Japanese villages use NFT to break through difficulties
Population loss and aging are thorny issues facing rural areas in Japan. A "Digital Citizen" report by Japanese research and consulting firm Yuri Group pointed out that from the 2010s to the present, only about 8% of Japan's population lives in rural areas, and most of them are elderly people. This change has led to the gradual disappearance of villages.
In order to improve this situation, Yamakoshi Village in Nagaoka City has attracted several villagers through NFT (non-fungible token) technology and DAO (decentralized autonomous organization) to combat population loss, aging, and marginalization caused by the destruction of the village after the earthquake.
Yamakoshi Village launched the Nishikigoi art NFT series in 2021. It is not only an identity and membership certificate of a "digital villager", but also a governance token used by DAO. In other words, people who hold Koi NFTs can participate in voting or express opinions on matters related to the village.
What’s special is that in addition to the local residents of Yamakoshi Village who receive NFTs for free, anyone in the world can become a digital villager of Yamakoshi Village by purchasing Koi NFTs. The funds raised from the sale of NFTs will be used to subsidize the village’s middle-aged and elderly residents (56.2% of the residents are over 65 years old), village operations, local campus activities, etc.
By granting others the right to vote on community-related matters, Yamakoshi Village hopes that several villagers who live far away will be able to build relationships with local residents and take the initiative to care about this village of only 740 people.
According to a report by Yuri Group, Koi NFT has raised more than $400,000 for Yamakoshi Village. There are about 1,700 villagers who own Koi NFTs. Takeuchi, the initiator of the program, said that NFT holders have voted six times so far.
Education, communication, and voting weight are all challenges
The Koi NFT has successfully brought funding and international attention to Yamakoshi Village, but if the project is to be implemented in the long term, many challenges still need to be overcome.
For example, the average participation rate in voting is currently only about 40%, and Takeuchi hopes that the proportion will increase to 60% to 80% in future voting.
In addition to voter turnout, Web3 technology is a difficult term to understand for those who are not familiar with it, so repeated education is required. Even explaining the "benefits of NFT" to elderly residents is a big challenge. Takeuchi believes that this may be one of the reasons for the low voting participation rate.
Blockchain is not restricted by geographical location, so Koi NFT has also attracted many overseas users to become digital villagers. In this case, "language" has also become a problem that needs to be overcome. After all, there are still many details in voting matters that need to be communicated to international digital villagers.
In addition, "How to balance the voting weight of local residents and digital villagers?", "Can everyone participate in some decisions?" and "Will local residents object to giving voting rights to digital villagers they have never met?" These are all questions that DAO members think about every day.
Now it seems that this policy may be as overly idealistic as a utopia, but it remains to be seen whether "using NFT to preserve villages and culture" will become a national consensus in Japan in the future. Yuri Group stated in the report that if the Wakayama Koshi Village strategy works and expands to other villages, it is estimated that about US$500 million in funds can be raised in rural areas of Japan.
The ups and downs of South Korea’s NFT market: from prosperity to downturn, where is the future going?
Summary of key points
Since 2021, various projects have emerged in the domestic NFT market, including NFT platforms and communities dominated by large companies. However, since 2022, the market has been in an unstable state.
The market has declined even more than the global market due to an overly localized focus, lack of real utility, and regulatory challenges.
Despite the sluggish market, practical application cases such as tickets and product certificates have emerged in the Korean NFT market, which shows that NFT has the potential to develop into a technology with actual value rather than just a speculative tool, so its future development is worth paying attention to.
1. Introduction
South Korea’s NFT market has developed in sync with global trends, experiencing rapid growth since 2021, especially with the popularity of blue-chip NFTs such as Cryptopunk and BAYC.
This growth was driven by the rapid development of multiple projects on Klaytn (South Korea's native blockchain network), well-known projects such as Metakongz and Sunmiya Club attracted the attention of global investors, and achieved a large number of transactions on OpenSea, the world's leading NFT market. In addition, the launch of the local NFT market also injected vitality into South Korea's NFT industry.
However, with major shocks such as the Terra Luna collapse in May 2022 and the FTX incident in November of the same year, the market environment began to change, triggering the so-called "crypto winter". As a result, the NFT market declined, and many projects faced difficulties and even terminated operations prematurely. Despite this, some companies are still persisting, continuing to operate or launching new projects.
In this report, we comprehensively analyze the current status of the Korean NFT market, focusing on projects that have closed due to the market downturn and those that have successfully operated despite the difficulties. By comparing and analyzing the strategies of these projects, we aim to identify the key trends shaping the Korean NFT market and provide insights into its future development direction.
2. Overview of the Korean NFT Market in 2024
South Korea's NFT market experienced rapid growth in early 2022, and the market was quickly dominated by large companies in the financial, retail, and telecommunications industries as they actively entered the NFT field.
① NFT Platform
During this period, competition among NFT platforms was fierce, and each platform competed for domestic users by providing localized services, offering a one-stop solution from NFT creation to trading. This strategy aims to quickly attract a stable customer base from mature companies by providing a convenient user experience.
In addition, these companies have rapidly established integrated markets and various related functions by leveraging their extensive experience and resources in the development and operation of platform-related services such as trading, sales and settlement.
In 2023, the market situation has changed dramatically, and many companies have begun to shut down their NFT platform services for various reasons. Due to their excessive focus on the domestic market, their user base is relatively limited and they cannot compete with global platforms such as OpenSea, Magic Eden and Blur.
In addition, the lack of attractive NFT projects that can maintain stable trading volumes also weakened their market position. Finally, the downturn in the entire NFT market led to a decline in demand, which may be the decisive factor in the closure of these platforms.
② NFT Project
NFT projects are emerging from a variety of entities from large enterprises to community-driven ones, with companies launching NFT projects by leveraging existing intellectual property (IP) or developing new character IPs, aiming to provide customers with a richer brand experience and enhance customer loyalty through unique benefits.
Notable examples include Lotte Shopping’s Belly Bear NFT and Shinsegae Department Store’s Puuvilla NFT projects, which issued 9,500 and 10,000 NFTs respectively, both of which combined membership benefits and sold out quickly, becoming examples of early success in the Korean NFT market.
Most of these projects rely on a simple membership-based business model and mainly make profits through secondary market transactions. However, with the decline of the NFT market, these projects have difficulty maintaining sustainable income, causing many projects to deactivate their community channels or shut down completely.
Even NFT projects that rely on the brand value of large companies face the challenge of maintaining active communities. Despite some initial success, these projects failed to provide long-term value and real utility, ultimately hindering their continued development and user engagement.
3. NFT market continues to decline
Against the backdrop of a long-term downturn in the global cryptocurrency market, South Korea’s NFT market is experiencing a more pronounced decline. This steeper downward trend is mainly due to three reasons: 1) the over-localization of the domestic NFT market, 2) the large number of NFT projects that lack practical application value, and 3) the increase in regulatory barriers related to cryptocurrencies.
① Excessive localization of the Korean NFT market
South Korea’s preference for localized social media platforms and communities has led to an overly localized NFT market, and when trends such as NFTs become popular domestically, they tend to form closed communities that limit participation from global users.
In addition, the increase in NFT platforms designed specifically for Korean speakers has also exacerbated this isolation, as users tend to choose native language platforms for convenience. This closed environment hinders the integration of the Korean NFT market with the global ecosystem.
This description of the South Korean market stands in stark contrast to the global NFT ecosystem, where NFT projects primarily operate through English-language community channels and markets.
Platforms such as Reddit, , is a significant obstacle.
② NFTs that have not yet proven their value
Similar to global trends, South Korea's NFT market initially attracted attention through collectible NFTs, with many NFTs related to well-known Korean artists and sports stars launched, some of which achieved high trading volumes due to the fame of their creators.
However, these NFTs, which are primarily viewed as collectibles or speculative assets, have struggled to sustain long-term interest and have gradually been marginalized in the market.
After this initial phase, the market saw a second wave with the emergence of membership-based NFTs, which were primarily backed by large companies. Although the issuance prices of these NFTs initially rose sharply, both trading volumes and prices subsequently fell sharply with little sign of recovery.
The emergence of this phenomenon is due to people's continued doubts about the intrinsic value of NFTs. Although the development of digital technology has made the concept of "digital collectibles" popular and triggered a wave of speculation, this craze has gradually subsided, and simply owning digital images has failed to maintain public interest and recognition.
Similarly, membership-based NFTs initially provided holders with benefits such as discounts and exclusive events, but struggled to create lasting value, largely because these NFTs failed to meet people’s expectations and lacked practical use, which prevented them from gaining sustainable development in the market.
③ High threshold brought by regulations
Another major challenge facing the domestic NFT market is the increasing regulatory barriers. The Virtual Asset User Protection Law, which came into effect in July, and the subsequent NFT guidelines have made the operation of NFT-related businesses more complicated. According to the guidelines, NFTs may be classified as virtual assets if they meet any of the following conditions:
When a large number or series of NFTs of the same or similar type are issued;
When NFTs can be divided;
When NFTs can be used as a method of paying for certain goods or services, either directly or indirectly;
When NFTs can be used as a way to exchange virtual assets between unspecified individuals, or as a means of payment for goods or services related to other virtual assets.
Classifying NFTs as virtual assets is a huge challenge for businesses. In South Korea, operating virtual asset-related businesses requires a virtual asset service provider (VASP) license. After obtaining the license, the company must also pass the Information Security Management System (ISMS) certification, which is an expensive and time-consuming process.
This is a major obstacle for companies or project teams with limited funds and human resources, making it difficult for them to enter the NFT field. In addition, it also raises the entry threshold for startups in innovative applications of NFT.
On the eve of the implementation of the Virtual Asset User Protection Law, a number of existing services have chosen to scale back or close to avoid strict regulatory requirements, and many NFT-related companies may shift their business focus or exit the market altogether.
4. How will the future of the Korean NFT market develop?
Although the domestic NFT market is in a downturn, there are still many successful cases of NFT application. A typical example is the NFT-based concert tickets launched by Hyundai Card, which aims to prevent counterfeiting and black market transactions. This shows how NFT technology can create real value in existing industries.
This move by Hyundai Card is not just a simple adoption of new technology, but it solves real social problems and reflects the actual benefits of NFT. As NFT technology continues to develop, it may solve the inconveniences in daily life and enhance the public's service experience.
NFT technology is also being applied to areas such as product authentication and customer relationship management (CRM). A typical example is Vircle, which provides NFT-based product warranty services. The company is expanding its business by partnering with fashion and electronics brands because authentication and after-sales services are crucial in these fields.
NFT digital warranty has many advantages, including solving the problem of loss of paper warranty and enabling customers to conveniently activate and obtain after-sales service through mobile devices. For enterprises, this data can be used for more efficient customer relationship management.
In addition, digital warranties can also serve as membership systems, integrating customer information from various channels into a unified system. These examples demonstrate the potential of NFT technology to bring real benefits to businesses and customers.
5. Conclusion
The Korean NFT market still faces many challenges in its recovery process. In addition to the factors mentioned above, some negative events related to NFT have also exacerbated the public's negative views, especially the scandals involving Korean Internet celebrities and the "money-making" scams of multiple projects, which have seriously damaged the public's trust.
Additionally, the widespread belief among many that NFTs are primarily speculative vehicles remains a significant barrier to market development.
To improve this situation, it is necessary to accumulate successful cases that can demonstrate that NFT technology creates real value. A positive shift in public perception is crucial to achieving this goal. This challenge is not limited to the NFT industry. Most Web3 projects face similar problems as they seek wider acceptance and understanding.
South Korea has advantages in some areas where NFTs can be effectively applied, such as games, webtoons, and K-pop. Although the market currently faces challenges due to the localized environment and unclear regulations, new attempts at NFTs within the existing framework are gradually unfolding, bringing exciting developments.
With more success stories, the continuous improvement of NFT-related technology and expertise, and increased investment from the government and businesses, South Korea is expected to launch innovations that lead the global NFT market.
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