The NFT market in China: “let’s buy profile pics”
“Hey did you hear about buying profile pics? Students of mine made a fortune from that, it’s really crazy.” This is how a baffled Chinese art school teacher asked me about NFTs one day. She surely knew nothing about tech, let alone blockchain, and any attempt to explain the world of DeFi would have ended after a minute with a yawning “what’s the point”. But the idea and value proposition of NFTs is incredibly simple to understand even for non-tech savvy people: Everyone likes to own things that express the uniqueness of one’s character, or group identity. We call that a status symbol - the meatspace is full of it. As more and more of our life goes digital, so naturally do status symbols.
“Buy profile pictures” (Chinese: mai touxiang, 买头像) is somewhat the Chinese alternative to
“illiquid jpegs”. Basically a simplified, slightly comical way for puzzled crypto-outsiders (and even many insiders) to make sense of the unfolding NFT craze. When your Wechat (Chinese Whatsapp) contact list is suddenly full of pixelated punks, birds, and all kids of apes, then you realize: the NFT wave has hit China.
When I noticed some of my contacts changing their profile pictures to that of NFTs, I immediately realized how well especially PFP NFTs fit the Chinese/Asian culture. Contrary to most Westerners, Chinese do not usually use a picture of themselves as profile picture on social media. Rather they use photos of their pets, funny animal pictures, stars, or even completely random people. This can be very confusing sometimes, but it also means that Chinese will intuitively get the idea and value proposition of NFTs. The success of PFP NFTs over pure utility NFTs so far seems to confirm this.
What are Digital Collectibles (DC)
So much about the popularity of NFTs generally. But of course, it didn’t take long for the reality of crypto regulation in China to catch up with NFT speculation. The September 2021 ban on all crypto- related services also included NFTs. However, in this case the government went on to create a regulated alternative to NFTs, called “Digital Collectible” (DC). This is an interesting development, considering that in the case of cryptocurrencies the government never considered to create even a regulated version. Obviously the government recognizes the technology itself as useful and important.
DCs are largely identical to NFTs, with one crucial difference of course: they are not built on
permissionless blockchains. Instead, China has homegrown alternatives to public chains 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 like Ethereum. It is essentially a multichain ecosystem with a local version that makes sure all transactions are compliant with Chinese law. It also has a global version that it says has removed Chinese state actors and is fully transparent.
BSN is backed by China Mobile and other large tech companies such as Red Date Technology, China’s biggest 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. There is some activity with individuals such as local artists as well as institutions releasing DCs to be sold online. However, in many cases it is not possible to resell them easily so as to curb speculation.
Poly Art Museum’s bronze tiger head, source: https://blooloop.com/museum/news/china-museums-digital-collectibles-nft/
Future of NFTs in China – a tale of two markets?
From what I personally observe, the opinions among Chinese about DCs vs. NFTs are divided. Even the communities are very separated, those who trade NFTs usually don’t put their hands on DCs. Some people tell me NFTs are the only thing they recognize because they are freely tradeable and built on public blockchains. But there is a considerable group of mostly older, more traditional and more “corporate” Chinese entrepreneurs who embrace DCs. They view it as a serious alternative to unregulated NFTs and important building block of the future Chinese metaverse economy.
Those caught in between are the artists. From the few conversations I had, I got the impression that they are hugely interested in NFTs as a way to sell their art to an international audience. Also the idea of selling their art for global commodities, which ETH, BTC, etc. essentially are, seems very attractive to them. But most of them are uncertain about the potential legal issues and even more about the tech side of things. Thus, they mostly sell their art on domestic platforms for now.
By trying to regulate NFTs in this way, China is staying true to its long-established model of selective openness. Just like with the Internet itself, China is trying to allow adopt new technologies while preserving a tight grip on the economy. DCs are surely lacking what most international crypto users perceive as inherent advantages of NFTs, especially their free transactability. However, there is clearly a domestic ecosystem evolving which could form the basis of a future blockchain-based economy, albeit permissioned and regulated.
The Author: Maximillian Mai lives in China (Chengdu, Sichuan) since 2016 and works as a full-time consultant and
entrepreneur in the blockchain/crypto industry since 2018. Currently he is working as co-founder and
Chief Business Development Officer at BerlinDAO (www.berlindao.com). BerlinDAO is a crypto
marketing agency that is driven by the DAO spirit and applies cutting-edge marketing methods to
make a difference for its clients in the crypto space.
Published November 2022