The “Digital Citizens Wanted” report, produced by Yuri Group, explores an innovative approach to addressing Japan’s rural depopulation crisis through the application of Web3 technologies. This research report examines the Yamakoshi village model, its potential for scalability, and the broader implications for rural revitalization in Japan.

The effective blank canvas approach now being used in Japan to rural areas, should be on the radar of foreign governments and municipalities. For Japan is in essence 20 years ahead of the population curve. European nations and some places in North America are following a similar trend, whereas other countries like the UK as a whole are trailing on rural populations.

By leveraging non-fungible tokens (NFTs), cryptocurrency, and virtual spaces, the project aims to create new forms of engagement and economic value for rural villages at risk of disappearing.


Japan’s Demographic Challenge

Japan faces a severe demographic crisis, with rural areas experiencing rapid population decline and aging. According to data presented in the Yuri Group report:

  1. Japan’s population peaked in 2010 and has been steadily declining since.
  2. The proportion of elderly citizens (65 and older) has increased dramatically:
    • 1925: 21.6%
    • 1955: 37.3%
    • 1975: 56.1%
    • 2000: 75.9%
    • 2010: 78.7%
    • 2022: 91%
    • Projected for 2030: 92%
  3. 744 municipalities are at risk of disappearing due to population loss.

This trend threatens the preservation of unique local cultures and traditions cultivated over generations in Japan’s villages.

The Web3 Opportunity

The report highlights the potential of Web3 technologies to create new economic and social models:

  1. Decentralized networks based on blockchain allow for peer-to-peer interactions without reliance on centralized platforms.
  2. Non-fungible tokens (NFTs) are seen as a key catalyst, enabling digital assets to have provable scarcity and increased economic value.
  3. The digital economy is expected to shift towards more decentralized models in the Web 3.0 era.

The Yamakoshi Model


The village of Yamakoshi has implemented an innovative program to attract “digital residents” from around the world. By leveraging NFTs and virtual spaces, the project aims to increase engagement with the village’s culture and create new sources of economic value.

Key Components

  1. Nishikigoi NFTs
    • The village has created and sold NFTs based on Nishikigoi, a type of ornamental carp for which the region is known.
    • Total sales have reached 120 ETH (approximately $423,000 at the time of the report).
    • At the time of reporting, 1 ETH was valued at approximately $3,500.
  2. Digital Citizenship
    • The project has added 1,700 “digital residents” to Yamakoshi’s population.
    • The management team aims to grow this number to 10,000 digital citizens.
  3. Virtual Meetings
    • Digital residents can attend meetings and engage with local issues through virtual spaces.
    • This allows for real-time participation regardless of physical location.
  4. Anonymous Participation
    • Digital residents use nicknames and avatars rather than real names and faces.
    • Avatars can be virtual representations of themselves, characters from popular culture (often anime for Japanese users), or custom-designed characters.

Benefits and Challenges


  1. Economic revitalization: The sale of NFTs has generated substantial revenue for the village.
  2. Cultural preservation: Increased global engagement helps maintain interest in and support for local traditions.
  3. Expanded community: Digital residents provide new ideas, resources, and connections to the village.
  4. Accessibility: Virtual participation allows for engagement without physical relocation.


  1. Communication barriers: Anonymous participation can make building trust and clear communication more difficult.
  2. Technology adoption: Ensuring local residents can effectively engage with new technologies may require education and support.
  3. Balancing virtual and physical community: Care must be taken to ensure digital initiatives complement rather than replace traditional community structures.

Potential for Scalability

The Yuri Group report suggests significant potential for scaling the Yamakoshi model:

  1. If adopted by the 744 at-risk municipalities in Japan, it could generate between $300 million to $500 million for rural communities.
  2. Government startup funding would be crucial for widespread adoption.
  3. Each village would need to identify unique cultural assets that could be tokenized or showcased virtually.

Analysis and Implications

The Yamakoshi model represents a novel approach to addressing rural depopulation and economic stagnation. By leveraging Web3 technologies, small villages can potentially tap into global networks of support and create new revenue streams. This approach aligns with broader trends towards digital economies and decentralized networks.

Key considerations for implementation:

  1. Long-term sustainability: Developing sustainable economic models beyond initial NFT sales.
  2. Digital divide: Ensuring inclusion of elderly or less tech-savvy residents.
  3. Cultural authenticity: Maintaining the integrity of local cultures while engaging with global digital communities.
  4. Regulatory environment: Navigating legal and tax implications of cryptocurrency-based revenues and digital citizenship.
  5. Environmental concerns: Addressing energy consumption associated with some blockchain technologies.

FERN Analysis

Based on the information provided in the FERN analysis and the conclusion of the “Digital Citizens Wanted” report, an observer might offer the following opinion on the potential success of this initiative:

The Yamakoshi model presents an intriguing and innovative approach to rural revitalization, but its long-term success remains uncertain. The initial financial results are undoubtedly impressive, with $423,000 generated from NFT sales for a small village demonstrating a clear interest in digital engagement with rural Japanese culture.

An observer would likely be excited by the potential for scaling this model to other at-risk municipalities. The projected $300-500 million in revenue, if realized even partially, could provide a significant economic boost to struggling rural areas. However, a cautious analyst might question the sustainability of relying heavily on NFT sales as a long-term strategy, given the volatility of the NFT market and the potential for the novelty factor to diminish over time.

Perhaps the most promising aspect of this model is its potential to create meaningful connections between rural villages and a global community of supporters. The concept of “digital citizens” participating in village affairs worldwide is innovative and could lead to a rich exchange of ideas and cultural appreciation. This networking aspect might be seen as the key to long-term sustainability beyond the initial financial gains.

Digital Citizens Critical View?

However, a critical observer would likely identify several challenges that must be addressed. The evolving regulatory environment for cryptocurrencies and digital assets presents a significant hurdle, requiring agility and potentially substantial legal resources. Additionally, the environmental impact of blockchain technologies is a concern that needs to be addressed to ensure this solution doesn’t create new problems while solving others.

The communication barriers in anonymous virtual environments present another significant challenge. While anonymity can encourage participation, it may hinder the development of deep, authentic connections crucial for true cultural exchange and community building. Finding the right balance here would be seen as critical to the project’s success.

An observer with an interest in cultural preservation might be particularly excited about the potential for these initiatives to safeguard and showcase Japan’s rich rural culture. Using technology to keep these traditions alive and relevant in the digital age could be seen as a valuable contribution to cultural heritage. The opportunity to virtually experience and engage with rural Japanese environments could be viewed as a powerful tool for education and cultural appreciation.

While there’s reason for optimism about the potential of the Yamakoshi model, a balanced analysis would suggest that its success will depend on how well it can adapt to challenges and create sustainable value beyond the initial hype.

If the project can foster genuine connections, successfully navigate regulatory challenges, and find ways to provide ongoing value to both digital citizens and local residents, it could indeed become a transformative approach to rural revitalization. However, it will require ongoing innovation, careful management, and a commitment to balancing digital engagement with real-world community needs.

Key takeaways on Digital Citizens:

  1. Web3 technologies offer new avenues for rural revitalization and cultural preservation.
  2. The Yamakoshi model has shown early success in attracting digital residents and generating revenue.
  3. Significant potential exists for scaling this approach to other at-risk municipalities in Japan.
  4. Careful consideration of long-term sustainability, inclusivity, and regulatory compliance is necessary.

The Yamakoshi experiment may well serve as a valuable case study for rural communities worldwide grappling with similar demographic and economic pressures in the digital age.

The success of this model could have far-reaching implications for the future of rural communities not only in Japan but globally, as the world increasingly embraces decentralized digital economies and virtual forms of engagement.

To view Inaka Labs Research, click here.

Link to the original report here.