Author: Jiyun Kyung, Business Development (https://www.linkedin.com/in/jiyunkyung/)
[TL;DR]
- Digital collectibles evolve through blockchain and NFT technology, forming a new collection culture.
- Companies adopt digital collectible strategies to enhance brand value, generate new revenue, and strengthen customer relationships.
- Projects like X-PASS and Gyujanggak Digital Heritage contribute to the popularization of digital collectibles by improving user experience.
- Digital collectibles are expected to provide more diverse experiences and value by converging with metaverse, AI, and other technologies in the future.
1. Evolution of Digital Collectibles: Past and Present
1.1 Transition from Traditional to Digital Collectibles
The history of human collection dates back to the beginning of civilization. Ancient Egyptian pharaohs collected precious jewels and artworks, while Renaissance nobles gathered paintings and sculptures. By the 19th century, collection culture became more popularized with stamps, coins, and antiques becoming popular collection items.
From the mid-20th century, various forms of collectibles such as baseball cards, comic books, and vintage cars emerged. Collectibles of this era had physical forms, with rarity and preservation condition being key factors in determining their value. Collectors often dedicated special spaces to store and display their collections.
With the advent of the digital age, the concept of collection began to change gradually. From the late 1990s to early 2000s, interest in digital items grew along with the development of the internet. Early digital collectibles mainly took the form of online game items, avatar skins, and digital stamps.
Digital collectibles of this period had several limitations. First, they were dependent on centralized platforms, risking loss of value if the platform closed. Second, easy replication made it difficult to guarantee true scarcity. Third, proof of ownership and transfer were unclear.
1.2 Emergence of Blockchain and NFTs
Blockchain, introduced with Bitcoin in 2008, fundamentally changed the concept of digital assets. Blockchain is a decentralized database that ensures transparency and immutability of information. This technology soon began to be applied to various fields beyond cryptocurrency.
In 2017, a new token standard called ERC-721 was introduced to the Ethereum blockchain. ERC-721 serves as the technical basis for Non-Fungible Tokens (NFTs), characterized by each token having unique properties and being non-interchangeable.
Over the next few years, NFT technology rapidly developed and began to be utilized in various fields. In the art world, cases of selling digital artworks as NFTs increased, while in the music industry, albums and concert tickets were released as NFTs. In sports, digital cards featuring memorable moments of players gained popularity.
Currently, digital collectibles provide various values beyond simple possessions. For example, owning certain NFTs can grant access to exclusive online communities or invitations to real-world events. They are also creating new forms of sponsorship models by enabling direct connections between creators and fans.
Digital collectible transactions occur globally and are possible anytime through 24-hour open markets. With blockchain technology transparently managing the authenticity and ownership history of each collectible, the risk of forgery or fraud has greatly reduced.
The evolution of digital collectibles has opened new horizons in collection culture. It has allowed for infinite creativity free from physical constraints and immediate access to global markets. As technology advances, the concept of digital assets continues to expand, and new forms of collectibles that transcend the boundaries of reality and virtual reality are expected to continue emerging.
2. Technological Foundation of Digital Collectibles
2.1 Role of Blockchain and Smart Contracts
Blockchain is a core element forming the basis of digital collectibles. It fundamentally ensures data integrity and transparency through a decentralized database.
In the digital collectibles market, blockchain performs roles such as proving ownership, tracking transaction history, and ensuring scarcity. For example, when purchasing an NFT of a specific digital artwork, that transaction information is permanently recorded on the blockchain. This allows anyone to verify the current owner and past transaction history of the work.
Smart contracts are programs that automatically execute on the blockchain, playing a crucial role in the creation, trading, and management of digital collectibles. Key functions of smart contracts include automatic execution, intermediary removal, royalty management, and access control.
Automatic execution means the contract executes automatically when predefined conditions are met. Intermediary removal means transactions are possible without a trusted third party. Royalty management allows automatic royalty payments to the original creator upon resale, and access control can grant exclusive content or service access rights only to specific NFT owners.
For instance, when an artist issues their work as an NFT, they can set the initial sale price, maximum issuance quantity, and royalty percentage for resales through a smart contract. Thereafter, every time the NFT is traded, the smart contract automatically executes to process the transaction according to the conditions.
2.2 Connecting Metadata and Digital Assets
Metadata is additional information describing the characteristics, attributes, and history of digital collectibles. In NFTs, metadata plays a crucial role in pointing to the actual content of the digital asset represented by the token. Key components of metadata include title, description, image URL, attributes, and external links.
Metadata is typically written in JSON format and stored in decentralized storage systems like IPFS (InterPlanetary File System). This ensures the permanence and accessibility of metadata without relying on centralized servers.
The method of connecting NFTs and actual digital assets can be broadly divided into on-chain storage and off-chain storage. On-chain storage directly stores digital assets on the blockchain itself, suitable for small-sized data or text-based works, but has high storage costs and capacity limitations.
Off-chain storage stores the actual digital asset on external servers or IPFS, with the NFT only including a link pointing to the asset's location. Most NFTs use this method, allowing efficient management of digital assets in various forms and sizes.
The accuracy and immutability of metadata are crucial to ensure the value and authenticity of digital collectibles. To this end, some projects record the hash value of metadata on the blockchain to prevent tampering.
Recently, the concept of dynamic NFTs has emerged and gained attention. This allows NFT metadata to change according to external data or events, which can be used for evolving game items or digital collectibles that change in conjunction with off-chain data.
3. Corporate Digital Collectible Strategies
3.1 Why Companies Create Digital Collectibles
Currently, various brands, including global retail and luxury brands, are creating digital collectibles. There are several strategic reasons why companies create digital collectibles.
Enhancing brand value is one of the main purposes. Unique and innovative digital collectibles can strengthen brand image and enable differentiation from competitors. This can lead to increased customer loyalty. Limited edition digital collectibles are effective in forming bonds with customers and increasing brand attachment.
Creating new revenue streams is also an important motivation. Companies can generate additional revenue through the sale of digital collectibles and royalties in the secondary market. This enables innovative business models beyond traditional product sales models.
Digital collectibles also offer great advantages in terms of customer data acquisition. Valuable insights into customer preferences and behavior patterns can be gained through collectible transactions, which can be used to develop more sophisticated marketing strategies.
The marketing effect cannot be ignored either. Digital collectibles often create viral marketing effects, contributing to increasing brand awareness. This can be an attractive marketing tool, especially for companies targeting younger generations.
Digital collectibles also play a significant role in building a tech innovation image. Digital collectibles utilizing the latest technology are effective in enhancing a company's innovative image, which can lead to an overall improvement in the company's brand value.
Lastly, they can be used as a means for global market entry. Digital collectibles are an effective way to reach customers worldwide without physical constraints, serving as a strategic tool for international brand expansion.
3.2 Creating Added Value with Digital Collectibles
Blockchain-based digital collectibles have the potential to create value beyond mere possessions. Firstly, they hold great potential in terms of CRM (Customer Relationship Management) marketing. Detailed data on digital collectible owners can be used to develop personalized marketing strategies.
For example, products or services related to specific digital collectibles can be recommended to their owners, or personalized promotions can be offered based on analysis of customers' preferences derived from their collectible ownership history.
Digital collectibles can also bring innovation in supply chain and inventory management. Blockchain-based digital collectibles enable transparent tracking of the entire process from product manufacturing to distribution and sales. This can be utilized for counterfeit prevention, quality assurance, and efficient inventory management. For instance, luxury brands can issue digital collectibles corresponding to each product to verify authenticity and track ownership transfers.
Moreover, digital collectibles enable new forms of customer engagement and community building. Creating exclusive communities for owners of specific digital collectibles can increase brand loyalty and collect customer opinions for product development. This helps strengthen interactions between customers and brands and build long-term relationships.
Lastly, digital collectibles can be used as a new form of customer reward system. By offering digital collectibles with scarcity and tradeability as rewards, beyond traditional point or mileage systems, customer participation can be encouraged and brand value increased.
Due to these potential added values, many companies are paying attention to digital collectibles, especially blockchain-based NFTs. However, appropriate strategies should be developed considering each company's goals, target customers, and technological capabilities comprehensively.
3.3 Differences Between Blockchain and Traditional DB-based Digital Collectibles
Blockchain and traditional DB-based digital collectibles differ in several aspects. In terms of ownership and authenticity, blockchain enables clear proof and tracking of ownership through distributed ledgers and ensures the uniqueness of each collectible. This greatly reduces the risk of forgery or duplication. In contrast, traditional DBs manage ownership by central administrators and may have relative difficulty in proving authenticity.
There are also significant differences in transparency and reliability. Blockchain provides high transparency and reliability as all transaction records are public and distributed. This can give customers greater trust. Traditional DBs are managed by centralized systems, which may limit the transparency of transaction records and sometimes lead to reliability issues.
In terms of data immutability, blockchain ensures data integrity as it's nearly impossible to alter recorded information. This plays a crucial role in maintaining the value and scarcity of digital collectibles. Traditional DBs allow data modification by administrators and may have relative difficulty in tracking change history, which can raise questions about data reliability.
There's also a big difference in trading freedom. Blockchain allows free 24/7 trading in the global market and enables automated transactions through smart contracts. This enables cross-border transactions and the creation of new business models. Traditional DBs may limit transactions to within the platform with restrictions on trading times and methods, potentially limiting utilization in the global market.
In terms of interoperability, blockchain allows interoperation between various platforms, increasing the usability of collectibles. This enables connections between diverse ecosystems, potentially increasing the value of digital collectibles. Traditional DBs mostly operate as closed systems with limited connectivity to other platforms, which may restrict the range of collectible utilization.
4. Case Analysis of Digital Collectibles
4.1 X-PASS's Digital Souvenir Case for Musical <Hadestown>
X-PASS is a Web3 cultural performance platform serviced by 'Metacultures', a blockchain company for cultural performances. Specifically, it provides NFT ticket issuance and ecosystem building linked to venue entry, token gating services through specific NFT authentication, as well as digital souvenirs and various blockchain services related to cultural performances.
X-PASS is offering digital collectibles commemorating the popular musical <Hadestown>, running from July 2 to October 6, 2024. QR codes for receiving digital souvenirs can be found throughout Charlotte Theater in Jamsil, where Hadestown is currently performing. The QR codes can also be found on Hadestown performance tickets (klip service, Yes24 reservation tickets).
Previously, obtaining NFT-based digital collectibles involved complicated and cumbersome procedures. Users had to create a new wallet to receive NFTs and submit the address to the company. For users unfamiliar with blockchain and Web3, creating a new wallet and managing 12-24 word mnemonic codes can be extremely difficult.
X-PASS provides an innovative user experience by linking with WEPIN wallet's NFT Hub Link, allowing easy receipt of digital souvenirs by simply entering an email address when accessing through the QR code. X-PASS plans to launch various services to enhance consumers' digital experiences and promote Web3 mass adoption, not only for Hadestown but also for various cultural performances in the future.
4.2 <Digital Souvenir Case of <Kyujanggak Digital Heritage Project>
Kyujanggak is a historical cultural heritage known to have been established by King Jeongjo, the 22nd king of Joseon, as a royal academic research institution and royal library in the late Joseon period. Kyujanggak is a treasure trove of Korean cultural heritage, preserving, exhibiting, and researching artifacts including many world documentary heritages, national treasures, and treasures.
<Kyujanggak Digital Heritage>, operated by NFTLab, is a project that presents a new way of appreciating and enjoying our cultural heritage by digitalizing and creating content from various types of cultural properties held by the Kyujanggak Institute for Korean Studies.
The digital souvenirs provided by <Kyujanggak Digital Heritage> are also linked with WEPIN wallet's NFT Hub Link, allowing visitors who are completely unfamiliar with Web3 and wallets to easily issue digital souvenirs. When visiting the Kyujanggak Institute for Korean Studies, visitors can randomly receive one of three types of Kyujanggak visit digital souvenirs by simply scanning a QR code, entering and verifying their email.
In the future, <Kyujanggak Digital Heritage> plans to issue NFTs featuring cultural heritage of high historical value, such as antique map theme collections and uigwe (royal protocols). Through this, they aim to provide experience and participation elements linked to the meaning of cultural heritage, and ultimately create a community of people who love cultural properties.
5. Conclusion: The Future and Prospects of Digital Collectibles
Digital collectibles are rapidly evolving alongside the development of blockchain technology. Starting from traditional collection culture, they have now developed into innovative forms based on NFTs, creating new value for both businesses and consumers.
Companies can achieve various strategic goals through digital collectibles, including enhancing brand value, increasing customer loyalty, creating new revenue streams, and entering global markets. Particularly in CRM marketing, supply chain management, and community building, the use of digital collectibles is bringing innovation to existing business models.
As seen in real-world examples, X-PASS's digital souvenirs for the musical <Hadestown> and the <Kyujanggak Digital Heritage Project>'s digital souvenirs are significantly improving user experience and contributing to the popularization of digital collectibles. These innovative approaches are expected to accelerate the mass adoption of Web3 technology.
The digital collectibles market is expected to diversify and grow further in the future. It is anticipated that richer experiences can be provided through convergence with other new technologies such as metaverse, AI, and IoT, and connections with offline experiences will be strengthened.
In conclusion, digital collectibles are creating a new paradigm in the digital economy beyond just a trend. Companies should pay attention to these changes and develop strategies that fit their characteristics and goals to maximize the potential of digital collectibles. At the same time, efforts should be made to improve user experience and increase technological accessibility so that more people can experience the value of digital collectibles.
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