Reza Jafery

@RezaJafery

The Future of Digital Collectibles: Can Physical Goods Drive Smart Contract Value?

Immortalizing fine art on the blockchain, and the digital future we’re heading towards.

I’ve played video games my entire life. The concept of intangible goods having value in a digital world wasn’t hard for me to grasp. I believe that digital collectibles are going to shake up the internet, and provide an on-ramp for people to enter the cryptoasset market. When I talk to people who aren’t familiar with blockchain about digital collectibles, it doesn’t seem like they really understand, or care to understand. When I put a computer in front of them with some sort of digital representation of a smart contract, they fall down the rabbit hole. Pretty soon, people who had no knowledge of the space were helping me figure out how much Gwei I had to use to make my transactions go through.

The year of the Kitty

Just one year ago, CryptoKitties swept over the crypto community with a wave of cute, cuddly pop culture. Many claimed that the app was little more than an overhyped development in the dApp space, but a year later, it’s still going strong, and other new crypto collectibles are joining the market at a rapid rate. Websites like BlockchainCuties and EtherBots follow in its’ paw-prints, slowly adding functionality and testing the limits of what we think is “normal”. Because let’s be honest, a couple years ago, hell even today, the thought of a digital kitten selling for over $100,000 might sound a little insane.

A few months ago CryptoKitties raised $12 million USD in a round led by Andreesson Horrowitz and Union Square Ventures. Transaction volume on the platform is down significantly from the times of CryptoKitties going for $100,000+, but it seems like venture capitalists are still optimistic.

It is as they say, institutional capital follows individual interest.

Chart taken from this article

A catalyst for mainstream adoption

Platforms like CryptoKitties help bring new users into the space, but a recent project I stumbled upon can potentially bridge a different gap. On May 31, 2018, a new player in the digital collectible race launched.

New York-based gaming company Tapinator, which boasts over 300 mobile games and 450 million downloads, announced the release of BitPainting, a crypto collectible platform that allows users to buy and sell famous paintings through the use of the blockchain. To be clear, this isn’t a marketplace where you can use bitcoin to buy a Picasso. These famous paintings exist in the form of digital collectibles.

While it’s tempting to compare BitPainting to CryptoKitties, there is a key distinction. CryptoKitties’ detractors argued that the app’s users were all members of a tech-savvy crypto community and that the app lacked mainstream appeal. It brought new users to the Ethereum network, but was far from user friendly. BitPainting offers up a different model, tapping into both an audience of fine art lovers, and a speculative crowd foaming at the mouth to see how much a digital collectible representing the Mona Lisa can sell for.

What really excites me about BitPainting, is the fact that these collectibles, in a way, represent a tangible item. In CryptoKitties, scarcity is created artificially through the use of “Generations”. A Generation 1 collectible should in theory be worth more than a Generation 5 collectible. With BitPainting, it gets a little more interesting. I’m extremely curious to see how the value of certain paintings on this platform compare to the value of their tangible counterparts. Will the digital Mona Lisa be as coveted as the physical?

Pioneering change and increasing trust

I’m enthralled with the concept of digital collectibles, I see them as the easiest way for new people to start interacting with blockchain technology. The trick is making them user friendly enough for new users to give it a try. If executed correctly this could spur increases in market capitalization as new users clamor to get Ethereum and purchase their digital masterpieces. Which is why I’m excited by BitPainting. Tapinator has released over 300 games, most of which have in-game marketplaces. They have the experience to make this work.

Since transaction history is transparent and verifiable on the blockchain, gaming and collectible app developers can increase trust in the system, while also automating fairness. This means any work of art you purchase on BitPainting will be exclusively yours, and you can know how much it has sold for in the past.

The fact that you can only purchase one version of a classic work like the Salvator Mundi on the BitPainting platform — as well as the fact that it is verified and secured by the blockchain — is a prime example of how blockchain technology is changing the nature of digital assets. In the past, digital works were almost impossible to secure, but now people can use blockchain tools to prevent fraudulent copies. The result will be a massive increase of trust in digital systems.

The future of blockchain and crypto collectibles

Solutions provided by these technologies aren’t limited to collectibles, either. Solutions like BitPainting are paving the way for applications that will eventually verify all kinds of information. For example, in the future, when buying a bag of coffee beans at the store, you may be able to verify that it was indeed a fair trade transaction that benefited the farmer who grew it. And imagine opening up your news app in the morning and seeing nothing but verified stories, with fake news already sifted out by a blockchain-based network. This may seem like a distant future, but there are already companies like RedPen working to make this a reality. While projects like mesmr are working towards a future where digital collectibles can be a gateway between creators and fans, or brands and customers.

An app like BitPainting could eventually evolve to track physical works of art, or even tracks the transition of digital masterpieces to physical formats.

“Bringing blockchain technology to bear in the digital asset space holds the promise to create entirely new platforms for value storage and exchange that traditional systems have failed to identify.” — Ilya Nikolayev, Tapinator’s founder and CEO

By creating new ways to store value, crypto collectible apps like BitPainting are making cryptocurrencies a practical tool as much as a monetary vehicle. Users who want to buy a painting will inevitably have a shared interest in the adoption of the tokens used to purchase the painting.

Further:

By driving interest into this space, companies like Tapinator are creating new ways for people to enter into the market. So even if you don’t think digital collectibles are here to stay, you can at least rejoice in the fact that they’re bringing in fresh blood.

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I’d like to interview the creators of different digital collectibles, if you or someone you know would like to chat, shoot me a message on telegram. My handle is @RezaJafery.

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