China Stories 3: Digital Collectible – NFT with Chinese features?

China’s NFT Market: “Let’s Buy Profile Pictures”

“Tell me, do you also buy profile pictures? My students have made fortunes with them, really cool.” For example, an astonished Chinese art school teacher first asked me about NFTs. She has no idea about technology, let alone blockchain, and any attempt to explain the world of DeFi to her would have resulted in a minute after a minute yawn “what’s the point” But the idea behind NFTs is easy to understand even for non-technical people: Everyone likes to own things that express their own personality or group membership. We call it a status symbol – the meat room is full of them. More and more parts of our lives are going digital, so why not status symbols too?

“Buy profile pictures” (Chinese: mai touxiang, 买头像) is something like the Chinese alternative to “illiquid jpegs”. Basically a simplistic, slightly funny way for crypto outsiders (and even some insiders) to put the NFT craze into words. When your Wechat contact list (the Chinese Whatsapp) is suddenly full of pixelated punks, birds and all kinds of monkeys, you realize: the NFT wave has reached China.

When some of my contacts changed their profile pictures to NFTs, I immediately realized how well especially PFP-NFTs (Profile Picture) suit Chinese or Asian culture. Unlike most Europeans, the Chinese generally do not use a picture of themselves as their profile picture on social media. Rather, they use pictures of their pets, funny animal pictures, stars, or even pictures of random people. Sometimes it can terribly be confusing but also means that the Chinese intuitively understand the value of NFTs. The previous success of PFP-NFTs compared to pure-use NFTs seems to confirm this.

What are Digital Collectibles (DC)?

So much for the popularity of NFTs in general. But, of course, it didn’t take long for the realities of crypto regulation in China to catch up with NFT speculators as well. The September 2021 ban on all crypto-related services also affected NFT trading. In this case, however, the government a regulated alternative to NFTs called “Digital Collectible” (DC, Chinese: shuzi cangpin, 数字藏品) approved. An interesting development considering that in the case of cryptocurrencies, the government has never considered allowing a regulated version. Clearly, the government sees some value in NFT technology.

DCs are largely identical to NFTs, with one crucial difference, of course: they are not built on open blockchains. Instead, China has native alternatives to public blockchains, such as the Blockchain-based Service Network (BSN). BSN integrates major consortium chains such as Hyperledger or Baidu’s XuperChain, as well as public chains such as Ethereum. It is essentially a multi-chain ecosystem that, in its localized version ensures that all transactions comply with Chinese law. There is also a global version that allegedly excludes Chinese state actors and is completely transparent.

BSN is backed by China Mobile and other major technology companies such as Red Date Technology, China’s largest blockchain (but not crypto) technology company. Other Chinese tech giants such as Ant Group (AntChain) and Tencent (Zhixin Chain) have also developed separate blockchain ecosystems and released their own versions of DCs. Many local Chinese artists and institutions such as museums already sell DCs on one of the hundreds of platforms. However, free trade is in many cases not allowed or allowed only to a limited extent in order to limit speculation.

Future of NFTs in China – Divide and Conquer?

In my personal experience, opinions among Chinese about DCs versus NFTs are divided. The communities are also largely isolated from each other. For example, those who trade NFTs usually do not touch DCs. Some tell me they only recognize NFTs because they are freely tradable and built on open blockchains. But there is a large group of mostly older and more traditional Chinese entrepreneurs who think that DCs have a lot of potential. They see it as a serious alternative to unregulated NFTs and an important building block of China’s future metaverse economy.

In between are the performers. From the few conversations I’ve had, I get the impression that they are very interested in NFTs. Mainly to sell their art to an international audience. But also the idea of ​​selling their art for globally tradable assets, which is essentially ETH, BTC, etc., seems very appealing to them. However, most of them are not sure how this works technically and even more so about the potential legal issues. Therefore, for now, they mainly sell their art on domestic platforms.

By attempting to regulate NFTs in this way, China is staying true to its long-established model of selective openness. As with the internet itself, China is trying to facilitate the adoption of new technologies while keeping a tight grip on the economy. DCs certainly lack what most international crypto users consider to be the biggest advantages of NFTs, namely their free tradability. However, a local Chinese ecosystem is clearly developing that could form the basis of a future blockchain-based economyalbeit strictly regulated.

About the author

Maximilian Mai has been living in China (Chengdu, Sichuan) since 2016 and has been a full-time consultant in the field of blockchain & cryptocurrencies since 2018. He is currently co-founder and Chief Business Development Officer at BerlinDAO (www.berlindao.com). BerlinDAO is a Web3 marketing agency with a focus on the latest marketing trends and methods to achieve the best results for clients.

disclaimer

All information on our website has been researched to the best of our knowledge. The journalistic contributions are for general information purposes only. Any action the reader takes based on the information on our website is entirely at their own risk.