It would be an understatement to say that crypto is going through a tough time. Since bitcoin hit its all-time high of nearly $70,000 last year, it has lost 70% of its value. The entire market has shrunk by billions of dollars.

Traveling to Amsterdam last month for the FT’s The Next Web (TNW) conference, a gathering of tech leaders, developers and investors, I was curious to hear the mood of the attendees. I wondered how many crypto champions would be; how many die-hard believers have found themselves preaching using acronyms like “HODL,” short for “Hold On For Life.” To my surprise, people weren’t shy about discussing the industry. On the contrary, there has been renewed enthusiasm to proclaim the long-term value of crypto. As the saying goes, in the midst of a recession, “now is the time to build”.

The topic of the day was non-fungible tokens (NFTs), digital collectibles whose buyers obtain certificates of ownership on the blockchain. They are usually purchased with cryptocurrency. Like the wider community, their biggest believers remained confident. Perhaps because tokens are associated with the optimistic notion of the Web3 internet, supposedly powered by forces of social connection and decentralization. But also because last year, NFT sales totaled nearly $41 billion, sparking a gold rush that had companies and artists rushing to market, rushing to release their own versions.

Some panelists evangelized an NFT utopia in which tokens would bridge the gap between our lives online and in the real world. “I hate that word,” said Sandra Ro, CEO of the Global Blockchain Business Council, “but I’ll say it: phygital.”

“Phygital”, a portmanteau of “physical” and “digital”, was coined over a decade ago by advertising executive Chris Weil to describe what he called the “tremendous possibilities for brands “to engage consumers in both worlds. The term has since taken on a life of its own. The fashion industry has held “phygital” shows during the pandemic, while the word is also used to describe a generation that grew up inhabiting both the physical and digital worlds.

Ro’s use of “phygital” refers to a type of NFT that is partly intended to address skepticism about their usefulness in the real world. A phygital gives the buyer access to something real alongside the digital asset – say, an actual designer t-shirt that your avatar can also wear in a metaverse.

Phigital is also the name of a soon to be launched marketplace for 3D NFTs, although initially these will be digital only. I asked Julian Picaza, product manager for Smart MFG, owner of Phigital, if he was worried about the future of NFTs, given the crypto crash. “Not at all,” he replied. Amy Wu, who runs FTX Ventures, a venture capital firm, was more circumspect: “We’re in a long cycle here. We may not see mainstream adoption for a few years.

There has been momentum in certain uses of NFTs such as sports. But as cryptocurrencies sank, token sales also fell. The monthly trading volume of OpenSea, the largest NFT marketplace, fell around 85% in the first half of this year.

Many people from TNW were clearly happy to be in real life this year. As I left, I wondered if this might be a clue as to why, despite NFT evangelism, the promise of owning a slice of the digital world still doesn’t seem so compelling outside of the crypto bubble.

Scott Chipolina is the digital asset correspondent of the FT

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