERATION-03, a free baseball hat for those who joined a surprise bodega scavenger hunt event during NFT NYC. (More on this here.)
This concept of vaulting from 9dcc revolutionizes authentication. Secondary resale sites like StockX, Vestiaire or even The Real Real employ verification experts, however because items are not purchased directly from a brand or authorized retail store, this verification is at the whim of human error. Verification of the original item through the blockchain creates a public data trail with proof of authentication that is not subjective.
LVMH-owned cognac brand Hennessy went Web3 with H3NSY in February 2023. H3NSY launched Hennessy 8, limited edition craft blend celebrating Hennessy’s 250 years of history. The drop was structured like this: 250 NFTs priced at approximately $226,450 allowed redemption of two physical cognac bottles, and five holders were invited to a private experience for private clients during Art Basel Miami. Buyers could redeem for physical product, keep the NFT and redeem in the future or trade the NFT on a secondary market.
Taking status and socialization to another level, Hennessy also launched a Web3 social club called Café 11, inspired by artist cafés of 1920s Paris. The goal of Café 11 is to curate distinctive experiences across the world. A batch of 1,765 NFTs were launched at $450 each. The inaugural event was hosted during Art Basel Miami December 2022.
H3NSY is solving the problem of authenticity as counterfeit cognac is an issue. The scarcity of this launch as well as the exclusivity tied to this limited edition craft blend offers traditional brand loyalists or even Web3 enthusiasts a new opportunity. And to top it off, its Web3 Social Club Café 11 cultivates a community around the brand through experience in-real-life (IRL) that traditionally the wine and spirits industry have sought to enhance.
The potential and possibilities of phygital NFTs have not been fully realized yet. Major brands are not all on board with phygital NFTs utilizing the blockchain to verify authenticity, cultivate a community and even deliver more value than they have ever before. However, the benefits are clear: For starters, authenticity verification helps to crack down on the counterfeit market, enables brands to make money from secondary market sales and lets customers verify a vintage Chanel purse is really real.
Additionally, brands and even musicians like Taylor Swift can drop a digital twin of a couture look or even a concert outfit that is exclusive to those who attend the event IRL. This new level of interactivty and fan engagement encourages user-generated content (UGC), enhances visibility for the brand and gives fans the opportunity to own the digital likeness of something maybe they either can’t afford or own IRL.
Last, immersive experiences have the power to connect the digital world and brick-and-mortar store locations because an NFT unlocks in-store benefits like discounts, access to an exclusive drop, or redeemable prizes.
The possibilities are endless ,and we are only beginning. So, let’s get phygital and stay tuned for what's to come!
Read More: How This Beauty Brand Is Embracing Co-Ownership
Janey Park is a Web3 content creator (writer, speaker, video creator) and brand strategy consultant. She is on a mission to help others jumpstart into Web3, especially through fashion and beauty.
This is not financial advice. If you don't want to spend money investing in crypto or Web3 — you don’t have to. The intent of this article is to help others educate themselves and learn.
