Digital Asset Use-Cases for 2024 and Beyond, Part 1 — Exploring the Landscape of Digital Collectibles

To kick-off the year, we will be looking at different use-cases for digital assets in 2024 and beyond. In the next article we’ll be looking at gaming, and after that use-cases for real-world assets. But today we’re starting by reviewing the most well-known use-case so far — digital collectibles.

Many people collect things. From stamps to skateboards, antique furniture to autographs, Lego to license plates; it’s clear that collecting things, for no other reason than the satisfaction of assembling them, ordering them, and grouping them, can be a pleasurable past-time. And a big part of collecting is taking joy in the rarity or the scarcity of the item, which in turn makes it more difficult to obtain (and, usually, more expensive).

A few years ago, collecting made the leap to the digital domain, thanks to blockchain technology. Previously, digital collectibles made little sense, as any asset can be copied an infinite number of times, and instantaneously distributed around the world over the internet. But blockchain technology is designed specifically to be able to attribute ownership to digital content — it’s the principal reason behind its initial invention.

And so, a few years ago, we saw the first ever boom in digital collectibles. Asset trading shot through the roof as people competed to collect different assets, be they images from renowned digital artists, to video moments from sports matches, to cute series’ of customized cartoon characters.

Perhaps inevitably, the market for digital collectibles became overheated, and then crashed. But it still exists, and will still continue to exist. And so, in this article, we’re going to be looking at some of the interesting avenues that digital collectibles might explore in 2024 and beyond. Tellingly, they all focus on adding some form of utility to the asset, beyond its simple existence.

Status

The idea of using a unique digital asset to represent status is already out there, and has seen some success — one needs to look no further than the massive success of Fortnite to see how much money people are willing to pay to customize and show-off their digital presence.

In the decentralized world, and well after the ‘bust’ of the regular NFT market, reddit announced that it was enabling a feature to link blockchain-based digital assets (as avatars) to user accounts. The move raised eyebrows, as the entire NFT concept had, in general, been poorly received by the reddit community. And yet, the initial collection of 40,000 tokens sold out quickly, and by January 2024 there are over 5.5M user accounts that hold a collectible avatar. And game avatar companies like Ready Player Me allow you to customize your appearance with digital collectibles.

These early successes are a pointer to one futures of digital collectibles, and can be summarized in three simple rules:

• Market them as collectibles, rather than investments
• Highlight how they will make the owner stand out of the crowd
• Make them easy to buy, sell, and display

Also note that the collectibles are used as a supplementary aspect to an existing application — you don’t have to own a digital asset to be a part of the community, but you might take greater pleasure out of it if you do.

Access

One of the most famous (and expensive) collectibles collections is the Bored Ape Yacht Club (BAYC), a series of cartoon drawings of apes in different poses and styles. While the peak hype around such collections has passed, owning one of the 10,000 BAYC assets entitles you to access certain perks that non-owners do not have: access to private social media channels, limited edition merchandising (see ‘Status’ above), and access to real-world events for BAYC owners.

For most, such perks might not be worth the tens of thousands of dollars required to own a Bored Ape, and join the club. But using digital collectibles as access tokens is nevertheless an interesting use-case. Many brands (such as Adidas, Cupra, Louis Vuitton and Mattel) have experimented with using digital collectibles as a way to identify owners to allow them to participate in games and virtual spaces.

Digital Right Management

The issue of rights and royalties for all forms of digital art (images, audio, video, and 3D) is incredibly complicated, and thus it may be a while until it is ‘solved’. However, there is potential for digital assets and collectibles to have a huge impact in the field.

Contrary to the belief of some, owning a digital collectible does not, by default, give you any rights to use, display, distribute, or monetize any artwork associated with the token (as the Spice DAO controversy demonstrated). However, it is possible to permanently associate rights with a given token. For example, BAYC owners have full commercialization rights to the images associated with their tokens, which has led to numerous merchandising products, from t-shirts to craft beer (it is important to note however, that these commercialization rights are specified in the BAYC terms and conditions, and are very specifically not the same as a general copyright).

Another factor is royalties from secondary sales of assets. An artist who puts an asset for sale directly (i.e. “first hand”) on a given marketplace will clearly gain 100% of the proceeds of the sale (minus marketplace fees), and some marketplaces have promoted schemes where a percentage of each further sale is given to the original artist. Yet, most royalty systems and contracts are implemented outside of the standard ERC-721, and it is incumbent of the marketplaces policies and practices to put them into practice. Opensea, one of the most well-known marketplaces, came under fire last year for discontinuing creator royalties (though it is now moving to restore some of this functionality). However, other marketplaces such as Blur have grown quickly precisely because they do not permit royalties, and thus appeal more to serious investors and traders.

What’s next for digital collectibles in 2024 and beyond?

Now the first ‘NFT boom and bust cycle’ is behind us (perhaps even condemning the term ‘NFT’ to the dustbin of history), we can look forward to a more mature era of digital collectibles in 2024.

What is clear is that minting pressure is still high on the mature chains. Collection creators want to be on Ethereum, yet are put off by bandwidth and cost. This is where LAOS Network comes in: allowing creators to mint regular assets and trade them on Ethereum, appearing as normal in Opensea and any other marketplace, yet not paying any ETH to mint the assets. This is possible thanks to the ‘Bridgeless Minting’ feature of LAOS, which you can try out now! Create a collection in Ethereum or Polygon, and mint an unlimited number of assets without paying ETH or MATIC: https://apps.klaos.io/

Stay tuned for our next article in the series, where we’ll be looking into what will happen with digital assets in the gaming world.