Research report: Domestic companies’ attitudes towards encrypted digital currency and blockchain

At the beginning of 2021, the world's richest man Musk strongly supported Dogecoin and Bitcoin. Under the leadership of the leader, companies around the world have turned their attention to the encrypted digital currency and blockchain industry. After Tesla invested 1.5 billion US dollars in Bitcoin, foreign institutions have gradually begun to invest in digital currencies such as Bitcoin, and leading domestic companies are turning their attention to the Bitcoin market.

Bitcoin market cap growth

After the price of Bitcoin exceeded $53,000, the total market value of Bitcoin exceeded $1 trillion. The market value of Bitcoin is different from the traditional enterprise market value algorithm. For the stock market, it only needs to calculate the total number of issued shares and the current stock price.

Bitcoin is a type of encrypted digital currency. The total number of bitcoins refers to the number of bitcoins that have been mined, that is, the total number in circulation, and the number of bitcoins produced is not fixed.

Bitcoin has experienced three production cuts so far, with production halved from the initial 50 coins at a rate of about four years. The most recent production cut of Bitcoin occurred in May 2020, and the number of Bitcoins produced also dropped to 6.25 coins.

According to data from Feixiaohao, as of the time of writing, the total output of Bitcoin has reached 18,644,325. Calculated at the current price of Bitcoin of $53,750.60, the total market value of Bitcoin is just around $1 trillion. The historical highest price of Bitcoin is $58,334.98, which means that the highest supply market value of Bitcoin is around $1.12 trillion.

At present, according to the ranking of corporate market capitalization at the beginning of 2021, there are only five companies with a market value exceeding that of Bitcoin. They are Apple, Microsoft, Amazon, Google and Saudi Aramco. The market value of Bitcoin exceeds that of Alibaba and Tencent in China, and is even more than $30 million more than Tesla.

Bitcoin's high market value is undoubtedly due to the recent investment in Bitcoin by a large number of institutions, especially the Grayscale Fund.

Due to the influence of the US SEC regulatory agency, users of the Grayscale Fund can trade fund shares through deposits or fiat currency, but redemption is not supported. The purchased fund shares have a fixed lock-up period and can only be traded in the secondary market. The purchased fund shares also require payment of an annual fund management fee.

Even in this context, the total number of bitcoins held by Grayscale has reached 655,400, exceeding 3.5% of the total circulation of Bitcoin, and the total holdings of Grayscale funds have reached 41.8 billion US dollars.

Meitu enters Bitcoin market with a strong momentum and becomes the center of public opinion

Among domestic companies, Meitu's purchase of encrypted digital currency at a cost of US$250 million has completely opened the door for domestic companies to invest in encrypted digital currency, making Meitu the first listed company after Tesla to publicly declare its investment in cryptocurrency.

On March 7, 2021, Meitu Inc. issued a voluntary announcement stating that Meituan Group purchased 15,000 units of Ethereum and 379.1214267 units of Bitcoin in open market transactions on March 5. The value of Ethereum was approximately US$22.1 million and the value of Bitcoin was approximately US$17.9 million. The total investment was US$40 million, equivalent to US$250 million in RMB.

Meitu officially stated that the purchase of Bitcoin and Ethereum was carried out in accordance with a cryptocurrency investment plan approved by the group's directors. The upper limit of this plan is no more than US$100 million in cryptocurrency, and the funds will come from the company's existing cash reserves. According to this statement, Meituan is very likely to purchase cryptocurrency again.

It is worth mentioning that Meitu's 2020 interim report pointed out that the adjusted net profit from continuing operations attributable to the company's owners in the first half of 2020 was RMB 24.9 million. This shows that Meitu's investment in the encryption field is 1.6 times the net profit in the first half of last year. Why use such a huge amount of funds to buy cryptocurrency?

Cai Wensheng, the founder of Meitu, said that Meitu continues to deploy blockchain and this time purchased Ethereum and Bitcoin as value reserves for the long-term development of blockchain strategy. Meitu is the first Hong Kong listed company to purchase BTC digital currency, and is also the first listed company in the world to use ETH as a currency value reserve.

Meitu Group stated in the announcement: The board of directors believes that blockchain technology has the potential to disrupt the existing financial and technology industries, similar to how mobile Internet has disrupted PC Internet and many other offline industries. The blockchain industry is still in its early stages, similar to the mobile Internet industry around 2005.

In this context, cryptocurrencies have sufficient room for appreciation, and by allocating part of its cash reserves to cryptocurrencies, it can be used to diversify the risk of holding cash in fund management. More importantly, this can show investors and stakeholders the Group's ambition and determination to embrace technological innovation, thus preparing to enter the blockchain industry.

Although blockchain has a positive long-term outlook, overall, the price of cryptocurrencies will still fluctuate in the short term. Therefore, the Meitu board of directors has decided to invest in Ethereum and Bitcoin, the two largest cryptocurrencies by market value. The board believes that this investment can maximize long-term shareholder value.

In addition, Meituan officials also said that the board of directors has seen growing momentum in the process of building consensus. For example, some traditionally conservative institutions (such as insurance companies) have begun to invest in cryptocurrencies; traditional asset management companies have also launched cryptocurrency funds for subscription; more and more listed companies are buying cryptocurrencies as part of their fund management and considering accepting cryptocurrencies as a payment method for their goods and services.

On the other hand, the convenience of accessing cryptocurrencies has been increasing, as evidenced by the fact that well-known banks also provide cryptocurrency trading and custody services. Finally, some regulators have also begun to license cryptocurrency trading platforms, which has increased investors' confidence in trading cryptocurrencies.

Meituan is the first company to publicly invest in encrypted digital currency. While most other domestic companies are not friendly to Bitcoin, they are very supportive of blockchain technology.

Alibaba's stance on Bitcoin and blockchain

Jack Ma, the founder of Alibaba, a leading domestic company, has repeatedly expressed his attitude towards Bitcoin!

In 2017, Jack Ma talked about Bitcoin at an event and said: "I am not very interested in Bitcoin. What I want to know is what Bitcoin can bring to society? But then again, I think blockchain technology is very powerful, so in Alibaba, we are trying to ensure that we will advance the world into a cashless society.

But Bitcoin, we look at it very carefully. I don’t know much about Bitcoin, but I am always curious. You are Bitcoin enthusiasts. I don’t think you can’t live without Bitcoin.”

Although Jack Ma publicly said that we should be careful with Bitcoin, his words show his affirmation of blockchain technology. In addition, Alibaba Group has already proved its approval of blockchain through its actions.

On November 8, 2017, Alibaba Group, Ant Financial Group and Xiongan signed a strategic cooperation agreement, and Alibaba and Ant Financial undertook the construction of the Digital Xiongan Blockchain Implementation Platform.

Through cooperation in blockchain and financial cloud, credit, biometrics, financial intelligence, risk control and security, Xiongan will be built into a "city of credit for collaborative governance, a green city for inclusive people's livelihood, and a city of financial technology innovation."

In May 2018, Jack Ma talked about Bitcoin and blockchain again. He said: "Blockchain is not a bubble, but Bitcoin is a bubble." As one of the founders of the e-commerce giant, Jack Ma is optimistic about blockchain technology in order to better solve the security problems of network technology.

On July 13, 2020, Alibaba released its 2020 fiscal year charity "financial report". Data showed that in the past fiscal year 2020, the Alibaba economy's charity platform generated more than 10 billion charity donations and raised more than 2.2 billion yuan for charity organizations.

Currently, blockchain has been widely used in multiple charity scenarios of the Alibaba economy. Of the total donation amount in this fiscal year, more than 60% of charitable donations have been recorded on the chain. A new global charity model supported by digital technology is taking shape.

At present, Alibaba Group is the company with the most blockchain technology in the world, and has therefore enhanced my country's voice in the global blockchain. Now, it seems that Jack Ma is relatively familiar with Bitcoin, but he has taken the position of Bitcoin bubble theory.

Tencent’s attitude towards Bitcoin and blockchain

Apart from Alibaba, another representative company in China is Tencent. Although Tencent and Alibaba started out as e-commerce and social networking respectively, their pace has been surprisingly similar over the years, and their attitudes towards Bitcoin and blockchain are also roughly the same.

Ma Huateng: Anyone can issue digital currency, so where is the security and supervision? Regarding digital currency ICO, I think there are still many risks. It’s not that the technology is immature. If everyone can use blockchain technology to issue digital currency at will, it will cause many regulatory issues.

Although digital currency is very popular now, we are not involved in it. We are not considering issuing coins because I think it is a very risky thing.

But in the field of blockchain, Tencent's pace is no less than Alibaba's. Tencent has registered a series of new blockchain patents in many different fields, indicating that the company is on the verge of launching new blockchain-related businesses.

These patents mainly include blockchain-based advertising and advertising monitoring services, fund management, "to C" applications, blockchain hardware devices, and storage solutions built using blockchain networks.

In addition, Tencent has specially created the "Tencent Blockchain" website TrustSQL to build the cornerstone of trust in the digital economy era. Tencent Blockchain supports EVM-compatible solidity smart contracts, and can customize access policies to achieve permission control; TrustSQL has massive data storage, supports more than 1 billion records, and supports unlimited capacity block file storage.

JD.com’s attitude towards blockchain

As a strategic partner of Tencent, JD.com, the second largest online retailer in China, has been increasing its investment in scientific research every quarter. In the first quarter of 2020, it has invested more than RMB 8.6 billion in total, providing great support for JD.com's future intelligent and digital operations.

As early as 2018, JD.com Chairman Liu Qiangdong decided to vigorously apply blockchain and other technologies on the JD.com platform. He believed that if JD.com wanted to position itself as an infrastructure service provider for the retail industry, it must rely on various "emerging technologies" such as artificial intelligence, big data, and blockchain to rebuild the entire retail industry.

Based on the characteristics of blockchain that cannot be tampered with and can be traced, JD.com has been actively promoting blockchain technology in terms of product traceability. On July 26, 2018, JD.com Global Shopping released 35 quality improvement measures for quality control and after-sales service, including the establishment of the "JD.com Blockchain Anti-Counterfeiting Traceability Platform".

In August of the same year, JD.com launched its blockchain business Zhizhen Chain. For an e-commerce platform, it is crucial to ensure high-quality supply, so JD.com's product has two applications in this regard.

In addition, JD.com has also launched a BaaS (Blockchain as a Service Platform), and together with the platform is a blockchain-based bill app that can track Pacific Insurance Company's invoices in digital form.

Currently, JD.com has partnered with blockchain privacy platform ARPA to protect the financial data of major customers.

JD Digits, a subsidiary of JD.com, was founded to help other companies modernize with cutting-edge technologies such as AI and blockchain.

Under the partnership, ARPA will leverage sMPC technology “at scale” to provide a range of privacy-preserving features to financial firms working with JD Digits.

Baidu's attitude towards blockchain

Baidu, as the largest browser operator in China, has always been in the leading position in the world in artificial intelligence and big data. In 2015, Baidu Finance established a blockchain technology team, and in 2016 invested in the American blockchain technology company Circle. Last year, Baidu's blockchain technology began to be widely implemented, and Baidu Finance became the main user.

Baidu Chairman Robin Li talked about blockchain technology at the Great Hall of the People and said: "Blockchain technology is very revolutionary, but it is still in a very early stage, but it may be a major technological innovation that changes the Internet.

Many things on the traditional Internet are virtual, and adding a copy does not add any additional costs. However, after the advent of blockchain, virtual items have become truly unique, which makes the Internet very different from the previous Internet."

Like Tencent, Baidu also has its own blockchain open platform, called XuperChain. From the official description of XuperChain, we can see that Baidu XuperChain is open source, self-developed and controllable, and can flexibly and efficiently support various business application scenarios, providing a rapid deployment and operation environment for blockchain.

At present, the number of users of Baidu Superchain has exceeded 3,564,310, and the blockchain height has reached 81.77 million. It can be seen that Baidu has taken a longer-term approach to blockchain public chain technology than other companies. It can be seen that Baidu currently has no plans to invest in Bitcoin, Ethereum, etc., and the core of its research is on its own public chain technology.

The attitudes of other bigwigs in China

Ding Lei, founder of NetEase, said: "I have never owned a single bitcoin myself, and blockchain is suspected of being over-hyped!" Ding Lei believes that blockchain itself is a technology. There is no problem with this technology itself, and it can solve many problems. The application scenarios are very rich and wide, but now blockchain is over-hyped!

360 founder Zhou Hongyi said: "Blockchains attacked by hackers prove that they also need security protection!" Zhou Hongyi once publicly stated to reporters that many exchanges and wallets have emerged, security incidents have occurred, and virtual assets have been lost, which just shows that blockchain technology needs security protection.

From these words, we can see that Zhou Hongyi has some concerns about the security issues of blockchain exchanges. As far as the current top exchanges are concerned, except for the China Currency Exchange, which has not had any security incidents in seven years, other exchanges are constantly troubled by security issues.

Innovation Works CEO Kai-Fu Lee: I have quit all blockchain 3 o'clock groups. At a small media event held by the 10th GMIC Great Wall Conference in Beijing, when someone mentioned whether artificial intelligence and blockchain can be combined, Innovation Works founder Kai-Fu Lee grabbed the microphone and said: "I have quit all blockchain 3 o'clock groups."

Zhu Xiaohu, managing director of GSR Ventures: “The blockchain bubble will definitely burst this year. I have not invested in any blockchain projects yet, and I have not invested in any mining companies.”

Tang Yan, founder of Momo: "Don't come to me for blockchain or coin! Our business is healthy so far, and we have no motivation to do these things."

Judging from the current attitudes of domestic bigwigs towards encrypted digital currencies and blockchain, from group buying to e-commerce, to O2O and new retail, they are all trying to enter the blockchain industry. However, there are different attitudes towards encrypted digital currencies such as Bitcoin. Except for Meituan, there is currently no news of other companies purchasing encrypted digital currencies.