Yamakoshi, a secluded Japanese village nestled in the Niigata mountains, has attracted 1,700 “digital citizens” through the sale of non-fungible tokens (NFTs) in an initiative aimed at supporting and sustaining its aging population.

The Neo-Yamakoshi Village project, led by local residents, manages the Nishikigoi NFT collection, which is named after the vibrant breed of koi carp.

This digital asset is both an identifier for Yamakoshi’s “digital citizens” and a governance token enabling participation in the village’s DAO-managed voting processes.

According to a new report by Japanese research and consulting firm Yuri Group, the project has raised over $423,000 through Nishikigoi NFT sales since its launch in 2021.

The proceeds have been directed toward community initiatives, such as organizing a sports day for local school children.

The Nishikigoi tokens are free to physically located residents, while the digital community must purchase them. The floor price is 0.0318 Ether (ETH) as of June 26, according to NFT marketplace Magic Eden.

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NFT technology alone does not present an immediate solution to Japan’s record-low birth rate, but it is a unique and experimental approach to raising funds for aging populations in isolated rural communities.

“If their strategy works and expands to other villages, we estimate that rural Japan could look to fund-raise sums in the region of half a billion dollars while also test-driving a new wave of social tech with global appeal,” Yuri Group said in its report.

In April, private sector group Population Strategy Council reported that 40% of Japan’s 1,729 municipalities are at risk of disappearing due to fewer births.

Prime Minister Fumio Kishida’s administration views Web3 as a key element in achieving “Society 5.0,” a plan that aims to create a more sustainable and advanced society by integrating technologies like artificial intelligence, the Internet of Things and big data.

The Neo-Yamakoshi Village project was granted 10 million yen (about $62,500) by the ruling Liberal Democratic Party to test and implement Web3 tools.

However, the project has encountered some hurdles, such as explaining the technology and its benefits to older adults.

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According to Yuri Group, the project’s manager expressed difficulties in demonstrating the decentralized autonomous organization voting process and observed low voter turnout.

Plus, overseas digital citizens have also encountered language barriers.

Meanwhile, global NFT trading volumes have seen steep drops in recent months.

Global NFT sales volume is on pace to close the second quarter of 2024 down 45%, while June is expected to become the worst-performing month since October 2023, according to CryptoSlam data.

NFT market capitalization, mostly dominated by collectibles and avatars, fell 31.5% in the three months leading to June 26, according to NFTGo data.

Despite the recent dip in NFT trading activities, Yuri Group told Cointelegraph that there is room for both practical NFTs and profile collectibles in Japan.

“This is Japan, after all, — the home of anime and manga and a country with a huge physical collectibles culture that lends itself well to NFT adoption,” Will Fee, a researcher at Yuri Group, told Cointelegraph.

“The ‘digital citizens’ in the Yamakoshi metaverse also tend to use anime or more cartoonish avatars, which would suggest the more playful applications of the tech also have a shelf life alongside its socially impactful use cases,” he added.

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