Alibaba and Tencent have successively tried their hand in the NFT market. Is it easy for large companies to confirm ownership of NFT artworks but difficult to change hands?

NFT (Non-Fungible Token) is not only popular in the native blockchain community, but domestic Internet giants are also joining this trend.

After Alibaba launched the Alipay payment code skin NFT in June, Tencent also accelerated its layout in this market in August and launched the "Phantom Core" NFT trading platform.

The NFTs launched by Alibaba and Tencent are created based on their Ant Chain and Zhixin Chain respectively. Both are currency-free blockchains that meet regulatory requirements, retaining the blockchain's characteristics of being tamper-proof and traceable, and can ensure the authenticity and ownership of encrypted digital collections.

Compared with the blockchain native field that names NFT as "non-fungible tokens", major companies describe it as "non-fungible proof of rights and interests", intentionally avoiding the word "currency" in the name, showing the two companies' cautious attitude towards regulation.

From the effect point of view, the NFT launched by Alibaba and Tencent has been welcomed by the market. However, the collections purchased by users are quite restricted in the circulation link. At present, "Phantom Core" does not provide an entry for NFT transfer or resale. The Alipay NFT applet states in the terms that users can transfer it to friends after holding it for at least 180 days. This is the biggest difference from the native blockchain output NFT.

In the field of native blockchain, NFT trading markets such as OpenSea have formed a closed loop from free creation, issuance, listing and trading to subsequent circulation. Industry insiders analyzed that the reason why domestic large companies set limits on the circulation of NFTs is mainly to avoid excessive speculation and avoid regulatory risks. In this case, there are also market voices that believe that the difficulty of circulation of collectibles does not essentially solve the pain points in the collection field.

Alibaba and Tencent have successively tested the NFT market

On August 20, Tencent's NFT trading app "Huanhe" launched the second phase of digital art sales. The collection for sale was a painting NFT called "'Kaleidoscope' Digital Ethnic Atlas". The whole set of works is based on the 56 ethnic groups in China. Each ethnic atlas is limited to 54 pieces, and the price is 118 yuan. Within 1 minute, 3,024 digital collections were sold out.

Fengchao Finance found that all users who participated in the rush purchase were required to bind their mobile phone numbers in advance and complete real-name authentication, which achieved the full unification of people, mobile phone numbers, and identity information. The platform can even automatically check whether the registered mobile phone number is the real name of the user. After registration, the "Phantom Core" App will automatically generate a blockchain address starting with ZX. After the user completes the rush purchase, the purchased NFT will be displayed in the "Exhibition Hall" of the platform, and users can click on the collection at any time to view it.

Huanhe App "Kaleidoscope" NFT trading page

The blockchain address starting with ZX corresponds to the blockchain network behind the "Huanhe" App - Zhixin Chain. Public information shows that Zhixin Chain is a trusted evidence storage blockchain platform jointly built by Tencent, China Network Security, and Fengtiao Lishun. With the characteristics of blockchain technology such as immutability and traceability, the application scenarios of Zhixin Chain technology cover copyright protection, judicial evidence chain, data traceability, etc. This chain belongs to the non-coin blockchain advocated in China.

Earlier on August 3, "Huanhe" and "13 Invitations" launched the first NFT sale. The audio "13 Invitations" digital NFT, priced at 18 yuan and limited to 300 pieces, was sold out almost instantly, and the collections were saved in the blockchain address of each buyer.

“Phantom Core” is the first attempt of Chinese Internet giant Tencent in the field of NFT. In mid-August, Tencent Music followed suit and launched the first “TME Digital Collection”, such as the 20th anniversary commemorative vinyl NFT of Hu Yanbin’s “Monk” released on the QQ Music platform.

Tencent is not the first domestic Internet giant to try NFT. In June this year, Alibaba's Alipay released four "NFT payment code skins" in limited quantities, including Dunhuang Feitian and Jiuselu, with an official price of 10 Alipay points + 9.9 yuan, which were also sold out as soon as they were launched.

The NFTs released by Alibaba are based on its Ant Chain technology. During the European Cup in July this year, Ant Chain worked with UEFA to award blockchain trophies to three stars, Cristiano Ronaldo, Schick and Benzema, and distributed the same digital trophy for the "Scoring King" to 1,600 real-name users.

The moves of the two major companies to deploy NFT were captured and amplified by the outside world. NFT, a concept born in the native blockchain circle, has accelerated its popularity among the public due to the support of major companies.

Uniqueness, indivisibility and non-tamperability are the biggest features of NFT. When promoting, major companies have consistently described NFT as "non-homogeneous proof of rights", equivalent to "digital certificate". In the field of native blockchain, NFT is better known as "non-homogeneous token". Although different from crypto assets such as Bitcoin, it is still a token issued based on blockchain and can be classified as a practical token.

Big companies have separated NFT from "currency", showing more and more sensitivity to regulation. After all, domestic blockchain development advocates "no currency", and the issuance and sale of NFT seems to be getting closer and closer to the barriers erected by regulation.

Free trade is restricted, and NFTs from large companies are difficult to transfer

Objectively speaking, there is a real market demand for digital collectibles issued based on blockchain. From ancient times to the present, the collectibles market has always existed as a niche market, and many people have a hobby of collecting artworks, antique paintings and calligraphy, and music records. However, this market is also mixed, with fakes rampant, which seriously damages the rights and interests of creators and buyers; circulation is not smooth, and the collection trading market channel is single.

When blockchain technology emerged, NFT found its place in the collectibles market. On the blockchain, every transaction can be verified, and all types of cultural and creative works can be stored on the chain, including pictures, video animations, etc. In the native blockchain circle, NFT has become a hot market, and a large number of original NFTs are freely created and traded on platforms such as OpenSea.

OpenSea NFT Trading Page

For Tencent and Alibaba, which have long been developing blockchain technology and own various blockchain intellectual property rights, the art collection market happens to be a highly feasible landing scenario. The "Phantom Core" trading platform emphasizes: After buying NFT, you don't need to worry about storage, circulation, loss, theft, transportation and other issues. You can quickly and easily purchase various digital collections, appreciate and manage these items that truly belong to you, and enjoy your digital rights.

At the current stage, Tencent and Alibaba mainly sell NFTs by collaborating with artists and well-known IPs, which can ensure authenticity and confirm ownership, and largely solve the pain points of rampant piracy in the traditional collection market. However, whether compared to the traditional collection market or the native blockchain circle, the liquidity of the encrypted digital collection NFTs sold by these large companies is greatly reduced.

Although “Huanhe” is called an NFT trading app, the trading attribute is only reflected in “users purchase from the platform”, and there is no trading channel between users. After the collector buys the NFT, he can see the HASH (hash value) of the corresponding work of the NFT on the Zhixin Chain, but if the NFT owner wants to transfer or sell the collection, there is no channel to operate it by himself. Some users said on the social platform that the purchased collections cannot be circulated, and their interest in collecting has also decreased a lot.

Alibaba’s NFT products are set up on Alipay and have an online auction venue, but there are also restrictions on the circulation of NFTs.

A few days ago, Alibaba's auction platform launched the NFT auction market. It should be noted that this is not a C2C market. Ordinary users cannot initiate auctions, and bidders participating in the auction must pay a deposit of 500 yuan to participate in the auction, which has virtually raised the threshold for NFT circulation. According to its latest terms, after users hold NFT digital works for at least 180 days, they can transfer NFTs to Alipay real-name authenticated friends if the relevant rules allow. According to previous rules, NFT works can only be used for specific page display and cannot be traded or transferred.

Logically speaking, whether it is Tencent's NFT or Alibaba's NFT, users are purchasing from the platform in a one-way manner; although the collections, artworks, and original content are on the chain and the ownership is confirmed, these products, especially the collections and artworks, have single distribution channels, opaque markets, and insufficient price discovery. These problems have not been fundamentally solved due to the emergence of blockchain. Compared with the native chain circle, the advantage of large-scale NFT series is that they can be purchased directly with legal currency, eliminating the complicated process of exchanging encrypted assets.

Compared with the NFT market in the native blockchain circle, the NFT market built by Tencent and Alibaba has not yet formed a closed loop of market logic. It is mostly issued by a single centralized entity and remains at the level of content rights confirmation. Looking at the markets such as OpenSea of ​​the native blockchain, the NFT sector has formed a full closed loop of free creation, issuance, listing and trading to subsequent circulation. Anyone can freely create and transfer the NFTs they hold through the encrypted asset wallet.

In the opinion of industry insiders, the two major companies impose restrictions on the circulation of NFTs mainly to avoid regulatory risks, and these NFTs are built on private chains or alliance chains, which are different from public chain NFTs.

Pan Helin, executive dean and professor of the Institute of Digital Economy at Central South University of Finance and Economics, believes that domestic companies are moving forward in their NFT deployment in a trial-and-error manner. On the one hand, they need to test the market reaction and pay attention to the preferences of the domestic market; on the other hand, they need to pay attention to compliance risks.

As experts have said, it is difficult to regulate NFTs. After all, not all digital products can be circulated without obstacles. Under the restriction of currency, how to establish the necessary regulatory mechanism and enrich the development norms is the test and difficulty facing the current domestic NFT market.