NFTs or non-fungible tokens have been gaining popularity as a new way to represent and own digital assets. Physical NFTs, also known as “phygitals,” are the next iteration of NFTs that combine the benefits of digital ownership with the tangible nature of physical goods. These tokens have a wide range of use cases and have the potential to change the way we interact with the world. One industry that is well-positioned to take advantage of this technology is the fashion and textile industry. With a history of embracing innovation in response to consumer demand, this industry could be one of the first to adopt phygital NFTs. 

This technology will likely reshape the way consumers interact with and purchase fashion and textiles, providing new opportunities for businesses and consumers alike. Additionally, phygital NFTs could also be used to promote sustainability and social responsibility, as they can provide transparency and traceability around a product’s supply chain and origin.

Exploring the Potential Uses and Benefits of Physical NFTs (Phygitals)

Despite their popularity, most people have little knowledge of what an NFT actually is aside from, possibly, “cartoons of monkeys”. Non-fungible tokens, or NFTs, are unique digital assets on the blockchain that cannot be replaced or substituted. When tied to a physical asset, these digital assets become Physical NFTs, also known as “phygitals.” Phygitals bring all the benefits of blockchain technology, such as security, data privacy, decentralization, and cost reduction, into the physical world.

Incorporation of Physical NFTs can provide many benefits to existing business models including improved supply chain tracking and on-chain verification of authenticity, as well as visibility around inventory and chain of custody. This technology can also open the door for entirely new revenue streams centered around Web3.0 integration. This can include, but is not limited to, royalties to creators on product resales, NFT presales and interactive user experiences combining the metaverse with the real world. 

How Physical NFTs Can Help Combat Fraud in the Fashion Industry

One of the main advantages of Physical NFTs for the fashion industry is the ability to authenticate products and combat counterfeiting. According to UNODC.org, counterfeit items are often associated with organized crime, money laundering, and human rights violations. Additionally, counterfeit products are typically manufactured without any regulatory oversight, which can lead to consumer safety and environmental concerns. The fashion industry is particularly affected by counterfeit products, which results in significant lost revenue and damage to a brand’s reputation.

When utilizing NFTs, each item is assigned a unique identifier on the blockchain that cannot be replicated or altered. This identifier can be easily traced back to its origin with the manufacture, proving authenticity. Products can also be embedded with a scannable NFC chip or RFID tag, making authentication immediate and reliable for anyone with a smartphone. This helps ensure that only genuine products are sold and also protects the intellectual property rights of designers.

Tracking the Threads: How Physical NFTs Can Improve Supply Chain Transparency

Another potential application of Physical NFTs in the textile industry is in supply chain tracking. The production of clothing, textiles, and accessories involves many stages, from the harvesting of raw materials to the final manufacturing of goods, to the shipment to a point of sale. Consumers are increasingly concerned about the sustainability of the products they purchase, and are demanding more information about where their textiles come from and how they are made. Some metrics of pressing concern include environmental impact, animal welfare, and worker safety. 

To provide customers with the information they want and to demonstrate their commitment to producing sustainable and ethical products, many companies rely on third-party certifications, such as GOTS (Global Organic Textiles Certification). However, these certification standards can be complex to navigate and often cover only one aspect of the supply chain, making multiple certifications necessary to show the full story.

Incorporating NFTs into the tracking process allows each stage, from farm to factory to consumer, to be recorded on the blockchain where it is both transparent and immutable. This makes tracking and reporting easier for both third parties and the businesses themselves. It also makes all of the information easily accessible to consumers on the open ledger, which builds loyalty and trust. Web3.0 creates a single location for accessing product information in a decentralized format which ensures easy access to reliable data and reduced possibility of “greenwashing”.

Royalty Rights: How Physical NFTs Can Enable Creators to Benefit from Resales

The resale market in the fashion industry is growing rapidly, as more and more consumers are looking for sustainable, eco-conscious options when buying clothing and accessories. A report by research firm GlobalData found that the resale industry is growing 11 times faster than traditional retail. This presents a new opportunity for businesses to tap into this growing market.

Currently, manufacturers only see income from the initial sale of a product, leading many companies to prioritize quantity over quality. This mentality has led to the fashion industry becoming one of the biggest polluters on the planet. According to UNECE, roughly 21 billion tons of clothing end up in landfills every year. If companies were able to see continuous revenue from the resale of their products, it could encourage them to move towards a more sustainable business model.

Physical NFTs can play a crucial role in this by enabling creators and IP owners to benefit from resales of their products. By incorporating NFT technology, businesses can write royalties on the resale of physical items, such as luxury bags or limited edition shoes, into the NFT smart contracts. This means that companies could collect a percentage of every resale throughout the life of an item, encouraging them to produce better quality products that are meant to last and be resold over and over again. This not only opens up a new revenue stream for businesses but also encourages practices that are better for the environment.

Fashion Meets Web3: How Physical NFTs Can Enable Immersive and Interactive Experiences

Physical NFTs can open up new opportunities for fashion brands to integrate Web3.0 technology and create immersive and interactive experiences for consumers. One potential application is the use of digital twins for physical items, allowing consumers to seamlessly integrate their personal style into the Metaverse and creating a new market for designer clothes. As more and more social interactions take place in digital spaces, brands can leverage NFTs to offer streamlined self-expression through avatar clothing, resulting in deeper consumer loyalty and representation.

Another application of Physical NFTs is the creation of virtual dressing rooms with access to digital models that represent a customer’s true physical size. This can be particularly helpful for boutique brands to more efficiently make outfits to order. Customers can try on clothes virtually before buying them, reducing returns and waste, and leading to a higher level of customer satisfaction. This in turn, leads to a more sustainable and profitable business model for brands.

A Solution for Secure and Immutable Incorporation of Physical Items into NFTs in the Web3.0 Space

To fully utilize the potential of Physical NFTs in the Web3.0 space, it is crucial to securely and immutably incorporate the physical item into the NFT on the blockchain. Some companies have attempted to create a connection between the two assets by using a QR code or NFC chip that points to an NFT URL. However, this approach does not create a true association between the two assets, as they can still be separated and altered.

To overcome these limitations and enable companies and creators to take advantage of the many benefits of Physical NFTs, LITH Token has developed a system that allows for a true marriage of digital and physical assets on the blockchain. This system also enables the incorporation of additional data files or functions, such as authentication and supply chain data, without the need for a centralized database or user ID system. This ensures that the benefits of decentralized blockchain technology are maintained, while also reducing the risk of counterfeiting, fraud, and failure.

A True Marriage of Physical and Digital on the Blockchain

LITH Token’s patent-pending technology, called the NOANE (NFC Oraclized Asymmetric NFT Encryption) Protocol, allows for a secure and immutable incorporation of physical items into NFTs in the Web3.0 space. The NOANE Protocol utilizes an NFC (Near Field Communication) chip embedded within a physical item as a secondary key to unlock encrypted files stored within the NFT. This allows for information about the product, such as previous ownership or the origin of raw materials, to be securely stored on the blockchain where it cannot be hacked or tampered with. This eliminates the need for centralized databases for storing product information, adding transparency and security, and reducing costs for businesses.

The NOANE Protocol also features a layer of encryption, ensuring that only the holder of both the physical and digital aspects can access sensitive information. This ability to unlock these files proves ownership of the physical item and makes recovery easier in case of loss or theft. With this system, there is no longer a need for middlemen or middleware that must be continuously kept up to prove the authenticity of a product years after it is created. The direct interaction between the NFC chip and the blockchain allows product authentication to happen entirely on-chain for its entire life.

LITH Token offers various solutions for any brand or company looking to make their products more sustainable and secure while providing immersive, interactive experiences for customers. Their API solutions are capable of integrating with existing online retail solutions, and they offer white label solutions for companies wanting to create their own unique

Embracing the Future

The emergence of Phygital NFTs has the potential to revolutionize the way we interact with the world around us, and the fashion and textile industry is at the forefront of this change. These technologies blur the lines between physical and digital, and provide endless use cases for businesses and consumers alike. As consumers demand more innovation in response to environmental and social issues, it is likely that the fashion and textile industry will continue to lead the way in embracing these new technologies. The future of fashion and textiles is exciting and full of potential, as Phygital NFTs open up new opportunities for businesses to connect with their customers in new and meaningful ways.