As a (quite avid) K-pop fan, when I first learned about blockchain and NFTs, I thought Kpop photocards would be a perfect use case.

For those who are unfamiliar with Kpop photocards, they are essentially a form of Kpop merch that are printed copies of selfies taken by idols. They are typically not sold by Kpop labels directly, but instead attached to idol groups’ albums (i.e., The only ways to get a photocard are 1. buy an album and get the attached photocard, or 2. buy a secondhand photocard from a secondary marketplace). Though many outsiders disregard them as mere ‘selfies’, photocards are actually a highly popular merch in the Kpop community. A lot of fans see photocards as quite fashionable to own. Additionally, some people see photocards as a means to ‘invest in an idol’. At least in China, there are robust trading activities for photocards in marketplaces such as Taobao and Xianyu (pictured below), and as photocards’ prices fluctuate based on the popularity of an idol, that offers opportunities for collectors to capture financial upside from owning photocards of idols whom they are ‘bullish’ on.

Kpop Photocards On-chain

At first, I thought Kpop photocards would be a perfect use case for NFTs. In my perspective, the two core value propositions of NFTs are 1) proof of ownership of a scarce resource, and 2) liquidity (with opportunities for financial upside), and these seem to be exactly what Kpop photocard collectors value! Furthermore, I thought NFTs would make the experience of trading photocards remarkably more convenient, as collectors no longer have to worry about the logistics and shipping. Therefore, when I saw major Kpop labels launch NFT-based photocards via platforms such as Momentica, I thought they made a really smart move.

These platforms did gain some users, but the traction based on the data I could find turned out to be a lot lower than what I expected. As of June 2024, as I’m writing this article, the Momentica app (which was launched in 2022) only has 17 reviews on the App Store. And as I browsed various Kpop-related online forums, I was surprised to find that a lot of Kpop fans don’t buy the concept of owning a digital photocard (and some even detest it). Why is that so?

First, some fans see using blockchain technology as doing harm to the environment, and they detest the idea of owning NFT photocards as they believe it is unsustainable. I understand where such concern is coming from, but I believe this will become less and less of a barrier to NFT adoption. As Layer 2 scaling solutions continue to mature, we’ll enter a future where blockchain transactions are executed with a less environmental impact.

However, the other concerns with NFT photocards surfaced in the online forums made me realize there are some fundamental issues underlying NFTs that bring into question its positioning as “digital collectibles”.

Issue #1: Lack of Excludable Benefits to Collectors

“Digital scarcity” has been marketed as a core value proposition of NFTs since its invention. The key message there is that blockchain - for the first time - enables the creation of limited supplies of digital files with documented and verifiable ownership. For a lot of NFTs out there, this promise is actually quite questionable if we look at them under the framework of goods classification (from Economics).

The goods classification framework essentially divides goods within an economy into different buckets based on the concept of rivalry and excludability. Rivalry means the supply of a certain goods is limited - one person’s usage of it will decrease the amount available for use by others. Excludability, on the other hand, means people can be prevented from using the good based on certain measures (oftentimes, this is money, i.e., excludable goods are essentially ones that people who don’t pay for it cannot access). Based on this framework, goods in an economy are categorized into four buckets, Private Goods, Common Goods, Club Goods, and Public Goods.

Traditional physical Kpop photocards fall under the realm of Private Goods. They’re rivalrous, as the supply is limited (and dependent on how many copies the Kpop label wants to issue). Physical photocards are also excludable, as only people who pay can access it (while the selfie of the idol printed on the photocard is generally viewable by non-collectors either via social media posts from collectors or via listings of the photocard on secondary marketplaces, the access to the physical card will be exclusive to the collector; and notably, it’s this rather than the former that drives the sense of  ‘excludability’). These characteristics are core drivers of value for physical photocards in the eyes of Kpop fans.

On the other hand, while NFTs are rivalrous (as verifiable ownership of the item is scarce), they’re often not excludable. For instance, on platforms such as Mirror.xyz and Sound.xyz, non-collectors will still have the ability to view/stream the article/song (though lacking the ‘verifiable ownership’ component, but a lot of non-crypto native consumers don’t see this as a big issue).

NFT photocard platforms such as Momentica have attempted to manufacture excludability by making the photocards appear blurred by default and become viewable only after being purchased…

…However, fans are still concerned that some collectors will end up sharing the selfie with the public. This concern is not unreasonable, as photocards are in a sense a social currency within the Kpop community that is meant to be flexed in front of others - more on that later - and such copyright infringement that ends up making paywalled content available to the public also happens quite often with other mediums.

Eventually, in the eyes of Kpop fans, NFT photocards do not offer the same level of exclusiveness as physical ones. (P.S., Maybe labels can address such concerns by offering unique, single-copy cards that will be truly excludable. However, this probably won’t suffice to convince fans to adopt NFT photocards as issues #2 and #3 - analyzed later - in my opinion present more significant barriers to adoption). Physical photocards grant collectors exclusive access to the physical card. They also entail other benefits exclusive to the collector. An important one is the exclusive right to form deeper personal connections with the idol through physical interactions with the photocard - many fans perceive owning a photocard as a means to enable their idol to become their companion in their quotidian life. It is common for Kpop fans to carry physical photocards (hence their idol) along with them everywhere they go, whether they’re at school or at work, and many like to take photos together with the cards to commemorate experiences along with their idols. For example, as a notable Kpop “ritual”, a lot of fans would, before eating a meal, take food pictures with their photocards placed in proximity to the food (it is especially common for them to do this when they’re eating at a restaurant and having a meetup with other fans).

Additionally, physical photocards are an established status token or social currency in the Kpop community. Ownership of physical photocards is in some cases, a must-have, for a fan to socialize with other fans (e.g., when you are meeting up with other fans at a restaurant, it’d be weird-looking if you don’t have a physical card to show in the food picture along with others’). Furthermore, owning a huge physical photocard collection can impart high status to the fan in the broader fandom as it shows dedication. On Youtube and other social media platforms, you can easily find videos or pictures of Kpop fans showing off their physical photocard collections.

The above benefits of physical photocards are all exclusive to collectors and not available to non-collectors. Contrast that with NFT photocards, which - along with many other mediums commonly minted as NFTs such as articles, social media posts, music, video clips - are often non-excludable and susceptible to free-riding by non-collectors. In the absence of exclusive benefits, an NFT’s promise of ‘digital ownership’ and ‘scarcity’ appear empty. It is unclear what benefits ‘ownership’ leads to (while verification on-chain matters to crypto-natives, today it does not appear to matter much to the average consumer). And when the content - the articles, songs etc, which most people care about - is actually still accessible to non-collectors, is it still fair to say that the medium is ‘scarce’?

All that is to say, NFTs are not inherently ‘scarce’ and ‘worthy of owning’ merely by being NFTs. However, I do believe issuers can introduce excludability to NFTs to make them truly ‘scarce’ and ‘worthy of owning’.

The best way to introduce excludability, in my opinion, is not really to paywall the content. First, under a paywall, how should a potential collector decide if the NFT is something they really want to buy and own? You don’t want to make people pay for something only to discover it is not what they wanted.

Moreover, it is possible that some collectors will still end up sharing the content with non-collectors, and this may further compromise the medium’s exclusive benefits to collectors, for instance, by undermining its ability to serve as a status token/social currency for a community. As an example, Momentica, in hope to preserve excludability of their NFT photocards, forbids collectors from taking screenshots of NFT photocards they own and sharing these screenshots on social media (every time a user attempts to take a screenshot, the app will automatically hide the photocard), but this essentially prevents collectors from using photocards as their status token/social currency, which undermines a quite important JTBD that photocards serve (and one of their true excludable benefits to collectors).

I think a better approach to creating excludability is to associate NFTs with unique perks related to the underlying subject. NBA Top Shot, in my opinion, has done a great job on that, as collectors are offered various perks such as tickets to offline events. In a similar vein, I believe a Kpop label can attach to NFT photocards perks such as access to offline events, online video chats with idols, or even exclusive access to Kpop-themed games (if I were to be imaginative). Only then, will fans be willing to consider buying NFT photocards (though arguably, to drive actual conversion, NFT photocards must prove that they offer significantly higher value than that offered by the off-chain collectible).

Attaching perks is also crucial to help the label show a “proof of work” to fans - another reason why many Kpop fans detest the concept of NFT photocards is that they see NFT offers labels a means to profit from fans without even having to spend money on the printing and manufacturing of the physical photocards. Given the lesser inputs required from labels to produce NFT photocards, many see them as less valuable. Hence, offering unique perks is crucial to help NFT photocards maintain their values perceived by fans.

Issue #2: Limitations of digital (vs physical) collection

One notable appeal of owning a physical collectible like a physical photocard is that it can provide you with companionship by your idol in real life. While your interaction with an idol in the digital world is fleeting - as when you’re online, you’re constantly hopping back and forth between different apps and websites - owning a physical collectible lets you create a permanent space for your idol in the real life and build shared experiences with them as you take the photocard with you while engaging in various activities (e.g., eating, studying, traveling). The same applies to other collectibles - no matter if the collectible is based on a human/anthropomorphic character (e.g., anime action figures) or not (e.g., fan fictions). Fan fictions are commonly made freely available to the public, but a lot of people still fancy the idea of owning physical copies of their favorite fictions and would get really excited when the author decides to publish physical copies, as a physical copy allows them to permanently store the piece IRL and enjoy constant companionship (and any novel shared experiences with the subject that may emerge during this companionship).  As Li Jin has written about, investment in the self, intimate knowledge, and self-congruity are critical constituents of psychological ownership, and the ability of physical collectibles to deliver them (“investment in the self”: making space for the physical collectible in one’s collection shelf or collection book, “intimate knowledge”: having constant companionship from the collectible, “self-congruity”: affirming one’s identity as the fan of the idol/anime character/fan fiction), in my perspective, are key to their appeal to collectors. However, this is likely a place where digital collectibles will struggle.

Don’t get me wrong. I do believe NFT projects should explore ways to recreate these experiences online - whether it’s letting collectors build intimate storage space for their collections, or finding ways to make digital collectible assume the role as a companion for the collectors (e.g., by enabling portability of the digital collectible across apps) - to strengthen the NFT’s “worth of ownership”. In fact, Momentica has made remarkable efforts in this direction. Its app has a built-in camera with filters based on the photocard owned by collectors which allows collectors to take pictures with their digital cards and commemorate real-life experiences with their idols. It even has a built-in step recorder that lets a collectors track how many steps they have walked with their idols(’ photocards).

However, I do think NFTs will find it challenging to deliver companionship experiences comparable to what physical collectibles can offer. While physical collectibles offer constant companionship in intimate spaces (as they are often kept at the collector’s home on a collection shelf, or in the case of physical photocards, physically carried by the collector), the internet has historically been a public space with little notions of intimacy and privacy. Additionally, the concept of digital collectibles being portable appears limited to avatars at the moment and inapplicable to other mediums (with mediums such as NFT photocards, there isn’t even an ecosystem of apps oriented around it that enable portability), and I’m not sure if online portability can match physical portability in terms of the companionship experience it offers. Some aspects of owning physical collectibles, I believe, will be just difficult to replicate online. For instance, while creating room for a physical incarnation of the idol (the physical photocard) in an intimate physical space allows a fan to reaffirm its connection with their idol, getting an NFT photocard probably can’t help them forge equally strong connections, as the effort underlying acquiring an NFT card (which entails no more than clicking a few buttons in the Momentica app) appears minimal in comparison to acquiring a physical one (which requires not only handling logistics with shipping, but also the manual process of adding the card to one's physical collection book, which can include some decorative work). This puts NFTs that derive their origins from physical collectibles (such as Kpop photocards) at a disadvantage, as they will be subject to brutal comparison with the latter by consumers.

Issue #3: Challenges of direct competition with an established social currency

Eugene Wei argues that humans are status-seeking monkeys, and social platforms make a living by offering, as a service to users, a status game whereby they can acquire status by earning a status token that shows “proof of work” (e.g., earning likes, followers with their social media posts). In the Kpop community, physical photocards are an established “proof of work” mechanism that allows fans with large collections of physical photocards to earn high status. Physical photocards can even serve as (implicit) prerequisites for participating in certain social experiences (e.g., grabbing food with other fans). As their values are widely recognized within the Kpop community, physical photocards can also serve as a real currency that can be used to exchange for other goods and services, ranging from other K-pop merchandise to even private tutoring services (!).

The established role of physical photocards as a status token and social currency creates a formidable network-effect moat, making it challenging for new mediums like NFT photocards to compete. NFT photocards have not yet garnered sufficient recognition from the fan community, and face a serious cold start problem.

While platforms like Momentica have attempted to evolve NFT photocards into a status token - for instance, it introduced a ranking system in its app that allows collectors with the most abundant collection to be recognized - my sense is that such a role cannot be created artificially, but instead, must be acquired organically as more members of the Kpop community come to recognize and appreciate the value of a medium. The network effects of physical photocards remain difficult to defeat.

Can easier trading be the “10x better” value proposition that will drive conversion from physical cards?

Yeah, maybe. The Momentica app already has features that allow collectors to swap and trade NFT photocards. However, while I used to think that the easier trading enabled by NFT photocards will constitute a significant value prop, I’ve come to question if that ease of trading means anything when there’s no liquidity because fans don’t have a demand for owning NFT photocards. It seems that making NFT cards something people want to own is a premise for easier trading to be a valid value prop. To accomplish that, NFT photocards would first need to prove that they have comparable value as physical photocards - but today, the former still seems far behind compared to the latter in their utility as a medium of companionship, status token/social currency, and source of exclusive benefits.

Of course, one can reasonably argue that there is always demand out there for financial speculation based on the popularity of Kpop idols, and people with such demand will happily adopt NFT photocards as they can be traded more easily than physical cards. However, for photocards, historically, speculation does not seem to have been the major driver of demand for collection - the majority of photocard collectors do so for collecting purposes instead. And when the value of NFT photocards as collectibles remains unproven and thereby its liquidity limited, how much appeal does the opportunity for speculation really hold?

Conclusions

• While NFTs have historically been promoted as an enabler of  “digital scarcity”, the validity of that scarcity is questionable when an NFT is not even excludable (e.g., when a music NFT still remains freely available for streaming by the public after a person pays to collect it). Similarly, though some believe that the experience of ownership of digital assets will be the big value unlock that drives mass adoption of crypto, the promise of “ownership” appears rather vulnerable when it doesn’t entail exclusive benefits

  • Of course, there’s always going to be people that don’t mind the lack of excludability, who will happily pay to own something that remains accessible to non-collectors, as they fancy the idea of having “verifiable ownership” of the item; however, the average non-crypto native consumer does not seem to share this preference today, and excludability still appears to be a critical component in their definition of ownership

  • While it seems that almost anything can be minted as an NFT (and many web3 projects are indeed experimenting with turning novel mediums such as social media posts into NFTs), the lack of excludable benefits can signal to consumers a lack of  “proof of work” behind its creation, thereby making the item less valuable for ownership. For NFTs that originate as physical collectibles (such as NFT photocards), their underlying “proof of work” will likely be closely compared to that of their physical counterparts. Therefore, without offering excludable benefits, NFTs are unlikely to be perceived by consumers as providing a truly valuable ownership experience.

• It is unrealistic to assume that converting an established physical collectible into an NFT will automatically generate the same level of demand. Physical collectibles offer collectors 1) excludable access to the collectible, 2) opportunities to form deep personal connections with the subject of the collectible as the collectible provides physical companionship to the collector (in an intimate space), and 3) ownership of a status token/social currency (as in the case of Kpop photocards). All are critical premises to true “scarcity” and “worth of ownership”, and I’d argue that #2 can drive #3, and the combination of #2 and #3 can reinforce #1. However, the mere NFT version of a traditionally physical collectible without any additional perks attached will likely fall short in all three aspects:

  1. Excludable access to the collectible: Most NFTs appear to be non-excludable and susceptible to free-riding (e.g., a music NFT will remain freely available for stream by non-collectors); though some NFT issuers seek to create excludability by restricting access by non-collectors, this manually imposed excludability can be easily challenged as a collector shares the paywalled content with the public. (Moreover, this restriction can undermine the appeal of the NFT as it may hinder a potential collector’s ability to assess in advance of a purchase whether the NFT is really something they’re interested in collecting, and it may limit the NFT’s potential to serve as a status token for a community by constraining its distribution and exposure on social media)

  2. Opportunities to form deep personal connections with the subject of the collectible as the collectible provides physical companionship to the collector (in an intimate space): On the internet, spaces with the notion of intimacy, and experiences whereby users can port a certain asset across different spaces - two key premises for a collectible to provide a sense of companionship and form deep connections with the user  - are either scarce or barely exist. While I’d love to see people explore ways to enable NFTs to deliver those experiences, I believe some elements of these experiences are unique to physical collectibles and will be difficult to replicate with digital mediums

  3. Ownership of a status token/social currency (as in the case of Kpop photocards): Physical collectibles which have earned positions as status tokens/social currencies benefit from network-effect moats that are difficult for a new medium to challenge (especially one that has yet proven it has superior value vs. the physical collectible)

  Overall, NFTs that are merely digital versions of physical collectibles and don’t offer any incremental perks will likely fall short relative to their physical counterparts in delivering these three key value propositions. Although NFTs can potentially offer easier trading and unique opportunities for financial speculation, delivering this benefit will need a baseline level of liquidity enabled by sufficient adoption of the NFT collectible as opposed to the physical version. However, this can be difficult to accomplish when NFTs do not measure up to physical collectibles in terms of the three core value aspects of collectible ownership.

  *Nonetheless, I do believe that over time, NFTs that are mere digital versions of physical collectibles may become more appealing as project teams focus efforts to address #2. This will ultimately help ameliorate NFTs’ weakness on #1 and #3 as well (and subsequently facilitate the trading/speculation value prop). However, I believe that in the near term, they must offer additional perks to drive adoption by average non-crypto native consumers.

While I previously thought mediums that are established as physical collectibles (such as Kpop photocards) make great candidates for NFTs, my view has now changed. Currently, I believe mediums that can be most easily adopted as NFTs in the near-term are mediums that:

• Don’t have a pre-established culture of physical collection (as they will not be benchmarked against any physical collectible counterpart in their performance on delivering the three core value props), and

• Whose on-chain nature enables better formation of personal connections between the user and the subject (value prop #2), and better social experiences (value props #3)

Under this framework, it makes a lot of sense to me why avatars were the first NFT medium to gain significant adoption. People inherently have a certain level of intimacy with their avatars, and avatars are arguably "portable" since they can be used across various apps. These characteristics allow them to create deep personal connections with users and offer a sense of companionship similar to physical collectibles. Moreover, while the likes of NFT photocards will struggle to challenge the position of their physical counterparts as the established status token/social currency of a community, avatars had the unique opportunity to become the first status token/social currency of a novel community built around the ownership of itself. Moreover, both of these value props were elevated with the “on-chain” aspect of NFT avatars, as 1) blockchain makes the concept of having a coherent identity across the internet (and subsequently the portability that enables companionship) more attainable, and 2) this new community around avatars (and the status game it created) was able to form precisely because being an evangelist of blockchain technology at the time uniquely enabled people to align themselves with a high status group - top-tier technologists in Silicon Valley. Hence, although avatars are not excludable by default (since the images can be publicly viewed), these novel exclusive benefits allowed them to be seen as truly scarce and worth owning.

However, with NFTs based on other digital mediums such as articles, social media posts, music, and videos, I feel like it may be a bit more challenging for them to prove their value as mere collectibles (despite the fact that they don’t have major physical collectible counterparts that people would compare them against).

• While people do collect these digital mediums (e.g., bookmarking tweets, bookmarking websites, pinning Pinterest posts), today, they are more limited in their potential to help users strengthen personal connections with a given subject

  • In the digital spaces where these mediums dwell, notions of intimate interactions and enduring companionship are less viable. While you can save Pinterest posts to a Pinboard, add songs to a Spotify playlist, or curate a YouTube playlist, your Pinboard and playlists probably do not feel as personal or intimate as the collection shelf in your bedroom. Unlike your physical collection shelf, these digital spaces leave limited room for you to customize it into what you want it to be (as the UI of these apps are standard), and after all, you know they’re owned by corporations. Moreover, while your bedroom is a space where you are constantly present, you likely don’t visit your Pinterest or Spotify collections as frequently. In the digital world, your attention is often divided between different apps, and even when you do open a specific app, your initial interaction is with the app’s feed, not your personal playlists or Pinboards

  • Collecting these digital mediums requires little work from the user’s end, and hence its delineation from other forms of interactions with a subject (e.g., saving a Youtube video to your personal playlist as opposed to sharing it with a friend) can seem a bit unclear; as a result, one’s personal connections with the subject forged by the act of “collecting” the digital medium is rather weak; and since the bar for one to collect something is low, the meaning of this act itself is limited in significance. I would even argue that stronger personal connections with the subject of these digital mediums are forged through means other than “collecting”, such as learning to sing a song you found on Spotify, learning a Tiktok dance, discussing an amazing article with your friends, or repeatedly streaming a video, rather than saving a song to a playlist or bookmarking an article in your browser. Furthermore, since these acts of forming deep connections are not exclusive to collectors but are also accessible to non-collectors, “collection” of these mediums appears to entail little meaning

• …and a more important problem is, today, it is hard (for the average non-crypto native consumer) to see how exactly collecting these mediums on-chain is better than doing so off-chain (e.g., creating a personal playlist in Spotify). I’d be excited, though, to see project teams deliver products that challenge this statement

Notably, the relatively low effort required for collecting these digital mediums not only limits their NFTs’ ability to help users forge deeper connections with a piece of content, but also constrains their ability to become a status token of a community. This is because a status token should be a “proof of work”. However, today, a lot of NFTs articles, social media posts, and songs etc, can be minted with minimal work or charge. This may set into play a vicious cycle - given the low effort required to acquire the NFT, the exclusive benefits it can offer to collectors are limited (as substantial effort is needed both for the NFT to help collectors forge meaningful connections with the subject and for it to serve as a status token). Consequently, the NFT issuer has little ground to justify a price increase.

For NFTs based on digital mediums such as articles, social media posts, music, and videos etc to demonstrate their appeal to potential collectors, issuers may consider attaching to these NFTs additional perks, but a better way to add exclusive benefits to these NFTs (that is uniquely enabled by their on-chain nature), in my perspective, is to position them as financial instruments that offer collectors opportunities to share future earnings of the underlying content. This may have legal implications (I’m not an expert on this topic by all means) and is barely practiced today according to my knowledge, but I believe these are benefits that will truly make them shine compared to off-chain versions.

NFTs are definitely still in their early stages, and I'm excited to see how they evolve. Once project teams find ways to link NFTs with compelling exclusive benefits that help justify their inherent values for ownerships, I believe NFTs’ appeal will be further amplified by their susceptibility to trading and opportunities for financial speculation. I can see this kickstarting a virtuous cycle whereby NFTs become increasingly valuable to own from the perspective of non-crypto native consumers, and ultimately drive the mass to adopt crypto.

I realize a lot of these thoughts deserve better development and would love to hear any feedback you have. If there’s any mistake/misinformation in this essay, I also welcome your criticism. Otherwise, if you have a similar interest in this topic, I’d also love to just connect. My DM is always open.

Credits: My views on NFTs and blockchain’s ability to enable an “ownership economy” are deeply inspired by the writings of Li Jin, Alana Levin, and Jesse Walden from Variant