Investment Research | On the value of NFT: Why Tencent can’t play with the metaverse?

A few days ago, the Ministry of Industry and Information Technology and the Central Cyberspace Affairs Commission issued an important document on the application of blockchain technology and industrial development, proposing that in the next few years, a number of well-known products should be cultivated in the fields of product traceability, data circulation, supply chain management, etc., 3 to 5 backbone enterprises with international competitiveness and a number of innovative leading enterprises should be cultivated, and 3 to 5 blockchain industry development clusters should be created. The document also proposed key areas that need technical research, including distributed computing and storage, cryptographic algorithms, consensus mechanisms, smart contracts, etc., in order to build the underlying blockchain platform.

Amid the expected thundering governance of cryptocurrency transactions and Bitcoin mining, the direction of industrial blockchain given by the government is encouraging - the blockchain technology foundation and blockchain technology application point to promoting innovation in digital economic models.

You may think it is a bit far-fetched. To discuss the value of NFT and how Tencent plays the metaverse, why do we have to start with government documents? Mars Investment Research believes that if Chinese industries embrace the blockchain era, they must not avoid the crypto economy. In this regard, we can see that the government is cautious in its wording and open-minded. They believe that blockchain technology can help innovate the digital economic model, which leaves room for the industry. Ma Huateng is forward-looking. He has long included the essence of the next era of digital economic model innovation in the concept of the true Internet. Their layout in the metaverse may also be a place where digital economic model innovation can be generated in the middle of industrial blockchain and crypto economy.

Let’s sort out the story of Tencent and the Metaverse:

1. Ma Huateng once wrote in the annual special issue "Three Views": "Now, an exciting opportunity is coming. After ten years of development, the mobile Internet is about to usher in the next wave of upgrades, which we call the True Internet..." Judging from the expression, "True Internet" and the Metaverse are similar.

2. Develop a blockbuster game that is comparable to the virtual world “Oasis” in “Ready Player One”.

3. Tencent is a shareholder of Roblox, the "first stock in the Metaverse", and is also a shareholder of Epic, which "has Metaverse aspects", with a 40% stake in Epic.

4. ByteDance invested nearly 100 million yuan in the Chinese version of Roblox Code Qiankun. When this news broke, people discovered that Tencent had already invested in Code Qiankun's competitor Miniwan.

The concept of the metaverse is so big that we think it will be a new economic and social ecosystem. David Baszucki, CEO of Roblox, which just went public, gave his definition of the metaverse in his mind: identity, friends, immersion, low latency, diversity, anytime, anywhere, economic system and civilization.

Baszucki said a true metaverse has eight different features. You need to have an avatar, like a rock star or a fashion model, which is a big selling point for the metaverse. You can make friends with real people and socialize in the metaverse. It must be "immersive," or make you feel like you are somewhere else and have lost touch with reality. You should be able to log in from anywhere, regardless of country or culture, and you need low-latency connections, whether you are at school or at work. The metaverse must be low-latency, meaning you can be anywhere at any time. If you are studying ancient Roman history in school, you can be teleported there in a second and start a journey to ancient Rome with your classmates. It must have a lot of differentiated content to support people's long-term interest, and you need a great economic system to ensure that people can live in the metaverse, not just programmers, but also artists and game planners. Finally, you need security and stability so that people can come together to improve digital civilization.

So, the anxious Pony brother came up with the concept of the full-fledged Internet, but he could not avoid the identity confirmation (NFT) in the digital world, as well as the economic system and digital civilization in the next economic and social ecology (whether it is the full-fledged Internet or the metaverse).

The Metaverse is not just a game, but the next stage of Web 2.0, which will become the representative technology, platform and service in Web 3.0. The chaotic Metaverse has triggered the rise of some new economies: land owners or speculators (Land owner/ Fipper), game players (Player), Metabuilders or contractors (Metabuilder/Contractor), virtual wearable device manufacturers (Metawear), and some derivative industries serving the Metaverse and its participants are also developing, such as the Blockchain Game Guild (Yield Guild), which uses the characteristics of NFT. NFT brings not only the uniqueness of the material, but also the transfer across time and space. However, all this has just begun...

In the past, large game developers’ interest in NFT games was mainly funded by crypto-native developers through incubation labs (such as Ubisoft’s Entrepreneur Lab)—the development cost of a AAA game is high, so large developers will only take the risk of big-budget projects after NFT games become mainstream. However, as crypto-native independent developers lay the foundation for mainstream adoption, large developers will directly participate in the production of large AAA games, including Tencent’s layout in this ecosystem is already visible to the naked eye.

The problem is that if Tencent’s Metaverse cannot complete elements of economic forms such as the above-mentioned NFT, we can foresee that there will be no Tencent in the next era.

All descriptions of the projects in this article are not recommended as a basis for investment decisions.