Let’s Get 'Phygital': Combining the Physical and Digital in Web3

The rapid rise of non-fungible tokens (NFT) and the metaverse in the past year has given rise to new types of projects and new use cases. One emerging use case in this space is the utility NFT, a type of NFT designed to provide holders with additional value beyond the actual digital asset.

Utility NFTs provide access and items for individuals looking to engage with brands and participate in the project’s culture. For crypto-native and Web2 brands in both fashion and entertainment, Web3 presents an opportunity to bring both digital and real-world items and experiences to its audience. This new popular pairing of the physical and digital world has led to it getting its own word: phygital.

The concept, simply, is that the project is not just in the digital space or the physical world but bridges both worlds, connecting them together in some way.

The concept of creating phygital products and experiences has led to some of the top consumer brands in the world to contribute to Web3 with their take on phygital ideas. Nike, Dolce & Gabbana, Tiffany & Co. and many others have created unique phygital offerings and experiences.

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Depending on the company's particular offering, unique phygital pairings brought about new products that felt less like objects and more like experiences.

Take Nike’s early phygital experience as an example. In late 2019, Nike revealed that it had obtained a patent for blockchain-based sneakers. As it continued to move toward phygital experiences, Nike went on to acquire NFT sneaker studio RTFKT Studios. This acquisition led to the launch of Nike’s metaverse sneaker line RTFKT x Nike Dunk Genesis CryptoKicks. By purchasing one of these NFTs, you are able to wear your sneakers in the metaverse and claim the right to owning your own pair in the real world to match.

Fashion has certainly taken center stage in the rise of phygital activations, pairing the traditional in-person runway show with new, digitally created looks or staging Web3 fashion week shows in the metaverse. The pairing of real-world items with in-game or in-metaverse items for your avatars makes for a straightforward example of how these events work. Yet, the phygital world is not limited to just fashion and sneakers.

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Collectible projects have also begun to develop in the phygital space. In September 2022, for example, Funko Teams and Warner Brothers announced a partnership for DC comic-based NFTs on WAX. Through the partnership, DC fans were given the opportunity to participate in an NFT drop for the digital version of DC’s “The Brave and the Bold” comic.

To better bridge the digital experience with the physical, the brands also announced the release of a physical version of the comic book available through Walmart. By either purchasing the digital or physical copy, you would gain access to the other with your purchase.

The recent trend toward providing real-world utility in the phygital world has captured the imagination of creators and brands alike. By marrying the physical and digital worlds, phygital drops are moving beyond just purchasing an item for display to creating something more, by bringing pieces of the real and the virtual world together to create unique experiences.

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