An Introduction to NFTs Backed by Physical Objects
When most people think of NFTs, they think of them being used only for digital assets like artwork and music. There’s a reason for that because NFTs and digital files go hand in hand and are in many ways a match made in heaven.
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But just because Beeple can sell a piece of digital art for $70 million, that doesn’t mean that there’s an inherent reason why NFTs need to be solely for digital assets. In fact, Beeple himself has sold an NFT with an accompanying sculpture for $29 million.
That’s why today, we’re going to take a closer look at NFTs that are backed by physical objects. And so, if you’re ready, let’s go ahead and get started.
An Introduction to NFTs
Perhaps the first thing for us to do is recap what NFTs are. The acronym stands for non-fungible tokens, and it refers to a kind of asset that’s created on the Ethereum network. Essentially, a unique token can be created for any digital asset, whether an image, a song, or a video.
The creators of these NFTs can then sell them, thus transferring the ownership of these digital assets to the purchaser. NFTs can be bought and sold indefinitely, and the original creator will receive a cut from any subsequent sales.
So far, NFTs have largely been used for purely digital items, but there’s no reason why they can’t be linked to physical items, too. They can be resold like a regular NFT or even redeemed in exchange for the physical item when that happens.
One exciting way to tie physical objects back to NFTs is to use an IPFS link that’s stored within the physical object and can be used to authenticate it as the original. It can then help to combat fakes and copies.
NFTs Backed by Physical Objects
You can think of NFTs backed by physical objects as being a kind of modern-day equivalent to a mixed media project. One of the interesting things about these kinds of NFT auctions is that the only way to get hold of the physical object is to purchase the accompanying NFT.
This can have the effect of raising the prices because it caters to two different audiences and attracts both bidders who want the NFT and those who want the physical object. This can lead to bidding wars and drive up the final value of your auction.
One of the interesting things about NFTs that are backed by physical objects is that, by their very nature, they can’t work in the same way as regular NFTs. It’s too complicated to explain every detail here, but it basically comes down to licensing and copyright law.
After all, the whole idea behind NFTs is to provide a sort of digital certificate of authenticity and ownership. This doesn’t change for NFTs backed by physical objects, but it places the onus on proving their provenance and authenticity.
There’s also the idea of recurring royalties. Traditionally, when artists sold a piece of physical work, they were only paid for the initial sale. With physical work that NFTs back, it’s possible for the artist to be paid a commission of every subsequent sale.
Trevor George, the CEO of NFT company Recur, explained, “Imagine a physical action figure or collectible sells today and then sells on eBay ten years later for $10,000. [Normally], the brand doesn’t participate in that secondary transaction. Thanks to NFTs and the blockchain, it’s now possible.”
Of course, we’re yet to see whether this is actually a good thing, but that’s almost beside the point. It’s an innovation, and no matter how much we might occasionally want to, we can’t fight innovation. The market will decide whether this is something that it wants to adopt.
The most interesting thing about NFTs backed by physical objects is that it’s possible to play NFTs to their strength, creating a physical object with digital elements. For example, Beeple’s recent piece that combined a physical object with digital art includes screens as part of a sculpture that can be used to display different pieces of digital art.
Beeple himself went on record to say, “This artwork’s unique ability to be updated makes it more akin to an ongoing conversation.” In many ways, it also means that an artwork is no longer completed once it’s released. NFT-backed physical objects can continue to change and evolve over time, and we’re yet to see the full extent of their impact.
As you can see, there’s a huge amount of potential for NFTs that are backed by physical objects, and while it’s still early days, it’s a market with a huge amount of potential and one that we can expect to see continuing to grow in the years to come.
And the good news is that if you need some help with NFT Development Services, we’ve got you covered. At Zfort Group, we have years of development experience and have built up a specialism in NFT development over the last few years.
And so, if you’re looking for an NFT development partner, you’ve come to the right place. Reach out to us today to find out how we can help you. We look forward to working together!
We will help you with your NFT project!