When Augmented Reality (AR) and NFTs Meet

Developments in the fields of virtual reality (VR) and augmented reality (AR) are transforming our perception of reality and may represent the early days of a new computing platform. Simultaneously, Web3 and blockchain-based tokens like non-fungible tokens are ushering in a new model for tracking ownership and facilitating transparent economic transactions.

What happens when these two technology sectors meet? Web3 introduces the concept of scarcity into the digital realm, which is gradually merging with the physical universe.

The combination of AR and NFTs holds the potential to create persistent digital objects that seamlessly integrate into our physical environment.

Integrating NFTs and merging them more into the physical world can unlock more of their potential. In this post, we’ll explore how AR and NFTs converge.

What Is an NFT?

Non-fungible tokens, or NFTs, are digital tokens on a blockchain that represent something unique, such as a digital piece of art, an in-game item, rare collectibles, or any other distinct digital/physical asset. NFTs utilize blockchain technology to link a physical or digital object with an owner in an immutable way.

NFTs have a wide range of use cases across DeFi, NFTs, gaming, tokenized RWAs, music, generative art, and much more. This has opened up new opportunities for artists to monetize their work without having to rely on intermediaries, for brands to create new connections with their customers through digital merchandise, and for unique digital experiences that blur the line between the virtual and the physical.

What Is Augmented Reality?

Augmented reality, or AR, refers to a technology that superimposes sensory information—images, video, or text—in real-time onto the physical world. Unlike virtual reality (VR), where the user’s real-world environment is completely replaced by a simulated one, AR alters the user’s perception and overlays new information over the existing environment.

Mixed reality (MR) is often considered an extension of AR. It refers to technologies that overlay objects on top of reality, allowing users to simultaneously interact with physical and digital objects. For simplicity’s sake, we’ll include MR under the AR umbrella in this post. In addition, extended reality (XR) is a term often used to encompass the entire spectrum of VR, AR, and MR experiences.

AR typically involves real-time interaction and a combination of digital and physical worlds and objects. The overlaid information can be adding new objects to the physical environment or masking the physical environment with digital objects. Ideally, the sensory information is seamlessly overlaid with the physical world so that the AR aspects of the experience are perceived as being part of the physical environment.

While augmented reality technology has existed for decades—with one of the most popular consumer applications of it being the 2016 mobile game Pokémon Go—it has largely been limited to government and corporate settings, and its adoption has been hindered by the excessive cost of the technology and the lack of consumer-grade hardware.

Synergies Between AR and NFTs

While individuals around the world spend an increasing amount of time online, the manner in which we interact with the digital realm has largely remained the same (albeit, the form factor has become much smaller). However, augmented reality and the metaverse may represent the next stage in computing, revolutionizing how people interact with the Internet, computers, and each other. An example of how strongly this thesis is held by some is Meta spending $36B on its Reality Labs division between 2019 and 2022. In comparison, the original iPhone cost more than $150M to develop.

As a new computing platform is emerging, facilitating immersive interactions with digital environments, NFTs provide a unique way to track ownership of digital objects. If AR—and, more broadly, XR experiences—achieve widespread adoption, NFTs could offer an integrated solution to track the provenance and history of digital objects overlaid in the physical world. Simply put, NFTs introduce scarcity to the digital world, while AR brings the digital world into the physical world. The confluence of these two trends opens up a whole new world of possibilities for user interactions and digital experiences.

Venn diagram showing the intersection of AR and NFTs
The intersection of AR and NFTs unlocks persistent digital objects that are seamlessly integrated into the physical world.

AR NFTs are a fusion of the aforementioned technologies. They represent digital assets that prove ownership via a blockchain and can also be interacted with in an augmented reality setting. Essentially, an AR NFT is a digital object that users can place and view in the physical world through the lens of an AR-enabled device, such as a smartphone or smart glasses.

Some of the most valuable physical commodities will soon be digital. Digital art is already exchanging hands for millions of dollars, and augmented reality makes it possible to interact with these digital objects in an entirely new way, unlocking novel user experiences across art, music, gaming, fashion, social media, commerce, and much more.

AR NFT Examples

Let’s examine the benefits of AR NFTs through some use case examples. The primary benefit of using NFTs in the realm of art and collectibles lies in their ability to authenticate and prove ownership of digital assets. However, most of this involves looking at those assets on a screen, instead of interacting with them in the physical world. Once AR technologies become widely available due to hardware costs going down and the supporting software infrastructure maturing, NFTs offer a new way to track ownership of items as persistent digital objects placed in the physical world.

AR can enhance the experience of owning and enjoying art and collectibles. Moreover, AR can create immersive experiences where digital assets take on a lifelike form within the owner’s physical environment. Users could see how a piece of digital art would look on their wall, view a token-gated virtual concert of their favorite artist, see a digital sculpture materialize in their home, or try on a clothing item in an augmented reality setting before going ahead with the purchase.

Another major use case universe of AR NFTs is gaming. Players could obtain a rare NFT creature in a game, then use an AR app to see and interact with that creature in their physical environment, a digital companion becoming a physical companion, creating an entirely new layer of immersion, where the lines between the game world and the real world are blurred.

The Future of Extended Reality and Web3

The fusion of XR and NFTs can redefine the boundaries between the physical and the digital and create a new frontier of immersive experiences across a wide range of entertainment industries and professional settings. ​​The intertwining of these technologies could reshape online interactions by creating more immersive, tactile, and personalized experiences while enabling a more transparent peer-to-peer digital economy.

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