Tencent tears off the "shame veil" of China's NFT

Author: Zhou Zhou, Huxiu Technology Group

Tencent has torn apart the "veil" of China's NFT industry.

On July 20, 2022, a piece of news shook the blockchain industry: Tencent would shut down Huanhe, which is one of the largest NFT platforms in the country. Subsequently (on July 21), Huanhe told a reporter from the Huaxia Times that it had not received any notice and did not deny whether Huanhe would be shut down.

But these seem to be of little importance now. People suddenly realized that even the largest NFT platform in the country could not guarantee that the NFTs purchased by users would not suddenly disappear. Those who bought domestic digital collectibles suddenly found that the NFTs they purchased never truly belonged to them.

The Chinese NFT industry began in June 2021, when Ant Group sounded the first horn, and Tencent, ByteDance, Baidu, JD.com, Bilibili, Xiaohongshu… almost all major internet companies rushed into the NFT industry. Among them, the largest in scale are Ant Group's NFT platform Whale Exploration and Tencent's NFT platform Huanhe. At the peak of NFT popularity, millions of users flocked to these two major NFT platforms every day.

As of now, there are more than 600 NFT platforms in the country. However, the industry's fervor cannot mask the awkwardness of domestic NFT platforms; they operate under the banner of NFTs, but what they actually do is unrelated to NFTs. The news of Tencent's plan to shut down Huanhe once again exposed the plight of this industry to the public.

Whether Tencent will shut down Huanhe is not important. What matters is that Tencent can arbitrarily choose to shut down Huanhe, while users cannot choose to own their NFTs.

And the ownership of data is where the true value of NFTs lies.

NFTs (Non-Fungible Tokens) are assets that can circulate online, characterized by the fact that each NFT is unique and can only have one owner. Based on these characteristics, NFTs can create an internet world where everyone has data rights, a more real and immersive internet world. Specifically, when you are in the real world, your computer, your car, your house, your paintings… every piece of labor from the creator is rewarded, while the paintings, music, videos, and virtual cars created in the online world also belong to the creators.

One of the problems that NFTs solve is to ensure that every internet creator (workers laboring online) can earn rewards just like every worker in the real world. What NFTs aim to achieve is to allow every creator to have the right to their own creation data, which they can own independently or resell to others.

Foreign NFT platforms are moving in this direction, whether it is sports shoe manufacturers like Nike, Adidas, and Puma; mainstream media like The Wall Street Journal and The New York Times; or car companies like BMW, Ferrari, and Rolls-Royce, all of which are choosing to explore the NFT direction. Without exception, they upload every NFT they create to a public blockchain to ensure that each NFT is not controlled by a giant. Decentralization guarantees the uniqueness, scarcity, and security of NFTs.

However, Tencent's Huanhe and more than 600 other NFT platforms in the country are simply selling images.

The digital collectibles released by Huanhe are a form of non-NFT data, with the data still owned by centralized giants like Tencent. In simple terms, Huanhe is a platform for selling images. Each image costs between 10 to 100 yuan, and the same image can be sold ten thousand times. These images, like all images online, have no intrinsic value.

Huanhe uploads these images to Tencent's blockchain, and Tencent can still arbitrarily change or remove this blockchain. This makes the act of putting data on the blockchain seem optional.

In fact, once users own NFT-form data, they can own it for life; it is as unique as all their offline assets. It is like a Picasso painting, like Jay Chou's first limited edition music album, like a notebook gifted by a friend… each one is unique and valuable. The difference is that NFTs only exist online.

Why do people buy these images, music, and videos? Collecting is a behavior rooted in human nature. For a rare and precious item, people cannot help but collect it. The birth of the internet has led to a large number of creative acts occurring online, and the internet allows every creation to be infinitely forwarded, creating an illusion: people seem to have no interest in collecting online items.

The characteristics of NFTs give people hope to realize their desire and need to collect digital artworks, which will greatly stimulate the creative passion of internet creators.

The future Van Gogh may not paint on canvas but create online; the future Michelangelo may no longer sculpt with clay and stone but create 3D works online; and the great musicians and writers of this era, while their works are freely spread across the internet, will not have to worry about not receiving payment for their creations. As long as they are excellent enough, fans will purchase the unique NFT versions of their music or books, which will have significant collectible value.

People collect because of the scarcity and uniqueness of collectible items. However, the NFTs launched by domestic platforms, due to being controlled by centralized platforms, can be easily copied and taken away, which drives the collectible value close to zero.

This is also the reason why many domestic NFT entrepreneurs are confused; they are not creating real NFTs but are taking advantage of users' lack of understanding and speculative mindset. Some NFT platforms even release NFTs that are not on-chain but simply display images on a webpage for people to purchase. This is undoubtedly a deception.

If the direction is wrong, no matter how far you run, you will not reach your destination. Currently, China's NFT industry is heading in a direction that deviates from its destination. These bubble-like innovations seem to be of no benefit to building a digital society or releasing data value.

Data, as the fifth factor of production, has become an indispensable part of today's productivity. In the history of human economic and social development, production and labor are the most fundamental factors of production. As time progresses, capital and technology have become new factors of production, both of which have had a revolutionary impact on productivity. NFTs, as a form of data that has rights and value, are gaining increasing attention and layout from various industries. They use technology to establish data rights, becoming a key factor in releasing data value.

Currently, there are two types of data: NFT-form data and non-NFT-form data. Do not mislabel the latter with the name of the former.