Big companies rush into NFTs: on the rise, but afraid of being blown away by the wind

Author: Si Linwei

"NFT" has become incredibly popular.

The bay in Singapore presents a charming blue hue, but Lei Ming (pseudonym) is focused solely on the monitor in front of him. As the chief designer of the company, he was called to Singapore from Beijing a month ago to be responsible for a major project—designing a set of NFTs for the company.

Despite Lei Ming's extensive design experience, this is his first encounter with NFT-related requirements. At this moment, he still doesn't quite understand what "NFT" really is, only knowing that it was originally related to blockchain. After working overtime for a month, he can only exclaim, "This thing is really too hot."

However, Xiao Lei (pseudonym), who is responsible for risk control, has a different perspective. Unlike the business line's style, he needs to consider more about the potential hidden dangers that NFTs may pose to the company.

Xiao Lei expressed that while he feels the NFT craze, his underlying sentiment is more about worry. In the current environment where regulatory policies are unclear, he can only repeatedly remind his colleagues in the business line to act cautiously and prepare risk control measures in advance.

According to incomplete statistics from Jiemian News, major internet companies such as Ant Group, Tencent, JD, Baidu, NetEase, and Bilibili have all entered the NFT field. In the tumultuous year of 2021, NFTs quietly became a new track for giants to cluster around.

But whether this is a new opportunity with a commercial closed loop or a fleeting bubble remains unknown.

The Year of NFT: Institutions Follow Suit, Celebrities Endorse

Like all new things, for most people, NFTs are something "indescribable."

In a strict sense, NFTs are one of the derivative applications of blockchain technology. They emerged around 2017 in the world's largest blockchain ecosystem, Ethereum.

At that time, during an upgrade of the Ethereum network, someone proposed a new proposal called "ERC-721," which allows each token in the blockchain network to have a unique blockchain hash value, thus making each token unique. Hence, "Non-Fungible Tokens" appeared, with various Chinese translations such as "非同质化代币" and "不可互替通证."

In the Chinese context, it can be understood as a tool that provides uniqueness and ownership certificates for digital content.

If one must summarize NFTs in one sentence, it would be "NFTs use computer language to realize the scarcity of digital content."

In 2021, NFTs broke out globally, becoming one of the most prominent applications of blockchain technology. This exceeded many people's expectations. Not only outsiders but even Vitalik, the founder of Ethereum, admitted that he had overlooked the growth of NFTs.

On March 11, 2021, some believed this day should be recorded in art history. On that day, Christie's auctioned a work by the crypto artist Beeple for $69.34 million, catapulting this previously unknown artist into the top three of living artists' auction rankings, with the most special aspect being that it was an NFT.

This became the first moment NFTs broke out globally. Subsequently, the media outlet Time magazine issued a news-related NFT, entertainment giant Disney released NFTs for the Spider-Man IP, and even fashion giant Louis Vuitton included NFTs as one of the surprises in its centenary celebration.

NFTs began to gain popularity worldwide and took over people's social media avatars. The second wave of enthusiasm was sparked by avatar NFTs, as people discovered that social media avatars serve as a natural display window with the most direct social effect. Thus, avatar NFTs represented by "Cryptopunks" and "Bored Ape Yacht Club" attracted attention globally, with the former being 10,000 pixel-style strange avatars and the latter consisting of a bunch of seemingly ugly monkeys.

At this time, global celebrities and KOLs also began to join the trend, from legendary American rapper Eminem to NBA superstar Stephen Curry, various stars spent tens of thousands of dollars to change their avatars to NFT images.

When the trend reached the Chinese music scene, Jay Chou, JJ Lin, and Wilber Pan also became holders of "NFTs."

To this day, if you pay close attention, you will find that many trendy young people's WeChat avatars have also turned into ugly monkeys, as NFTs gradually expanded from a technology into what Dawkins referred to as a "meme," a cultural element that can replicate and spread itself.

The Hot Giants: Clustered Entry, Sold Out in Seconds

Naturally, major domestic companies would not miss this wave of trend, with Ant Group being the first to take the plunge in 2021.

Ant Group has been deeply involved in the blockchain field for many years. With the support of its blockchain network, Ant Chain, on June 23, Alipay issued a batch of "NFT" payment code skins, with each NFT limited to 8,000 copies, priced at 10 Alipay points + 9.9 yuan, available for purchase in two batches daily. Once the event was announced, the NFTs were sold out in a flash.

As the event gained popularity, there were instances of sky-high prices for NFTs on second-hand platforms like Xianyu, with scalpers even entering the scene, directly posting on Xianyu: "High price for buying back Alipay NFTs, Dunhuang Art Research Institute NFT number 0001 or 6666, 100,000 yuan each, other numbers 500 yuan each."

Screenshots circulating online showed that the highest price for the same NFT on Xianyu had reached 1.5 million yuan. The next day, Xianyu quickly removed all NFT products, and Ant Group issued an official announcement emphasizing that it would not allow any speculation.

However, the immense energy generated by NFTs truly surprised everyone. After Ant Group's trial, Tencent quickly followed suit.

Unlike Ant Group's relatively uniform style, Tencent's layout still follows the amoeba strategy, encouraging internal teams to innovate. Around August, two teams from within Tencent announced that they would soon launch NFTs.

On July 30, QQ Music announced that it would launch an NFT crypto art service called "TME Digital Collectibles," issuing virtual collectibles to users and starting internal testing. This platform's technology may later be synchronized across various TME products.

On August 2, the so-called first NFT trading platform in China, "Huanhe," officially launched its app, which is produced by Tencent's PCG business group.

From the current perspective, Huanhe's layout is faster, with its first NFT collectible based on the well-known video interview program "Thirteen Invitations," named "Limited Edition Thirteen Invitations Vinyl Record NFT," with a total of 300 pieces, priced at 18 yuan, and it also sold out instantly upon release.

QQ Music followed closely, and on August 9, QQ Music launched its first music digital collectible—Hu Yanbin's 20th Anniversary Vinyl NFT "Monk." This album was limited to 2001 copies, with over 40,000 reservations before the sale.

Clearly, not only users and collectors but also developers and creators have underestimated the charm of NFTs.

Three months later, the young team from PCG created an NFT collectible for Tencent's 23rd anniversary, which was only distributed to internal employees. The familiar penguin image joined the NFT trend, and among the 72,000 Tencent employees, the vast majority received their first NFT.

With the entry of these two giants, internet companies have all begun to ramp up their efforts.

With the strong support of Ant Group, Tmall and Taobao's digital collectible activities have been continuous. By December, digital collectibles finally appeared on the JD app. On December 17, Jiemian News learned that JD's NFT issuance platform "Lingxi" had launched a mini-program within the JD app, and the first batch of NFTs based on JD's mascot "Joy" quickly sold out.

On the other hand, Bilibili, which was reported on December 6 to be testing blockchain scenarios, launched a batch of avatar NFTs a month later. It is said that this series of avatars is not for sale; users need to sign up, with the condition being that Bilibili user levels must reach level 6, and they must have used Bilibili daily throughout 2021, totaling 2,233 users.

Meanwhile, NetEase, which was slightly slower to act, had previously issued NFTs for its game "Naraka: Bladepoint." In the second half of 2021, NetEase Planet began recruiting talent for building an NFT platform. The latest version of the NetEase Planet app has already introduced digital collectibles.

An insider from NetEase Planet told Jiemian News that the digital collectibles platform is one of the foundational scenarios for its metaverse business, providing IP parties with a complete brand solution for digital collectible contract minting, product marketing, user management, etc. It also offers collectors services such as secondary creation, exchange, purchase, gifting, and collection sharing for digital collectibles. The upcoming digital collectibles include types such as random blind boxes, fun videos, and 3D models, with the content being carefully selected.

The rapid entry of major domestic companies has added a new dimension to the heat of NFTs.

Concerns of Major Companies: Quietly Renaming, Cutting Off Secondary Trading

However, behind the major companies' enthusiastic exploration of NFTs lies a cautious approach, as if walking on thin ice.

An insider from QQ Music told Jiemian News that there had been several hesitations within the team regarding the NFT business, and they were not very daring to experiment too much.

After launching NFTs, the first thing major companies did was to rename them. On October 23, Jiemian News learned that the "Ant Fan Grain" mini-program on Alipay and Tencent's NFT issuance platform "Huanhe" had completely removed the term "NFT," changing it to "digital collectibles."

At the same time, after reducing the mention of NFTs internally, the definitions and introductions of digital collectibles were all updated, particularly emphasizing the difference from virtual currencies, retaining only the blockchain technology's contribution to their scarcity.

This renaming was quite sudden, with no prior announcement, and there has yet to be a clear explanation.

However, subsequent internet giants entering the market, including JD, Bilibili, NetEase, and Xiaohongshu, all emphasized that they are digital collectibles, rarely using the term NFT, and when introducing related products, they stressed their differences from virtual currencies.

The second measure is to cut off secondary trading. Due to strict regulations on virtual currencies in China, multiple departments had cleared and prohibited virtual currency mining and trading in 2021. Since NFTs themselves have token attributes, they are in a very awkward position.

Thus, domestic giants chose to shield their financial attributes, with the most critical measure being to prohibit secondary trading. Since Alipay launched NFTs in June, the speculative heat had raised concerns among the development team, and the rapid removal of NFTs from Xianyu extinguished the greed of many speculators.

However, Xianyu's action was merely a "stopgap" measure; the root issue lies in "whether trading is allowed," which is the fundamental aspect of its financial attributes. Therefore, major companies began to address this aspect.

An unnamed insider from a major company told Jiemian News that since the key to NFT speculation lies in trading, not allowing trading became a prerequisite for compliance. Moreover, domestic alliance chains are different from public chains and cannot interact freely.

After careful consideration, the decision to never allow secondary trading became the bottom line for domestic giants exploring digital collectibles.

Since the launch of this business, Ant Group has repeatedly emphasized in various responses that it rejects virtual currency speculation and does not support user trading.

However, if collectibles are not given liquidity, their value will naturally be greatly discounted. Therefore, after weighing the options, Ant Group's digital collectibles only opened the transfer function, requiring a holding period of more than 180 days, with buyers needing to undergo real-name authentication and bind their identity information.

Such strict measures are aimed at eliminating the risks of related speculation, and all major companies, including Tencent and JD, have chosen the same strategy: initially only opening the purchase or collection function, requiring real-name authentication, and gradually opening the transfer function after holding for a certain period.

Whether it is renaming NFTs to "digital collectibles" or blocking trading functions and delaying the launch of the "transfer" function, every action behind the major companies' hot sales of NFTs is taken with great caution.

In this scenario, a scene has emerged regarding the NFT business: doing without speaking.

Taking Ant Group as an example, with the vigorous development of the digital collectibles business, the Alipay mini-program "Ant Chain Fan Grain" has been upgraded to "Whale Explore," which is an independent app that has already launched on major app stores, but Ant Group has not heavily promoted the launch of "Whale Explore."

JD is similar; its digital collectibles business "Lingxi" requires users to search for it in the search box to access it. Bilibili also released information through a newly registered official account in its dynamics, and Xiaohongshu did the same.

It is not difficult to see that each company has set the entry interaction for collectibles to be quite inconspicuous. This not only indicates that NFTs themselves are not core businesses but also implies a layer of meaning about working quietly.

Due to concerns about regulation and the sensitivity of new NFT-related businesses, major companies have tacitly chosen to remain silent. Platforms like Tencent, JD, and Bilibili are reluctant to discuss this business in the broader context of 2021, and apart from necessary responses, they have not invested much in promotional resources.

The Future of Domestic NFTs

According to Nonfungible, the global trading volume of NFTs reached approximately $544 million in the latest week, with the average trading price of NFTs around $2,400 each.

At the same time, OpenSea, currently the largest NFT trading platform globally and incubated by Y Combinator, has reached a valuation of $13 billion, despite being a small company founded just five years ago. According to DappRadar, OpenSea's total trading volume has surpassed $20 billion, setting a historical high.

However, these NFT transactions almost all occur on public blockchain networks. For domestic giants, the market scale and valuation only have literal reference significance and provide no strategic assistance. Moreover, domestic digital collectibles started later and currently lack complete market statistics.

In fact, from the perspective of a commercial closed loop, there is no problem with the development logic of digital collectibles. The core gameplay in China currently combines blockchain technology with cultural IP, where the issuer provides IP resources, the issuance platform provides technical support, and collectors pay for it.

Many major domestic companies with blockchain technology development capabilities, such as Tencent, Alibaba, and ByteDance, also possess a vast amount of IP resources, allowing them to directly serve as both issuers and technical supporters. The biggest feature of the digital collectibles business is its ability to generate a certain cash flow.

However, the biggest question for the development of domestic NFTs lies in whether it can be compliant. Due to its inherent financial attributes, regulation is the core of everything.

He Yifan, executive director of the BSN Development Alliance focusing on the compliance of domestic NFTs and CEO of Hongzao Technology, told Jiemian News that the key to the development of domestic NFTs lies in how the issuer controls the attributes of NFTs. If defined as securities, regardless of whether in Europe, America, or domestically, any involvement with financial attributes will inevitably face strict regulation. If defined as virtual goods, then it will develop according to the rules governing virtual goods, "and it also depends on whether financial risk prevention measures are in place," He Yifan added.

So, how to find a path to compliance against the backdrop of the global NFT market explosion may be the survival strategy for domestic giants in the digital collectibles space.