How NFT Physical Products Disrupt Traditional Marketplaces
The Dibbs Team
Aug 9, 2023
7 min read

How NFT Physical Products Disrupt Traditional Marketplaces

How NFT Physical Products Disrupt Traditional Marketplaces


Traditional marketplaces have democratized the shopping experience for consumers and provided businesses an opportunity to tap into a global market. But they’re plagued with inefficiencies and challenges, many of which stem from the absence of verifiability throughout the product life cycle.


There's a risk of original goods being swapped with counterfeits or getting lost during the final stages of delivery. Furthermore, intermediaries may exploit the system, manipulating documents and invoices to conceal the theft.

Physical NFTs present a solution to these issues. In this article, we’ll explore the concept of physical NFTs and how they can solve the problem that traditional marketplaces face. 

Key Takeaways
Physical NFTs, or 'phygitals', combat counterfeiting and theft in traditional marketplaces by providing verifiable proof of authenticity and ownership.
They also foster trust in the refurbished market by providing a comprehensive, immutable record of an item's history, fostering trust and informed decision-making.
The benefits presented by phygital NFTs enable businesses to distinguish themselves from larger competitors and build a loyal customer base.


What are Physical NFTs?

Physical NFTs, also called phygitals, are digital tokens tied to tangible assets and are used to verify their authenticity and ownership. There are two parts to a physical NFT: the digital token residing on the blockchain and the actual physical asset, which is linked to a unique identifier like a QR code or a Near-Field Communication (NFC) tag. 

The "Collezione Genesi" or Genesis Collection is a notable example of physical NFTs. This collection was created by the renowned fashion house Dolce & Gabbana and was sold off to collectors via an auction. Winners would receive the physical counterparts of the NFTs and exclusive access to D&G’s events. 

How are Physical NFTs Solving Challenges Traditional Marketplaces Pose?

The most significant advantages of physical NFTs lie in their ability to verify authenticity and provenance, which offers traceability within the supply chain and brings the following benefits:

Prevents Counterfeiting

Despite the introduction of anti-counterfeit measures like tamper-proof seals and RFID tags, the Guardian reports that counterfeit luxury goods have surged by 10,000% over the past two decades.

This surge can be attributed to the fact that brands can’t oversee the manufacturing process and invest resources in tracking and controlling the distribution of knock-offs sold at lower prices.  

However, the tokenization of assets helps address these challenges. When a physical item is created, it can be tokenized as an NFT on the blockchain. The NFT contains metadata about the item, such as its creation date, origin, and unique characteristics. 

Now, when a customer buys the physical item, they can verify its authenticity by checking the associated NFT on the blockchain. If the physical item doesn't have an associated NFT, or if the data doesn't match the physical item, they can determine that the item is a counterfeit.

Eliminates Instances of Stolen Goods

Close to one in ten people had at least one parcel lost or stolen between 2021 and 2022. This amounts to a staggering 1.009 billion packages globally, at a total cost of $38.81 billion.

Despite the severity of the issue, brands often find it challenging to combat it due to the lack of real-time tracking and the usage of fragmented systems. Different stages of the supply chain utilize disparate tracking systems that fail to communicate effectively with each other. 

For instance, a luxury handbag brand may use one system to track production in its factories, another system to manage distribution to retailers, and yet another system to track last-mile delivery for online sales. This makes it challenging to pinpoint which stage of the supply chain the theft took place. 

Furthermore, in some instances, malicious actors may even forge or manipulate documentation to present stolen goods as legitimate. 

But physical NFTs change this. Once you’ve tokenized the physical item on the blockchain, the data associated with it becomes accessible to all stakeholders in the system. In addition to this, it also becomes easy to track the provenance of an item through blockchain records. 

So, tokenized assets serve as an unalterable, single source of truth, ensuring that packages are accurately tracked and not misplaced during shipment or delivery. Their immutable and tamper-proof nature also safeguards against any potential document manipulation.

Moreover, it’s also possible to get the GPS location of the tokenized goods within the supply chain using oracles. This enables quicker identification of thefts and stolen goods, significantly enhancing the security and transparency of the supply chain.

Improves Visibility in Secondary Marketplaces 

Buying refurbished goods online poses many challenges. It’s difficult to determine the history of a refurbished item, look into the product conduction, why it was returned, and how it was repaired. This lack of transparency can make it hard to assess the item's worth and reliability.

However, NFTs significantly enhance transparency and trust in the refurbished market. By linking an item to an NFT, it’s possible to create a complete record of the item’s history.  This includes details about its original purchase,  repairs or modifications it has undergone, its previous owners, and more.

This enhanced transparency empowers buyers to make more informed decisions, as they gain a clearer understanding of the item's condition and history. Simultaneously, it aids sellers in showcasing the value of their items, especially if they feature valuable upgrades or have been meticulously maintained.

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Enhances Customer Experience

Customer experience is increasingly becoming a pivotal differentiator for businesses. According to an Adobe report, over two-thirds of companies that excelled in customer experience outperformed their industry peers. However, traditional marketplaces often fall short in this aspect, as they tend to adopt a one-size-fits-all approach.

Phygital NFTs, on the other hand, offer a solution to this issue, enabling brands to create engaging and personalized experiences through the use of smart contracts. For example, a brand can create an NFT loyalty program that issues physical NFTs that customers can exchange for the object when they’ve collected a certain amount of points. 

NFTs can also grant access to communities where customers can get access to early product releases and interact with brands or creators through Q&A sessions, personalized messages, or even one-on-one video calls. This makes customers feel special and enhances their overall experience.

Launch Phygital NFTs with Dibbs

By offering a level of transparency, security, and personalization that traditional marketplaces can't match, phygital NFTs can help businesses carve out a unique niche and build a loyal customer base. This empowers businesses to compete with industry giants.

So, if you’re ready to explore phygital NFTs for your business, Dibbs can help. As a leading tokenization service, Dibbs enables you to create and manage your NFTs. Schedule a demo today to discover how you can enhance your customer engagement with Dibbs.