China NFT Market at a glance

Not financial advice.

August 22nd, 2021

Executive Summary

Compared with the explosive development of the overseas NFT ecosystem, China’s domestic NFT market has only just begun. Recently, Tencent, Alipay, Soyun Technology, 0–1 Universe and others have begun to create their own NFTs and launch NFT artworks.

Trends we see in the China NFT market

  • Mostly built on tokenless blockchain, pay with RMB rather than Crypto. Tokenless platforms that don’t recognise crypto as currency should expect no regulatory scrutiny.
  • China’s NFT ecosystem resembles more of an enterprise layout and is initiated at national level, supported by enterprise-level organizations; so far we have seen tech giants like ‘AntChain(Alibaba)’ and ‘zxinchain(Tencent)’ build on top of their own chains with some adopting Near protocol and Conflux as the underlying blockchain
  • China NFT space is driven by individual creatives and influencers, such as crypto curators Cao Yin, Sun Bohan and artists such as Reva and Song Ting.
  • Major Chinese NFT projects worth mentioning include: MaoDaoNFT(https://twitter.com/maodaonft) , Riverman(https://twitter.com/RivermenNFT) and GameFi LoserChick (https://app.loserchick.fi/) There is little doubt that the world of NFT is poised to go mainstream and will be revolutionary and disruptive to both new and established industries. At this stage, the China domestic NFT market is in its infancy. NFT helps with copyright protection, but at the same time it faces tests of compliance and fit with business models.

The current NFT landscape in China & differences from the West

China’s blockchain industry is generally focused on business and government, and progress on the consumer end is rather slow, but there are few successful cases. China’s NFT market is led by two main groups of people, the crypto natives, and the “out-of-circle” groups brought in by the NFT attempts of Internet giants.

Key events in 2021 for the Chinese NFT Space

  • Beeple’s “Everydays: The First 5,000 Days” sold for $69.34 million in a Christie’s auction.
  • China ‘s earliest offline crypto art exhibition “Virtual Niche — — Have You Ever Seen Memes in the Mirror?” initiated by BCA (Block Create Art)
  • Metaverse Boom, Metaverse was defined as ‘the end of the internet’ in June, initiating a wave of new thinking about the economy of digital products
  • GameFi spring led by Axie, ‘play to earn’ mechanism caught attention
  • China-made NFTs like Alipay‘s NFT skin that started selling on the second-hand marketplace ‘Xianyu/闲鱼‘
  • IP backed, influencers/celebrity endorsed, such as MaodaoNFT and Riverman

Why Chinese tech giants/tradfi companies care about NFTs.

Experts in the industry generally believe that the emergence of NFTs has opened up a new and unique value-carrying method for digital assets and opened up the imagination for digital assets.

Domestic enterprise testing of NFTs show that its value is gradually being recognized. Generally speaking, the NFT digital products launched by Tencent and Alipay all adopt the alliance chain route, mainly based on major popular IP, including audio, painting and others, aiming to encourage and promote the intellectual property protection of digital creation. Users only enjoy the collection and display services, and cannot conduct second-hand transactions, transfer gifts, etc.

In addition to games, NPA derivatives, equity certificates, tickets, etc. may be another direction for NFTs to try in the future.

Key use cases:

China’s NFT market is mainly led by tech giants like “BAT” (Baidu, Alibaba, Tencent), with one after another entering the NFT sector. These tech giants begin with their areas of expertise. Alibaba uses its own payment advantages, while Tencent differentiates itself in the music segment.

Key use case: Alipay NFTs skin and Alibaba’s NFT marketplace ‘Guang Qian’ Alibaba is currently making significant progress in this field, leading the NFT trend in China

  • 8,000 pieces of Alipay Dunhuang Feitian NFTs sell for up to 700,000 yuan/piece (~$107,700) on second-hand e-commerce platform Xianyu, based on AntChain
  • Alipay issued another 16,000 copies of the “Wu Liuqi” NFT payment code skin
  • Alipay and Dunhuang Fine Arts Research Institute issued another NFT payment code skin called ”Nine-Colored Deers”, 8,000 pieces of the NFTs have been sold out.
  • Alipay and Near protocol collaborated and launched NFT virtual mansion ‘Tu Lifu/秃力富’ at the Taobao Maker Festival. The 310 digital real estate NFTs issued by the artist Huang Heshan sold out within two days, with a total price of more than 360,000 yuan (~$55,300).
  • Alibaba auction launched its own marketplace ‘Guangqian’, supported by Conflux tech for deposit services
  • Tencent PCG’s NFT marketplace app “Huan He” was officially launched. The platform promoted the launch by issuing 300 NFTs as vinyl records based on the popular Tencent-developed celebrity talk show “Shisanyao.” Each piece is priced at RMB 18 ($2.8).
  • Tencent’s NFT marketplace ‘Huan He’ and GGAC partner artist Zhou Fangyuan officially launched the “Digital Ethnic Book” NFT on August 20. A total of 56 NFT products were issued at that time, with a total of 3136 NFTs issued
  • Tencent Music launched its own NFT Marketplace service “TME Digital Collection” (https://www.thepaper.cn/newsDetail_forward_13911012) in August. The platform is currently in closed beta on QQ Music. Tencent music collaborated with famous singer Hu Yanbin to launch “Monk”; a 20th Anniversary Vinyl NFT. It opened a lottery appointment on the QQ Music platform to purchase qualifications, with a limited sale of 2001 copies.

China mainstream CEXes also actively participate in NFT. Chinese backgrounded CEXes like Binance and Huobi all launched their own NFT channels such as: Binance Smart Chain NFT(launched on Jun 24th); Huobi incubated NFT marketplace Ibox.com;

Since Tencent was announced as the official agent of the popular foreign game “Roblox”, the concept of Metaverse has ushered in unprecedented popularity. According to the Baidu search index, we can see that NFT as a search keyword is mainly associated with keywords like Metaverse, DeFi, cryptokitties, LOUIS THE GAME etc.

In terms of the real users, NFT “out of the circle” is more about the concept, rather than the holders who actually participate in it.

The entry of luxury brands into the NFT space has appeared in China mainstream media reports, with the public’s focus trending to the combination of traditional industry + NFTs, e.g. Louis Vuitton and Burberry in NFTs and online gaming (https://36kr.com/p/1356760601723522?ivk_sa=1023197a).

Conclusion

NFTs will be the core economic element of the next-generation digital economy. Compliance NFT based on alliance chain In a sense, China industrial NFT is exploring the NFT secondary market. As the country maintains a high pressure on crypto currencies, balancing the regulatory red line with market enthusiasm has become the biggest challenge for the major tech giants. These blockchains initiated by enpterprises like Alibaba and Tencent are building a path for NFT compliance in China. Payment The China tech giants’ adoption of NFTs could signify a new channel for Chinese users to buy digital artwork with renminbi — and possibly in the future, the digital yuan, industry insiders implied. Regulation as a major concern At this stage, the domestic NFT industry is still in the trial stage and is facing multiple tests. Insiders generally believe that domestic companies have deployed NFT markets and are exploring the blockchain C-end market. However they still face multiple tests and risks in in development.

China and the US have adopted relatively different priorities in the development of the blockchain industry in the past. The financial environment in the US is more open, so the current blockchain practice is very focused on financial resources. China’s blockchain policy is more geared towards serving the real economy.

A team of former consulting, Wall Street, private equity, government, and corporate veterans accelerating the blockchain revolution