Japanese founder launches NFT-based marketplace to redefine physical collectibles ownership

Image credit: Velvett

Some of our readers may recall that we have covered the Smaoku auction site several times over the last decade. The C2C marketplace saw rapid progress, expanding not only in Japan but also in Asia, but in February of 2017, it was acquired by fellow competitor and Japanese C2C marketplace giant Mercari. At the time, Smaoku’s founder Daisaku Harada joined Mercari.

In April of 2018, Harada was appointed as CEO of Souzou, a new business subsidiary of Mercari. The new unit created the Mercari Atte app, which allows users to trade items in person, and the Merchari bicycle-sharing service, but shut down in June of 2019 (Mercari Atte is no longer in service, and Merchari was taken over by Neuet and is now in service as Chari Chari).

In July of 2022, Harada announced his retirement from the Mercari Group. After that, he has been working as a private investor or as a fellow at the Chiba Dojo fund/community while he revealed that he would launch a new startup before the end of the year. Earlier this year, he moved to Singapore to begin his Web3 business in earnest.

Today, he is launching a closed beta version of a web3-based C2C marketplace called Unikura, probably named after “Universal” and “Kura” (meaning warehouses in Japanese to store items). It is groundbreaking in that it brings the Web3 technology to a marketplace where real things, not virtual items, are being traded.

C2C marketplace without item delivery

Daisaku Harada

Harada came up with the idea while working remotely during the pandemic, where he bought a piece of art to decorate the backdrop of his desk as he was constantly communicating via Zoom and Teams. However, rare and valuable art is something of a hassle to manage. If it is within reach of children, it can be damaged, and if stored in a closet, it can become moldy in a hot and humid environment.

This type of collectible is an asset and can also be an investment, as its value can increase according to the supply-demand balance in the market, but at the end of the day, it is important to exercise the right of ownership and satisfy the desire to own. The more things a collector collects, the more he or she feels the hassle of keeping them close at hand, or even the hassle of unboxing the package when it arrives at the store.

Harada decided to create a marketplace that allows users to store physical items and trade only the proof of ownership via NFT (non-fungible token). When you send your physical item to the nearest Unikura’s warehouse in Japan or Singapore, the platform sends you back the proof of custody as an Ethereum-based NFT. That’s why you can then trade an item with other users by buying and selling the NFT. The buying user doesn’t need to have an physical item in their hand.

If you want to have the physical item in your hand, you can have it sent to yourself from the warehouse by erasing the proof of storage/possession (burning the NFT). The Unikura team is also considering inviting core users to tour the warehouse several times a year, to allow users to see for themselves whether their items are stored properly.

Creating a Third Place for Geeks

One of Unikura’s vault for storing users’ items.
Image credit: Velvett

As a result of the long tail created by the Internet, people’s tastes have become more diverse and everything is collectible. Niche items are generally unappealing but become highly engaging for a certain core group of people, more specifically, geeks. However, because of the niche nature of this type of collectible, it is not easy to find friends to share thoughts and feelings with.

The reason why many people gather at Comiket (Comic Market) even in the midst of extreme heat and typhoon days, besides finding rare collectibles they want, is probably because they are looking for a community where they can talk about them. Similarly, the Unikura marketplace has built a community on Discord where collectors owning similar items can talk to each other, which is one of the benefits offered to users.

In addition, most transactions on the marketplace are for secondary distribution and are recorded on the Ethereum chain. Based on the the history, the marketplace returns a certain amount of rewards to not only the seller who made the most recent transaction but also to those in the past. The system will allow sellers to realize the benefits of using Unikura compared to transactions involving the physical handover of items, which may also help accelerate secondary distribution.

The marketplace has also established a system whereby not only recent sellers but also past sellers receive a certain amount of rewards based on the history of transactions recorded on Ethereum. This system will help sellers realize the benefits of using the marketplace in addition to in-person transactions, and will help revitalize the secondary distribution system.

Although trading cards currently account for the majority of items dealt on the marketplace, Harada intends to enhance its functionality so that a wider variety of items can be traded. The idea of turning physical collectibles into NFT is so called physically-backed NFT. In this space, we can see other startups like Y Combinator-backed Courtyard but it has a possibility of copyright infringement in that the designs created by third parties are converted directly into NFT. The Unikura team has carefully considered the legal issues in this regard to build the system accordingly.

In the high volatile crypto space, we’ve seen a number of fiat-pegged stable coins gold-convertible tokens like Digix. Compared to these efforts to stabilize the crypto value, Unikura’s idea of distributing tokens connected with physical items with value sounds very interesting.

Singapore-based Velvett, Harada’s startup behind the the marketplace, announced in April that it has secured $3 million US in a seed round from Chiba Dojo Fund, Kanousei Ventures, Hirac Fund (operated by Money Forward Venture Partners), W, mint, F Ventures, Flick Shot as well as several unnamed individual investors.