How the experience of physical products is revolutionized by NFTs

Physical backed tokens allow ownership verification of items

Azuki introduces the Physical Backed Token

Chiru Labs - the team behind the anime NFT collection Azuki - introduces the Physical Backed Token (PBT). This revolutionary technology allows brands to take the experience around their physical products to a new level using NFTs. This is because until now, the connection between physical objects and digital proofs of ownership has been limited. With the help of PBT, a link between the actual ownership of the object and the representative NFT can now be realized on the blockchain in a very user-friendly way. The following lines explain how this works and the benefits it offers to brands.

How does the link work?

An NFT serves as a digital proof of ownership. Should the NFT change hands, all transactions run completely securely, transparently and without an intermediary via the blockchain. The sender and recipient can therefore be absolutely certain that the NFT will change its rightful owner without having to check this. But what if the NFT is meant to be representative as a digital certificate of ownership on a physical object, such as a luxury watch? Who controls that the luxury watch also changes hands in real life when the associated NFT changes hands?

The creation of a digital token in conjunction with a physical object is basically nothing new. Until now, however, links have been established via QR codes on the item or commercially available NFC (near field communication) chips, which are also used for payment processes with smartphones.

The challenge here, however, is that the physical and digital assets are different entities. A secure link between the token and the asset, throughout its lifecycle, can therefore not be guaranteed without at least one trusted entity. Thus, with previous methods, the NFT can change hands, which is also clearly documented on the blockchain, but without moving the luxury watch.

Phyical backed tokens are intended to remedy this situation and enable decentralized authentication and tracking of the complete ownership of physical objects. Although this process is also based on the use of a chip that is attached to the object, PBTs cannot be transferred arbitrarily. This is because the so-called BEAN chip generates an asymmetric key pair on the blockchain when activated, which is why these tokens can only be transferred if there is confirmation from the chip embedded in the object. At the same time, the physical item cannot change hands without a signature in the digital key pair. Thus, for the first time, blockchain technology enables trustless authentication without a central server or middleman and ensures ownership of a chipped physical item with its digital counterpart. In doing so, neither entity will have the sole right to authenticate or verify ownership of items, according to Azuki.


To announce and demonstrate the technology, Chiru Labs recently held an auction for eight skateboards that can be authenticated by the embedded BEAN chip. The skateboards, which are coated in 24-karat gold and weigh just under 20kg, fetched $2.5 million. If the skateboard is sold or given away to a new owner, the subsequent owner can easily scan the item to verify ownership. The brand calls this principle "Scan-to-Own".


By scanning the chip with the smartphone, the PBT is either mined or transferred to the owner's wallet. If the physical item is sold or given away to a new owner, the subsequent owner can "scan" the same physical item, enabling decentralized transfer of the PBT from the previous owner to the new owner. Azuki describes cryptographic ownership security as "enabling the use of physical assets to create digital experiences." Since digital tokens could previously only be used to access physical items, Azuki opens up new storytelling avenues for brands.

Next Level Collection Experience

In addition to the described authentication of possessions via the blockchain, the PBT opens the door to creative possibilities for staging experiences. Thus, the collecting character, which has already been taken to a new level by NFTs anyway, is stimulated even further. As an owner, collections can be built that span both the digital and physical worlds, trading authentic items or participating in real-life quests. The combination of a physical and digital collection experience are just the tip of the iceberg of experiences enabled by the new token standard, according to Azuki.

Three exciting application areas for PBTs

An interesting use case for us in the field of PBT is the decentralized authentication of products, especially luxury products. For example, a luxury watch can be identified as an original or duplicate in seconds by simply scanning it with a smartphone, without the need for an expert to prove it as an intermediate instance.

The revolutionary case of tracking ownership of physical goods described earlier is also a real gamechanger for us. Cryptographic proof of previous and current owners of the item enables brands to create completely new product experiences for the target group. We see revolutionary opportunities here, especially for the car trade. We will explain exactly how this could look in upcoming blog articles.

Until now, NFTs could be used to unlock physical experiences, such as entry to events or exclusive access to brand merchandise. Using physical products to create digital experiences reverses this scenario for the first time. For example, owning an item can unlock digital experiences such as exclusive airdrops or token gating access.

We would be happy to advise you on the use of NFTs in the existing business model of your company or in which you operate. We are convinced that the right NFT strategy will be at least as important for companies in the future as social media strategy already is today. We are happy to support you in taking advantage of the opportunities to position yourself in this area at an early stage and look forward to receiving your non-binding contact request.