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Let's Get Phygital, Phygital: The Convergence of Physical and Digital Persists in Web3

Let's Get Phygital, Phygital: The Convergence of Physical and Digital Persists in Web3
November 9, 2023
Dylan Dittrich

Photo: RTFKT

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In their lifetime, Nike-owned RTFKT's NFT collections have generated close to $1.4 billion in trading volume and $170 million in earnings per The Block. But that's old news. The CloneX collection produced much of that volume and revenue during some of the NFT space's most bubblicious moments.

But what have those collections done lately?

CloneX still frequently generates more than $2 million in trading volume monthly, though that's a far cry from nearly $200 million at its peak. The path of floor prices is similar. Once as high as $63k, floor prices sit just below $3,000 today, steadily declining for most of the last two years. The RTFKT (pronunciation reminder: "artifact") story is about more than just the avatars and jpegs, though. Since its acquisition by Nike - and even before - crypto market observers have looked to the company as a trendsetter in the intersection of physical and digital, crudely dubbed by some as "phygital." Let's take a brief Listerine break to scrub that monstrosity from our mouths.

Naming conventions aside, RTFKT and Nike's efforts have demonstrated some interest in this convergence. RTFKT has frequently provided NFT holders with the opportunity to purchase physical sneakers to match their NFTs, delivering on a promise that failed to launch from the roadmaps of most projects.  RTFKT recently presented such an opportunity again, with an October "forging" period for holders of the RTFKT x Nike Dunk Genesis Cryptokicks NFT. During that period, holders could purchase physical Nike Dunks. While the forging did little for the floor price of the project - it more than halved over the period as immediate upside evaporated - it did inspire a surge in trading activity. $613k in trading volume in October was more than 7x the September total.

The takeaway?

NFT appetite may be much softer overall, but crypto-enthusiasts are still interested in owning the rare and exclusive physical kicks that accompany them. The Dunks, offered in 3 colorways at $222, won't ship until June of 2024, but that isn't stopping enterprising parties from trying to turn a quick profit. In a great irony, a select few who forged their physical pairs are now trying (unsuccessfully) to sell preorders on - of all places - eBay. That sums up the state of the physical and digital intersection at present; neither the blockchain-based nor traditional means of transacting offer an end-to-end, full-service ecosystem.

Listings on GOAT and StockX will have to wait until the product is in hand. With floor prices leading up to the forge clustering around 0.1 ETH, the sneakers will likely have to sell for more than $500 in most cases to offer any material profit potential. Is that achievable? We can look to prior RTFKT physical kicks for precedent.

At one point, The Meta Pigeons and the Fewocious collaborations, which preceded Nike, both sold for several thousand dollars on StockX. Today, a few thousand dollars has become a few hundred dollars. The Nike Cryptokicks iRL, minted during less prosperous times and at higher retail prices ($585 - $1,333), have finally hit secondary markets and are struggling mightily to meet those lofty retail values. Those outside the crypto space have little reason to admire those sneakers, and crypto fanatics already had their opportunity to buy them via crypto-native means, leaving little incremental demand on traditional sneaker secondary markets.

The story is a little brighter for more familiar Nike favorites. Air Force 1s designed in collaboration with Haruki Murakami still sell for close to $1,000 (close to their mint price), while other Air Force 1s from that May forge command premium prices, no small feat for one of the most ubiquitous sneaker models in existence. The lower entry point for the Nike Dunk Genesis Cryptokicks makes profit seem more attainable, but the admiration from traditional sneakerheads is in doubt. There's no Murakami collab here, and the sneaker space isn't red hot in its own right.

Still, most would agree that the Dunks will be more useful "iRL" than they are in the metaverse. Wouldn't want the tumbleweeds rolling through there to scuff your virtual kicks.

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