Azuki’s Physical Backed Tokens Explained

October 19, 2022

It was always going to be difficult for Azuki to get the monkey called Zagabond off its back. It seems like they might just manage it… 

Yesterday, Azuki announced it is conducting a public auction for eight golden skateboards plated in solid 24K gold on Oct 21st. 

“How is a public auction for another expensive item any value to Azuki holders?”, I hear you ask. Well, here’s where it gets interesting. Every skateboard is embedded with a cryptographic chip that connects the physical skateboard to a digital token (a Physical Backed Token, or PBT). 

How is this innovative?

The OGs amongst you will know that a digital token representing a physical item isn’t new.

The problem with previous examples is that the physical and digital assets have been distinct entities – the NFT has no connection to the physical asset once claimed. After a few trades, keeping ownership of the NFT linked to ownership of the physical item becomes a challenge. 

Azuki is using a new standard (EIP-5791) to solve that. The key innovation is that the NFT can only be transferred to a different owner if a signature from the chip is provided to the contract. That means the physical item must be present to complete the NFT transfer.

How does this make anyone’s life better?

This is a significant development for physical crypto and IRL NFTs. This technology unlocks a number of use cases. Here’s why you should be excited:

  • Decentralized authentication of goods: If you want to buy a vintage watch, you want to make sure it isn’t a knock-off. To authenticate an item, people often go to the manufacturer or authentication professionals. Physical Backed Tokens empower anyone to authenticate a physical item by scanning it with their phone.
  • Tracking ownership lineage of physical goods: Imagine a pair of trainers owned by Michael Jordan, who then sold those trainers to Eminem. Eminem performs in those trainers and decides to auction them off for charity. If those trainers were embedded with a Physical Backed Token, you would be able to prove that lineage on the blockchain.
  • Using physical products to create digital experiences: Brands can use items containing PBTs to provide exclusive experiences to people that own them. For example, Drake could provide VIP access to his concerts to anyone who owns his limited edition merch embedded with a Physical Backed Token (simply by scanning the merch).

The reason this is valuable for Azuki holders is that the auction provides a new way to raise money without diluting the Azuki and Beanz collections (by making another collection for example).

Azuki is also creating a bit of a name for itself by being one of the stand-out projects that is experimenting with new and interesting technologies. You can be pretty sure Azuki will use this tech to provide fun IRL experiences to its holders in the future.

Developments like this only remind me of how early we are… stay bullish folks!

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