NFT survival rules in the Chinese market: consumption attributes and circle culture

Author: Lawyer Liu Honglin

Is NFT consumption or finance?

Since the concept of NFT digital collections began to catch fire in 2021, players and investors around the world have poured into this field, and it has quickly become another hot spot after virtual currency. However, as the craze fades, especially in the Chinese market, the positioning of NFT digital collections has begun to become subtle.

As a legal practitioner who has long been concerned about the blockchain field, Lawyer Honglin has been thinking and paying attention to the feasible commercialization path of NFT digital collections. Recently, he happened to communicate with several entrepreneurs of NFT digital collections, and he felt more and more that: In the Chinese environment, the relationship between NFT's "consumption attributes" and "financial attributes" is the key to whether NFT can survive in the long run.

From a global perspective, NFT digital collections are no longer just a synonym for digital artworks, and they are going further and further on the road of financialization. For example, many overseas platforms not only regard NFT digital collections as unique digital assets, but also include them in the scope of financial investment: hype, speculation, and even financial derivatives based on NFT digital collections. These gameplays are endless. However, can such gameplay be realized in China? Obviously unlikely.

China's regulatory attitude towards virtual currencies has always been strict, especially in 2021, when the crackdown on virtual currency-related activities has intensified. At the same time, the country is also constantly strengthening the prevention and control of financial risks similar to Tokens. Therefore, those "financial gameplays" of overseas NFTs must be "castrated" when they arrive in China. I believe that if NFT digital collections want to survive in China for a long time, they must take a path of "consumption attributes greater than financial attributes".

One ​​of the charms of NFT digital collections is that they can be deeply integrated with various cultural industries. Digital art, sports entertainment, celebrity peripherals and other fields can bring fans and users a deeper interactive experience through NFT digital collections. For example, NFT digital collections like NBA Top Shot have attracted a large number of basketball fans by selling digital collection cards of NBA highlights. This model also has similar scenarios in China, such as artists issuing limited edition digital artworks, virtual idols' exclusive NFT digital collections and peripherals, etc.

Image source: NBA Top Shot official website

China is a huge cultural consumption market. If NFT digital collections can be combined with local culture and seize the trend of cultural consumption, it is entirely possible to open up a larger market in the future. For example, Peking Opera NFTs, digital versions of traditional handicrafts, and even digital props of domestic TV dramas and variety shows may become hot areas for consumer NFT digital collections in the future. This combination with culture can not only meet the emotional needs of users, but also enhance the scarcity value of NFT digital collections, thereby promoting the legal survival of NFT digital collections.

In addition to the cultural industry, NFT digital collections can also be combined with fields such as education, public welfare and social responsibility to form new application scenarios. More and more public welfare organizations are trying to raise funds by issuing NFT digital collections, using their uniqueness and scarcity to attract donors. For example, some environmental protection organizations use sales revenue for environmental protection projects by issuing limited edition digital artworks. For donors, this is not only a way to support public welfare, but also to obtain unique NFT digital collections as a souvenir. The combination of NFT digital collections and the field of education also has potential. For example, some online education platforms can provide users with exclusive learning materials, limited edition course content or certification of specific courses by issuing NFT digital collections. This approach can not only stimulate users' interest in learning, but also create a new digital education consumption model.

How to define consumption attributes?

When it comes to consumption attributes, many people may first think of the consumption behavior of physical goods, such as buying clothes, electronic products, or limited edition sneakers. In fact, in the field of NFT, this consumption attribute also exists. For example, the limited edition digital artworks or digital collection cards issued by many platforms, the essence of these NFT digital collections is no different from buying a pair of limited edition sneakers.

To give a simple example, a brand has issued a series of limited edition NFT sneakers. Users who own the NFT can not only display them in the virtual world, but also enjoy special discounts in the brand's offline physical stores with this NFT digital collection. For many users, this is a consumption behavior. They buy NFTs not to resell them for profit, but to enjoy these additional rights and interests. This model is likely to be promoted in China because it is more in line with the definition of consumer goods.

The uniqueness and uniqueness of NFT digital collections give it a scarcity attribute similar to that of physical collectibles in the digital field. Just as limited edition sneakers have set off a craze among young people, digital collectibles are also sought after in the online world. Especially in China's game industry and two-dimensional culture, the consumption of NFT digital collections is more obvious.

Financial attributes are not completely gone

Of course, the fact that consumption attributes are greater than financial attributes does not mean that NFT digital collections have no investment value at all. In fact, NFT digital collections are like limited edition sneakers. Although they are consumer goods, they will have a certain premium among specific user groups because of their scarcity.

True fans are willing to pay more for their favorite products, but at the same time, some speculators will make profits by buying, holding, and reselling. This phenomenon is common in the global sneaker and art markets, and it also happens in the NFT digital collection market. Decades ago, stamp collectors were keen on stamp collecting, and some precious stamps had high prices in the market because of their scarcity, which is not fundamentally different from today's NFT digital collection enthusiasts. At this time, NFT digital collections seem to be consumer goods, but because of their uniqueness and scarcity, they have "investment value" to a certain extent.

However, the financialization of NFT digital collections in China must be carefully controlled. China has strict supervision on the financialization of virtual currencies and related assets, so NFT digital collections cannot be hyped and speculated on a large scale here like overseas markets. In order to circumvent this, some platforms have begun to ensure the healthy development of the market by limiting the price fluctuation range of NFTs. For example, some platforms set an upper limit on the increase to avoid excessive price fluctuations caused by market speculation. This approach not only retains the investment attributes of NFT digital collections, but also limits the accumulation of financial risks.

NFT and circle culture

Although China has strict supervision on the financial attributes of NFT, the market still has huge potential to be tapped. NFT digital collections are combined with consumer goods, and through limited issuance, exclusive rights and interests, they are providing sustainable market space for more users. China's huge base of young Internet users and cultural consumption habits also provide possibilities for the future development of NFT projects.

As digital collectibles, NFTs often realize the amplification of their value through circle culture. The fan circle is a path for NFT digital collections to survive legally. Users in these circles often have a deep emotional resonance in a certain field based on common interests and hobbies. For example, fans of artworks, music albums or virtual idols may get a closer connection with their favorite things through NFT digital collections. This connection is not just a return on investment in terms of money, but also a resonance on the emotional and cultural levels.

The fan circle can be regarded as a market segment. Through precise target audiences, NFT digital collections can gain high recognition and acceptance in these fields. For example, after purchasing a limited edition NFT music album, users can get opportunities to interact with artists and exclusive concert tickets. Such projects not only meet the consumption attributes of NFT, but also create additional value and experience through the culture of user circles.

At the same time, this model makes NFT digital collections more reasonable when they are circulated. If a collector wants to resell NFT digital collections, he can get a reasonable premium through scarcity and demand in the user circle. This lays the foundation for the long-term development of NFT digital collections in China. The price of NFT digital collections will not get out of control due to excessive hype, but will fluctuate around real user needs and consumption attributes.

Although the NFT digital collection market has broad prospects, more user education and market maturity are needed to achieve long-term development. At present, many users' cognition of NFT digital collections still remains at the level of "hype" and "speculation", ignoring their real consumption attributes and application value. Platforms and industries need to carry out more educational activities to let users understand that NFT digital collections are not just a tool to make money, but can become a bridge connecting creators and consumers in the digital world.

By raising users' awareness of NFT digital collections and reducing hype in the market, a healthier ecosystem can be created for the NFT digital collection market. Users can not only obtain unique digital collectibles through NFT digital collections, but also trade and invest in a reasonable way, rather than blindly following trends and speculating.

At present, many platforms have been trying to achieve the legalization and standardization of NFT digital collections through technical means, especially some leading platforms are actively embracing the country's regulatory requirements to ensure the legality and compliance of NFT digital collections. The development of NFT digital collections in China is destined not to be as financialized and speculative as overseas markets. China's market and policies determine that the future of NFT digital collections here is more inclined to consumption and collection. Although the scarcity of NFT digital collections brings certain financial attributes, this is only an added value, not the core.

Mankiw Lawyer Summary

Is NFT digital collection a consumer product or an investment product? From the perspective of China's environment, the key to the long-term survival of NFT digital collections is that consumer attributes are greater than financial attributes. We cannot deny that NFT digital collections have certain investment value, but this value must be controlled and restricted in the Chinese market. Just like limited edition sneakers or precious stamps, NFT digital collections can be collectibles in the fan circle, and can also bring certain premium returns under certain conditions.

The future of NFT digital collections lies in how to provide users with more consumer experience within a legal framework, while bringing a healthy and sustainable ecosystem to the market. In this process, NFT digital collections will become a bridge connecting digital assets and physical consumption, providing new possibilities for the widespread application of blockchain technology in China.