What are rare digital goods?
Rare digital goods (or crypto collectibles) have emerged in the public blockchain space in the form of frogs (Rare Pepes) and cats (CryptoKitties).
If you make it past the initial thought of “this must be a scam” and decide to take a closer look, you’ll probably find yourself thinking…
Are rare digital goods just cleverly branded altcoins?
The answer to this question is… yes and no.
The term “altcoin” implies both an alternative token to bitcoin and also a competing currency (or coin). While rare digital goods are most certainly alternative tokens (though in many cases that token exists on the Bitcoin blockchain), their primary use is not currency (though in at least one case, a rare digital good has been utilized as a de facto currency, see PEPECASH).
Rare digital goods are non-currency, transferrable, digitally native objects .
Bitcoin is the first implementation of digital scarcity as a currency with many other public blockchain currencies following suit: Litecoin, Darkcoin (Dash), Ethereum, etc. In the ICO space, native tokens (or “utility tokens”) for services such as Storj, Civic or Tierion function as currency within and outside of their respective platforms.
A wise man once said…
“Bitcoin is the Internet of money, and currency is just the first application” — Andreas Antonopoulos
To extrapolate on this idea…
Public blockchains are the Internet of digital scarcity, with currency as the first application and goods as the second.
Up to now, the goods applications of public blockchains fall loosely into several different categories:
- Unique collectible images (CryptoKitties and CryptoPunks)
- Trading cards (Spells of Genesis and Rare Pepes)
- Visual art (DADA)
- In-game items (Bitcorns)
Rare digital goods have come into existence on more than one public blockchain with these chains effectively becoming different artistic mediums utilized based on preference of the creator (artist / game designer).
One of the more interesting aspects of rare digital goods is that even though the creator can specify an initial use (access control or in-game actions for example), because the good exists outside of the creator’s platform, it allows for permissionless third party uses. While the properties of the good are unchangeable (such as total in existence and issuer), the uses and characteristics can (and will) change over time.
If rare digital goods aren’t currency, what gives them value?
Rare digital goods have several attributes that make them desirable to hold and collect. These include:
- They do not take up physical space
- Easily identified, unchangeable properties (counterfeit resistance)
- History of applied characteristics (legend)
As the world turns to digitalization, it has become more and more acceptable (and in many cases, more desirable) for collectors to hold something digital as opposed to physical. Because rare digital goods inherit properties from the public blockchains on which they’re created, they have the same counterfeit resistance as blockchain currency (counterfeiting is an issue that’s ever-present in the physical art/collectibles world).
The “legend” attribute is slightly more nuanced and is present because of the amorphous and permissionless nature of public blockchain tokens. Because game designers and web developers are free to apply new use cases to rare digital goods, they have the ability to add additional value to the holder.
What does the future hold for rare digital goods?
The goods application of public blockchains is a relatively unexplored area and has the potential to bring blockchain use to the general public in ways the currency application has yet to achieve.
For those still skeptical on why anyone would collect rare digital goods, I recommend reading Heritage Auctions post titled, Why do humans collect things?.
Joe Looney is co-founder of the Rare Pepe project and creator of rarepepewallet.com