Let’s get phygital
This week, we dive into the different ways phygital elements have been implemented in games and how NFT technology can mitigate the issues around counterfeiting.
With rumors of Amazon venturing into the NFT space, it seems like an appropriate moment to discuss the concept of meta-phygital. Rather than exploring intricate definitions of the term "phygital", we will simplify it as the concept of integrating digital and physical elements or experiences through different methods. These may involve augmented reality, digital kiosks, or other shopping-related experiences, but for the present purposes, let’s focus on the use of NFTs.
The concept of linking physical and digital ownership is not new, but NFTs offer similar advantages to physical product ownership and transfer as cryptocurrency does for currency, which is the ability to prove uniqueness and prevent "double spend". NFTs have an edge over physical goods in terms of verifiable uniqueness since physical goods can easily be counterfeited even with certificates or mint numbers without a trusted third party to confirm authenticity. In the case of NFTs, the blockchain serves as an ever-present, trustworthy authority. While it is possible to be duped by a counterfeit collection on a marketplace that is not paying enough attention, marketplaces do provide verified badges that link collections to a smart contract address. Connecting physical items to digital ownership with blockchain (or other cryptographic) verification will become increasingly important as society and consumption continue to shift towards the digital, especially if the concept of a metaverse gains popularity.
There are several ways the connection between the physical and digital space can manifest. One approach involves obtaining a digital NFT upon the purchase of a physical item, which may occur either during the purchasing process or through scanning to activate, similar to a gift card. Another popular way is redeeming an NFT for a physical product, which often involves burning the NFT or converting it into a non-redeemable version. However, an NFT smart contract can easily maintain a list of all redeemed NFTs, which eliminates the need for dramatic destruction. In most cases, obtaining an NFT version of a physical object does not necessitate any burning, destroying or physically marking, but rather relies on a unique identifier. Without such an identifier, it would be easy to scan or activate numerous copies, rendering the process ineffective. Many early attempts at converting physical toys or items into the digital realm have learned this lesson the hard way, with databases of keys, QR codes, or bar codes frequently appearing online.
The Amazon rumor suggests a simple strategy of granting both physical and digital items upon purchase, but this approach has a significant flaw. While physical goods can typically be returned for a refund, NFTs often do not follow this refund policy, unless specified in the Smart Contract. This creates a tricky situation where a buyer could sell the NFT to someone else and return the physical item, leaving the second buyer vulnerable. Amazon could potentially require the return of both the physical item and the NFT before authorizing a refund, but this process would be cumbersome. To streamline this process, Amazon could create an Amazon wallet for the NFT, where a simple click of a button would authorize a refund. However, Amazon's history of removing Kindle books from Kindle devices and leaving customers hanging raises questions about the trustworthiness of such a system. Imagine a similar scenario where Amazon reclaims an NFT in your wallet due to licensing issues or counterfeit physical goods.
When it comes to games, trading card games have had an interesting history that spans both physical and digital realms. Trading cards are essentially just printed information and so it makes sense to translate them in both directions. One early example of this was the Eye of Judgement game for the Playstation EyeToy camera, where players could use physical cards to play matches against opponents online. The camera would track the cards and translate the gameplay into the digital realm, creating an early form of augmented reality. To this day, playing online matches using a webcam remain popular. However, there is no foolproof way to prevent players from simply using printed copies of the cards, as there is no way to track their true uniqueness. The counterfeit issue is not just limited to trading cards - Nintendo’s Amiibos and the popular “toys-to-life” game Skylanders have also suffered from piracy of their encrypted NFC chip data.
Magic: The Gathering, the original trading card game, had a long running digital client before the launch of its now popular Arena Magic: The Gathering Online (MTGO). MTGO had a redemption program that allowed players to exchange their digital copies for physical printed copies of their cards, which were deleted in the process (a primitive centralized version of burning). Although similar to the idea of marking an NFT as "redeemed", the company could have faced tracking issues without unique IDs characteristic of NFTs. Instead of deleting the digital versions, the company could have found ways to mark them as redeemed. However, this can get complicated to track properly.
The Pokemon Trading Card Game (PTCGO) has a long running program that allows players to convert their physical card packs into digital versions for use in the PTCGO game. Each physical pack comes with a code card that can be redeemed in the digital version, although the code is not unique to each card, so players receive an unopened digital pack instead of copies of the specific cards they own. The game was designed to be kid-friendly, as it does not allow in-app purchases for real money, requiring players to buy physical cards if they want more. Unlike other pre-NFT TCGs, PTCGO allows players to trade cards digitally. However, inspired by the successful models of Hearthstone and M:TG Arena, the game is being phased out in favor of a new version called Pokemon Trading Card Game Live, which eliminates trading and reduces the number of cards received per code to "balance the economy" around duplicate limitations. Despite this, the new version maintains its kid-friendly nature by not offering any in-app purchases, and even the premium battle pass can be obtained with earned currency. Although the number of cards received per pack has been halved, the PTCGO remains one of the most affordable digital TCGs, with online digital stores offering codes for less than $0.20 per pack depending on the series.
A much more digital-native approach was taken by a newer TCG from the creator of the genre, Richard Garfield, in the game Keyforge. Rather than following the conventional trading card system of collecting cards and building personalized decks, the game abandoned this approach and opted for an algorithm that generated distinct, pre-made decks that could not be modified. Each deck was printed with a unique QR code and other procedurally generated elements, such as a unique deck name and card back. Players could scan the QR codes into a centrally managed app to claim and attach the deck to their account. The app also provided other useful features, such as performance tracking in sanctioned tournaments and a redeemable reward currency that could be exchanged for physical prizes at tournament conventions. There were some issues with the system, including the inability to transfer digital ownership of a deck to another player when selling the physical deck on the secondary market, and the risk of someone else claiming a player's deck if they accidentally revealed the QR code online. Unfortunately, Keyforge never released an official digital client, although an unsanctioned third-party client exists that allows players to use decks from the scanned-in database, albeit without verifying ownership. With the game being revived by a new company, a digital version may be on the horizon, which would be particularly well-suited to the game's unique approach.
Lastly, let's discuss NFT-based card games, which are launching in large numbers. According to chainplay.gg, there was a 50% increase in the number of card games in the last nine months. Cross the Ages, currently in beta, plans to offer players physical copies of its NFT cards, similar to MTGO, but with an added NFC feature to prevent counterfeiting. Spellfire is a web3 reboot of a TCG from the early 90s that follows the Keyforge approach, but with a unique QR code per physical card. The unique QR code per card allows for the possibility of replicating the Eye of Judgment experience or other captivating AR elements without counterfeiting, as the codes must be registered to the owner's account. Currently active web3 TCGs such as Splinterlands, Gods Unchained, and Skyweaver do not have any plans for phygital elements, so it remains to be seen if this differentiator will matter. Cross the Ages and Spellfire are both set to launch this year, so we won't have to wait for too long to see what novel features emerge from these systems.
Undoubtedly, there will be many more unforeseen challenges to address in this space, some of which may require new NFT standards or technologies beyond QR codes and NFC for the physical realm. This will be particularly true as we strive to synchronize digital with physical ownership. The industry will likely have to stay vigilant against the ingenuity of fraudulent participants, but we hope that blockchain technology will prove to be a more robust and trustworthy system than many of the previous systems that relied on centralized authorities.
Thanks for reading this week’s piece of our weekly series “Nami’s Nexus”, where we look to decode web3 gaming and dive into the various areas and nuances of the industry and beyond. Don't forget to subscribe to our blog and follow us on Twitter to receive more web3 gaming content.