Huanhe’s Retreat & the Digital Collectible Landscape in China
Recently, Chinese Internet Giant Tencent Holdings announced that their NFT Platform Huanhe will no longer release new NFTs to the public, as public scrutiny increases in the country. Although new collections will not be issued, users who have previously bought digital artwork are able to hold, display or request a refund.
Huanhe is Tencent’s official Digital Collection platform that allows users to buy digital artwork and create their own digital collections. It was established last August and become one of the hottest digital collection platforms in China, with collections selling out in seconds.
Crypto trading is banned in mainland China, and digital collections ownerships riding on a fine line. Over the recent years, as state media repeatedly highlights the issues around NFT speculation, tech companies such as Tencent and Ant Group signed a pact in June to halt the secondary trading of collectibles as well as ‘self-regulate’ their own activities. We can only assume that Huanhe’s halt is a result of this pact.
According to unofficial statistics from Lianxin (链新), sales on Huanhe have exceeded 80 million yuan (roughly $11.6m USD) since its establishment in August 2021, with the monthly sales in April 2022 to be nearly 20 million yuan (roughly $2.9m USD) alone.
Local crypto media has been critical of how the current digital collections market in China simply cannot be supported by so many platforms, and the potential for a huge bubble burst brought about by false prosperity. This goes to show that despite being backed by top endorsements & high-quality IP projects, the local market cannot survive on platforms where collections cannot be circulated.
Huanhe’s exit highlights a key topic within the industry — What’s the use of holding digital collections? Keep in mind that once a user buys an NFT on the Huanhe platform, users can only hold on to it as a collectible item and cannot be circulated.
We all know that digital collections lack application scenarios — even if they include an aspect of uniqueness, sometimes tens of thousands of copies of the collection are released at the same time. The so-called uniqueness only means that the user has a unique hash value, but what is the uniqueness of a string of codes?
One of the worrying questions bothering Huanhe users’ minds is how can they manage the collection once the platform stops operating? The core problem behind Huanhe is how users own the collection — one that’s not on the public chain and is semi-centrally distributed. Without being in the Metaverse, without having a secondary market, without any application scenario, how are NFTs expected to hold its value?
With Huanhe being the first big player to fall, the answers to ‘what’s the use of a digital collection’ is still unclear, and only time will indicate the future of this industry.