Analysis of China’s NFTs

At present, NFTs in China have a complete industrial chain and formed a closed-loop ecological environment. Based on the composition of the industrial chain, from the bottom level to the top, the NFT industry’s ecology can be divided into basic infrastructure, application and trading market. Since 2021, about 30 million NFT transaction records have been made on Blockchain. This, together with 100 million NFT objects, 20 thousand NFT smart contracts, 2 million block chain accounts, 998 domestic NFT platform data, as well as related policies, news and investment and financing data, make up the ForeChain NFT Database. Following explosive growth in 2021, the NFT trend has weakened in 2022. From NFT circulation market data, transaction volume, transaction prices and the number of buyers and sellers have fallen sharply. In the first half of 2022, there were 5,282,069 transactions with a total turnover of US $10.094 billion.

Market supply and demand push NFT into a benign stageFrom the perspective of supply and demand, the contradiction between supply and demand was previously prominent. On the supply side, although there was a large NFT supply in the market, it was a manifestation of the 80/20 rule, since transaction volume was highly concentrated at a few well-known NFT creators. On the demand side, a bubble existed to a certain degree in the market, as speculators raised the overall market investment demand for NFTs. On the whole, the primary market lagged behind the secondary market, and the development of supply and demand was unbalanced.
Since the “crazy growth” development in 2021, the NFT market has entered a relatively stable development cycle at present. From the perspective of the NFT market’s participation structure, as the market gradually enters stability, the number of enterprises, professionals, institutional investors and new players have increased. In terms of the number of participants, the number of speculators have decreased and overall trading patterns have slowed down. High-quality NFTs have become the focus of attention of both supply and demand parties, and the overall market has begun to develop healthily.

The industrial application of NFTs continues to expand
NFT was first explored and applied in the field of digital art. After the outbreak period in the second half of 2021, digital art and collectibles remains the main application of NFTs. Relying on Blockchain decentralization, traceable and tamper-proof characteristics, NFTs indeed have unique advantages in digital content confirmation and circulation, and have realized the transformation from digital content to digital assets. Therefore, NFTs have begun to act as the equity certificate of digital assets on virtual platforms such as games and the metaverse. At the same time, the digital circulation model has improved the operation efficiency of green finance, logistics, copyright and other physical fields.

Consumer value: collection, function and investment
From the perspective of buyers, NFTs possess several consumer values. As a container of digital art collectibles, its non-homogeneous features give it collection value, allowing ordinary users to also participate in the activity of art collection; smart contracts support the writing in of various property rights transactions and benefit distribution mechanisms. NFTs can be used in commercial activities such as real estate transactions, copyright transactions, possessing much exploitable functionality. NFTs also have financial properties. NFT’s scarcity grants it value, where one can earn spreads through buying and selling them, write in liquidity mechanisms through fragmentation or mortgage methods. Needless to say, NFTs can be used to conduct various financial operations.
The multiple kinds of consumption value each NFT has gives them traffic, further bringing in new usage value and marketing significance. At present, all kinds of institutions have participated in NFT issuing. They have become high quality content producers, offering goods such as IP-owned subsidiary products, important marketing channels for brands and commercial institutions, college-managed degree and certificate circulation platforms, copyright circulation channels of digital assets exchange, financial products issued by decentralized financial institutions. Currently, although NFTs still have many unexplored values, they have long become a key part of the digital age through existing in the forms of products, channels and even trading modes.

The importance of NFT compliance is prominent
Compliance is an unavoidable hurdle for digital collectibles. Demonetization and definancialization will become the basic requirements for the sustainable development of the digital collectible industry. As the digital collectible market continues to thrive, the importance of compliance also becomes more obvious. Right now, many platforms are already facing compliance pressure. For example, since March 2022, Wechat has banned over ten digital collection platforms, and standardized public accounts and small programs that hype and organize secondary sales of digital collections.
At the same time, compliance has become an important trend in the digital collection industry. On July 25, according to the “Blockchain Information Service Management Regulations”, the Cyberspace Administration of China announced 348 filing numbers, including nearly 100 digital collection-related enterprises, and more than 150 digital collection-related services. This is the first time that such a large-scale filing through the Cyberspace Administration has happened, and is also an important breakthrough in the compliance process of the digital collectible industry.

Transaction realization: improve mobility and facilitate value circulation
From digital existences to digital assets, NFTs will also bring about a decentralized, convenient and diversified trading system, greatly improving the mobility of virtual resources, and releasing the potential economic value of the Internet era. The potential benefit of mobility is that resources can be allocated efficiently. Just like the “invisible hand” of the capital market, NFTs allow the ownership of digital content to change faster, travel wider, effectively allocating the assets they carry and truly expending the value of virtual assets.
NFT is of great significance in the era of metaverse and Web3.0. Whether in the field of art, games, reality, or the metaverse, NFTs can connect the virtual world with the physical through anchoring specific digital or physical assets, realizing the interconnection of heterogeneous spacial assets and values. On the virtual reality platform Decentraland, for example, land, infrastructure, goods and other existences on the platform all appear in the form of NFTs to determine their ownerships. This means the virtual world is no longer simply a game, but becoming an intangible world in parallel with the physical world where one can carry out processes like production and living, economic operation, and even establish a new political system and a space for philosophical thought.