Chinese tech giants have entered the NFT space by using their own licensed blockchain.
But in order to do so in a compliant manner, they must localize their processes and remove the core cryptographic functionality of NFTs.
Chinese tech giants are already making moves in the non-fungible token (NFT) space, but in a localized way that removes the native features of cryptocurrencies.
Tencent announced that it has partnered with the Dunhuang Research Institute to digitize the iconic murals of the Mogao Caves, a UNESCO World Heritage site in China’s Gansu province.
The project is Tencent’s first step into the NFT market, where it hopes to use blockchain technology for philanthropic purposes to preserve and promote cultural heritage.
Tencent aims to issue 9,999 NFTs on its licensed blockchain Zxinchain, each of which digitizes a unique painting from the Mogao Caves. Starting Wednesday, users on Tencent’s WeChat messaging app can win the chance to earn an NFT by taking a short quiz about the site and can display digital cards as social status in the WeChat ecosystem.
For each one issued, Tencent’s charity will make a donation to the Dunhuang Research Institute. The company told us in an exclusive interview that donations totaled about 4 million yuan, or more than $500,000.
Fino Feng, who leads Tencent’s Dunhuang project, said about 380,000 people had participated in the competition and that all NFTs had been issued.
“We want to use blockchain technology to break through silos and make more people aware of cultural heritage preservation.NFTs can be that digital carrier of our traditional culture and bridge it with the people,” Feng said.
Mogao Caves NFTs
Tencent isn’t the only tech company riding the recent NFT craze.
Alibaba’s payments arm AliPay also tested the waters in June, selling NFTs of original artwork created by the Dunhuang Academy of Fine Arts through an Anthem license on AliPay’s mobile app.
But unlike the usual NFT offerings on public blockchains, Tencent has adapted to the local Chinese regulatory environment and largely removed the core cryptocurrency functionality.
Issuing NFTs on public networks such as Ether involves the use of Ether for whoever mines the NFTs and whoever wants to buy and sell them. As access to fiat currency for crypto assets in and out of China has become increasingly restricted over the past few years, Dunhuang Research Institute believes that launching the project on a public network would not be regulatively feasible.
In addition, Qin Qing, product director of Tencent Blockchain, told us that issuance is currently only happening on the primary market and users will not be able to trade NFTs like they usually do with digital art on Opensea.
However, Qin said they are open to the idea of a future – when China has clearer regulations on NFTs – opening up the system to allow third-party partners to create a marketplace where users can exchange NFTs.
“Since Tencent issues in the primary market, we can’t launch a secondary market ourselves,” Qin said.” But even with a secondary market, it will only deal with fiat …… and we obviously won’t encourage speculation and speculative activity.”
Qin added that another important difference between Tencent’s NFT compared to the cryptocurrency’s native NFT is that every WeChat user who draws a Dunkin NFT must authenticate with their real name to receive the digital card.
“This is very different from NFTs on the public blockchain, which can remain anonymous,” Qin said.
Similarly, Alibaba prohibits transactions in NFTs sold or auctioned through its Antchain.
Alibaba’s user terms and services page currently shows that NFT owners on Antchain can only give NFTs to recipients who are 14 years old or older, have completed real name verification within Alibaba, and are friends with the donor on Alibaba after 180 days of ownership.
However, it appears that Alibaba initially did not strictly enforce the 180-day time limit, and users found ways to flip NFTs created on Alibaba’s “Xiangyou” app (a marketplace for used goods) by the Dunhuang Art Institute in June.
Idlefish initially offered up to $1.5 million for one of the NFTs, worth more than $200,000. But Xiangyou quickly shut down such ads, and a search for “NFT” on Xiangyou now yields no results.