This report is the second in the series of NFT special reports. In addition to combing the recent trends and layout status of NFT ecological development outside China, it will also focus on the following issues:
China’s policy trend: the state’s regulatory policy on virtual currency has always been strict. A large number of policies have been launched to regulate the prevention of virtual currency transaction risks, and from the recent policy dynamics, the regulation is still tightened. Although the state has clear provisions on the risk prevention of virtual currency, the regulatory system for digital collections at the policy level is still not perfect. Under the current incomplete regulatory system, China’s NFT trading platform, NFT project creators and investors are in the stage of careful exploration. The recent policy changes led to the March 2022 Tencent WeChat and ant group tightening rules for digital collections platform, and the official account and small program of some digital collections.
Differentiation of NFT development paths at home and abroad: 1) different underlying technology architectures. Most overseas NFT platforms are built on decentralized public chains, while China’s mainstream NFT platforms basically rely on alliance chain operation, which is not completely decentralized. We believe that at this stage, China’s NFT is mainly developed based on the alliance chain, which is a relatively better implementation in line with China’s compliance environment;
2) there are great differences in the positioning and business model between NFT and digital collections. It is reflected in the value orientation, issuance mode, pricing mode and transaction mode of NFT. The relatively open creator environment overseas and the fully liberalized secondary market make the supply of NFT products very rich and in the buyer’s market. However, China’s digital collection market is in short supply; 3) Overseas NFT development path is more innovative and diversified. The endowment of overseas public chain NFT is different from that of China’s Alliance chain digital collection, so their development paths are different. The former is more dynamic and diversified in model innovation, and the latter is playing an active role in copyright protection and traditional culture publicity.
Long term and short term prospects of NFT industry: 1) in the short term, the development of NFT at home and abroad is at an early stage, and a series of problems are faced at the technical and policy levels, such as serious homogenization of NFT and imperfect supporting policies. In the short term, we expect that the overall NFT market will cool down slightly in 2022. It is suggested to focus on institutions or platforms with outstanding advantages in a high-quality track, or platforms with strong comprehensive strength; 2) In the long run, blockchain and NFT should really play an innovative role in the whole industry, relying on the progress of relevant technologies and the follow-up of legal compliance. In the future, we can focus on the following changes: first, at the technical level, the technical reserve and talent reserve of blockchain are still insufficient; Second, at the policy level, compliance supervision needs to be improved, and the refinement of policies is a long-term process; Third, track development is diversified, enabling the real economy, which is expected to open up market space.
Investment suggestion: China’s Internet giants, listed companies and small and medium-sized enterprises enter the digital collection track based on different endowments such as traffic platform, blockchain technology, content ecology, operation ability and cooperation with cultural exchange. In the short term, we believe that the time has not come for the opening of the secondary market of China’s digital collections. Only when the relevant technologies are mature and the supporting policies are improved, the distribution channels, cross chain transactions and secondary market of digital collections are expected to be gradually opened. Under the trend of tightening policy supervision, it is suggested to pay attention to the platform of high-quality track with exclusive advantages, such as deep ploughing a certain subdivision field such as games, social networking, film and television, music and so on, Or a platform with strong comprehensive strength, which has one or two advantages in terms of capital, channel, content IP, etc. It is recommended to pay attention to:
1) major Internet companies with strong comprehensive strength: Tencent holdings, Alibaba, Netease and Baidu;
2) content companies with IP reserves that are expected to break through in a high-quality subdivision track: Mango Excellent Media Co.Ltd(300413) (IP, film and television integration), Visual China Group Co.Ltd(000681) (picture), reading group (online copyright), Ireader Technology Co.Ltd(603533) (online copyright), Zhejiang Huace Film And Tv Co.Ltd(300133) (IP, video), Shanghai Yaoji Technology Co.Ltd(002605) (IP), Zhejiang Jinke Tom Culture Industry Co.Ltd(300459) (IP), Tencent music (audio);
3) others: Bluefocus Intelligent Communications Group Co.Ltd(300058) (operation capacity), Three’S Company Media Group Co.Ltd(605168) (cooperation with the cultural exchange), Zhewen Interactive Group Co.Ltd(600986) (cooperation with the cultural exchange), etc.
Risk tips: uncertainties in policy supervision, lower than expected blockchain technology iterations, speculative digital collections and other risks.
