Chiru Labs, the company behind top NFT collection Azuki's, successfully auctioned eight golden skateboards for a total value of 2.5 million dollars, paid in ETH. The ownership of these boards is recorded on the Ethereum blockchain.

The highest bidder was willing to pay 400 thousand dollars for the ownership of a board, which he can prove on-chain ('proof-of-skate' as Chiru Labs calls it with a pun intended).

How does this work? And how can the gold-plated, 20 kilo shiny objects (which apparently actually do a fine job as a skateboard) change hands? Meet Physical Backed Tokens, a new token standard (ERC-5791, so an Ethereum standard) that allows us to record ownership of real-world items.

Physical Backed Tokens

Chiru Labs put a chip in the skateboards that can be scanned with a smartphone. Scanning this chip means minting the PBT and transferring it to the owner's wallet. A PBT token is a version of an NFT that requires it to be linked to a physical chip.

In other words, the skateboard is in your hands, the certificate of ownership is in your crypto wallet and the chip in the board tie the two together. If you want to sell the skateboard, you will need a signature from the chip, which allows the NFT to be transferred to the new owner.

Use case: luxury items - for now

Three months ago, we wrote about Tiffany's, which sold out their so-called NFTiff's, a limited edition of real-world Crypto Punk pendants and a corresponding NFT (although Tiffany's didn't apply the PBT system).Regardless of the exact implementation, luxury products will benefit from these kinds of "twin NFT's".Counterfeiting will be easier to detect. This will unlock a big market of collectibles and art that now is on eBay, and which will soon feel extremely out of date. Currently, you have to trust the autograph of the creator of the artwork that the piece you buy as an original - if you're so lucky that it exists at all.

Future use case of Twin NFT's with the metaverse
Apart from the use case of collectibles, imagine the implications of buying - for example - a luxury pair of sneakers. Buying the NFT gives you instant access to the 'metaverse version' of the sneakers, which you can for example wear in a game. But the NFT also gives you the right to the physical sneakers. Those are delivered at your home. There is a chip in them that proves you have the NFT and thus can function, for example, as a ticket for events. We are still so early...