Introduction

Web3 markets offer several comparative advantages over their Web2 counterparts: provenance, smart-contract programmability, and decentralized secondary markets. Thus far though, many Web3 projects have not significantly benefited from all these advantages. For Digital Art collections, loss of originality seemingly follows success: they will have to contend with both human and AI generated copy-cats that eventually enter the market [Reference: https://www.plagiarismtoday.com/2023/06/28/yet-another-nft-plagiarism-scandal/]. This reality, coupled with the fact that art is traditionally illiquid, suggests that secondary market activity for Digital Art is unlikely to grow significantly. For Physical Goods, especially high-end fashion products, some brands are using the blockchain to prevent fraud from imitation. However, most handbag or shoe owners will not trade their items; so their secondary market activity will be limited. Projects would derive more long-term value from Web3 by tokenizing credits instead of products or works of art.

Artwork and products are non-fungible. But credit is semi-fungible; and fungibility yields more options. In normal market conditions, a credit holder has similar options as one holding the product, plus the option of redeeming the credit for said product, or waiting for the future when prices or offerings may improve. For the creator or project, credits provide an efficient means to earn off-collection revenue: a prospect or follower may wish to incorporate a project’s creative elements into her own work, rather than owning items in the existing collection; a group of fans may prefer experiencing a private virtual one-on-one with a music artist, over owning his tracks.

For projects with large followership or user base, service credits offer higher potential for secondary market transactions, higher revenue potential via redemptions, and they leverage programmability to implement expirations and transfer restrictions in code.