Digital collections are on the rise

Wen 丨 Laika Think Tank, author 丨 Shiba Inu, editor 丨 G3007

Digital collections are still a long way from scale, but the discussion of this issue is more interesting.

In the past year, the digital collection market has changed rapidly.

Internationally, the transaction volume of NFTs has shown an explosive growth situation, such as Opensea, an overseas trading platform focusing on NFTs, which has exceeded the order of $1 billion as of August 2021, corresponding to less than $20 million for the whole year of 2020.

From the domestic situation, for the Internet industry in 2021, the big manufacturers still choose NFT as a layout direction in many future uncertainties.

With the popularity of the Internet and the increasing number of people's digital lives, how to confirm the property rights of the large number of digital assets generated by each person on the Internet? What about images, codes, domain names, trademarks, programs, and other intangible assets with invisible value? With the development of blockchain technology, it is technically ensured that property rights are marked by timestamps, and have the characteristics of immutable and traceable.

But this brings up new problems.

In terms of technical support, China's crypto collection platform is provided by the alliance chain to provide low-level technical support, not decentralized. This is contrary to the original design of the "decentralized" nature of blockchain.

In terms of platforms, many companies are pushing their own digital collection platforms, but compared with foreign situations, the transaction volume of a single platform is still very small and does not go out of the circle, resulting in a small transaction volume. At present, there is no head platform appearing.

In terms of transaction mode, limited by laws and regulations and trading media, the sale of digital collections is still dominated by the primary market, and collectors lack a secondary trading market for transfer and circulation.

01, 2021, the year of the vigorous embryonic digital collection market

Overall, domestic NFTs started late, mainly based on digital collection transactions in the primary market. Represented by Ali, Tencent, Baidu, etc., Ant Chain, Zhixin Chain and Super Chain are respectively laid out, and the representative platforms include Tencent Phantom Core, Ali Whale Detective (Ant Chain Fan Particle) and NFT China.

For example, in June 2021, Alipay released two "Dunhuang Feitian, Nine Color deer" payment code NFT skins in the upper limit of the "Ant Chain Fan Grain" Mini Program. In August 2021, Tencent launched the NFT APP magic core and launched the "NFT Artist Program" by the PCG Division, and will sell more NFT digital art products in the future.

Recently, there has been news that digital collections have been launched every day.

On January 6, music creator and rock musician Zhang Chu's undisclosed digital tape "Goat" was released in a limited edition at Tencent Music's "TME Digital Collection".

On January 5, 2022, the first online IP digital collection in China, "Dafeng Dajia Renren's Heavens and Ten Thousand Worlds", opened for reservations, limited to 2,000 copies, and was officially released on January 8. This is an encrypted digital product issued based on Tencent Cloud's "Zhixin Chain" technology agreement, and is the first phase of reading group's digital collection.

At the same time, on January 5, the official certification number of Station B "Bilibili Digital Collection" released a dynamic, announcing that its first digital art avatar "Pigeon" was officially open for registration, with a limited number of 2333 on the whole network. This means that Station B has officially entered the army of issuing digital collections.

On New Year's Day 2022, Xiaomi released a digital collection "Core Era" 3D model, Tencent launched the "2021 Care Canvas" digital collection at almost the same time, and OPPO also launched the Find N Yuan Cosmic Adventure Digital Collection Limited Gift Box.

As of January 4, 2022, MetaVision has a total of 14 digital collections for sale, including Jia Wei's "Flowers in the Wild Garden NO.1", Li Ye's "Matrix THE MATRIX", Wang Sibo's "Light Painting Mountains and Seas Classics of Divine Beasts" series, and Sun Luo's "Snowflake Workshop" series and other photos, original paintings, computer-generated digital images and other products.

In terms of business model, Meta Vision and upstream creators adopt a sharing cooperation model, sign a licensing agreement, and after reviewing, selecting and scheduling, the digital works will be sold online, and the sales revenue will be paid to the content creators in proportion to the agreed share. If it is company-owned content, there is no need to pay a share.

Although it started later than abroad, in the past year, the digital collection market has also shown a state of blooming under the entry of various companies. In addition to the big factories, the entertainment industries such as movies, e-sports, paintings, theaters, and museums have also widely launched digital collections.

02, still a fragmented island: non-"decentralized" development

Blockchain is essentially an open source distributed ledger, which is the core technology of Bitcoin and other virtual currencies, which can efficiently record the transactions of buyers and sellers, and ensure that these records are verifiable and permanently preserved. At the same time, the blockchain itself has the characteristics of decentralization, information transparency, inability to tamper with and security.

But in terms of specific applications, there are many different situations. A few days ago, we published an article titled "The Quest for Better Blockchains," and one of the core ideas is that it's not easy to build a greener, faster, and truly decentralized blockchain. Contrary to the original intentions of blockchain designers, blockchains and cryptocurrencies are in many cases extremely complex, consume huge energy, and are in fact centralized, contrary to common perception.

As far as the domestic digital collection market is concerned, it is still a "race to the ground" movement of each family. Especially at the technical level, the domestic encryption collection platforms are all supported by the alliance chain: for example, Ant Chain provides technical support for the digital collections of Alipay and Ali platforms; Tencent Zhixin Chain provides technical support for phantom nuclei; JD Zhizhen Chain provides technical support for Lingxian, jd Zhizhen Chain, Ant Chain under Ant, and Tencent Zhixin Chain all belong to licensed blockchain networks (alliance chains).

From a technical point of view, the biggest difference between the alliance chain and the public chain is that the alliance chain has an entry threshold, and not anyone who wants to participate can participate. The members of the Alliance are predetermined. So the consortium chain is basically centralized, or at least semi-centralized.

The previously mentioned Opensea supports crypto assets based on mainstream public chains. Opensea is a project deployed on Ethereum that requires users to prepare an Ethereum wallet in advance and prepare Ether as a fee. Opensea supports token payments including ETH, WHALE, RARI, WETH, USDC, DAI, etc.

However, the above tokens are not officially recognized trading mediums in China. In September 2021, ten departments, including the Chinese Bank and the Central Cyberspace Administration, jointly issued a notice on preventing the risk of virtual currency speculation, which clarified the essential attributes of virtual currency and related business activities: virtual currency does not have the same legal status as legal tender. That is to say, virtual currencies such as Bitcoin, Ether, and Tether have the main characteristics of being issued by non-monetary authorities, using cryptography and distributed accounts or similar technologies, and existing in digital form, and are not legally compensatory, and should not and cannot be used as currency in the market.

In summary, domestic digital collection transactions are different from overseas: first, more as the innovation or extension of existing products or services of the platform; second, mainly for the purpose of collection and self-viewing, there is a lack of a negotiable secondary market; third, the transaction currency is RMB, not virtual currency, so it is not interoperable with the overseas digital collection market.

03. The positive significance of digital collections

With the in-depth development of Internet technology, the efficiency improvement brought to various industries is undeniable. However, in the art collection market, because the products have the characteristics of non-standardization and scarcity, the transaction frequency is low compared with other daily products, and the degree of online is not high.

Generally speaking, for low-frequency transactions, the intermediary plays a greater role in matching buyers and sellers, so there are also higher transaction costs.

Judging from the previous development of e-commerce platforms in China, the rise of the e-commerce model has subversive changes to retail formats, especially to improve transaction efficiency and reduce transaction costs. In terms of specific price performance, it is the reduction of the price of goods - because the Internet platform directly connects buyers and sellers, the real-time and convenience of transactions make the profits of middlemen gradually tend to zero.

Will the stories that have taken place on other retail goods be repeated in the digital collection market, or the larger collectibles market?

It is undeniable that unlike traditional art collections, digital collections have their own peculiarities. Digital Collections/NFTs give digital files unique identities and metadata on the basis of blockchain that can distinguish them from each other. At the technical stage, each digital collection is stored on the blockchain, creating an immutable record with information about token creation, sale, association of digital collections to specific digital assets, and the scope of permission to own or use digital assets. Based on the characteristics of digital collections, digital collections can be used in art, games, fashion, supply chain, real estate, media, entertainment, sports, public welfare and other scenarios.

Judging from the sources of the current digital collection, there are digital art works jointly sold by young and middle-aged artists and platforms, and there are also derivatives of IP. Artistic value depends on the artist's ability to create digitally natively, and also on the degree of acceptance of digital collections by a new generation of consumers.

If in the future, the direct selling e-commerce platform becomes the main trading place for digital collections, then one possible situation is that the previous high intermediary fees for art consumption will disappear, the price of art will go down, and more people will enter the market of art consumer goods. An obvious fact is that the development of blockchain NFTs has helped many young people to express themselves artistically and let more people see their works, and this process itself is also a value discovery of the market for young artists, which should be supported.