— August 8, 2022 | 8:01 am HKT
Proof-of-stake blockchain network Tezos became one of six blockchains in the first batch of integrations with China’s state-backed Blockchain-based Service Network (BSN) two years ago. But since then, Beijing has clamped down on the use of blockchain for cryptocurrency transactions and mining.
Despite Chinese restrictions, Tezos has quietly grown to become one of the world’s most popular blockchains for artists, on which non-fungible token (NFT) creators have sold more than US$46 million worth of their works — the 12th-highest figure among all blockchains tracked by NFT industry data aggregator CryptoSlam.
Katherine Ng, managing director of TZ APAC, the blockchain’s regional unit, told Forkast in a video interview that BSN had facilitated Tezos’s continued operation in the Chinese market.
“When it comes to the BSN network, it’s a way for us to participate and engage with developers in China in a compliant way,” Ng said.
NFTs are not banned in China, but state media outlets have issued a string of warnings about them, and semi-official rumblings over secondary NFT sales have reduced activity in the industry. Chinese tech giant Tencent has gone as far as laying off staff at its NFT marketplace in the country.
“I don’t think that would actually stop the creativity of Chinese artists despite this regulation [or lack thereof] of NFTs,” Ng said. “Chinese artists in our community are still experimenting with NFTs rather than just buying and selling art.”
Tezos community member artists Bai Wei and Song Ting are prime examples of Chinese artists embracing the cultural and creative qualities of NFTs rather than simply the many trading opportunities pursued by thousands in China’s NFT black markets.
The cultural proposition of NFTs, Ng said, goes beyond China’s borders to a new generation of collectors based outside the country.
“Chinese collectors within this millennial and Gen Z segment would appreciate the cultural value and Chinese art that really features these elements of Chinese philosophical culture,” Ng said. “We’re seeing that trend happening, and I think it’s going to be here to stay.”
Watch Ng’s full interview with Forkast Editor-in-Chief Angie Lau to learn more about proof-of-stake blockchains operating before the Ethereum 2.0 merge, why artists are keeping up with the tech trends, and how China-compliant blockchains are improving interoperability among networks in the country.
Angie Lau: Crypto turbulence has knocked the wind out of NFTs. Monthly sales dropped under US$1 billion in June, the first time in over a year. Is it time to hunker down and lick one’s wounds, or is it time to build something bigger, stronger and, most importantly, safer?
How does Tezos, an open-source, decentralized proof-of-stake blockchain, which has one of the lowest gas fees around, plan to support the world of NFTs, digital art and artists?
Welcome to Word on the Block, the series that takes a deeper dive into blockchain and all the emerging technologies that shape our world at the intersection of business, politics and economy. It’s what we cover right here on Forkast.News. I’m Editor-in-Chief Angie Lau.
And today, we’re in conversation with Katherine Ng, managing director of Tezos APAC. Thanks for joining us, Katherine. Or shall I say TZ? It’s TZ. Katherine, it’s TZ.
Well, you’re the MD of TZ APAC, which is the Asian entity, as we know, supporting the Tezos ecosystem. In 2021, Bank of America said TZ had the second most developer interest in the blockchain industry. That’s pretty good. How are you keeping up with that right now, especially amidst the current market state?
Because it’s a pretty crowded market. You’ve got 13,000 cryptocurrency networks. Those are your competitors. It’s a crowded space and it’s often hard to distinguish among the most promising ones from those that are unfamiliar. So, why do you think there’s such engagement for an audience that’s just learning, potentially, about what Tezos is right now? What’s the differential? What’s the difference that developers are responding to that’s so different from other blockchains like Ethereum or Solana, or the other 12,998 of them?
Katherine Ng: That’s a good question, Angie. Thank you. You’re right, there are many options out there for developers to build on. So why Tezos? We, first and foremost, started out as one of the pioneering proof-of-stake chains. It’s really attracted this whole global movement of artists all over the world that decided, ‘Hey, you know what? I need a chain that’s cheaper, faster and better than Ethereum or other proof-of-work chains out there. I want to, at least, mint an NFT with a few cents and be able to afford to sell my art online.’
And it’s amazing how these artists also made a conscious choice to mint on a chain that’s eco-friendly. They wanted to really observe their carbon footprint and make positive climate change impacts. So, they pioneered the clean NFT movement on Twitter and, somehow, it all converged on Tezos. And it was such an organic, beautiful grassroots movement to see, and now Tezos is the de facto art chain in Web3. And we’ve really showcased that amazing growth in the digital NFT art space with large-scale exhibitions like Art Basel Hong Kong, Art Basel Miami and Art Basel in Basel. So, that’s like the creme de la creme of art fairs globally, and it’s also really amazing to see how galleries, curators and artists from traditional art were embracing the NFT movement. So that, I would say, is our core strength, in addition to the energy efficiency that proof-of-stake chains like Tezos allow.
Lau: It’s almost like wherever the artists go, this is where the creativity and the innovation also go. You’re like the meatpacking district of blockchain. You’ve got the coolest lofts, the warehouses, and some incredible artists absolutely housing their work there.
Was it always the intent of Tezos to really capture the artists’ movement? Was that the seed of the thinking at the very beginning, or did it evolve into art?
Katherine Ng: Really good question, Angie. It actually was something that the ecosystem did not predict. Neither did the foundation. Neither did any of the entities predict that. It was completely organic and viral. Before that, we were, as an ecosystem, very much focused on core tech development. So, we have, like, 80 PhDs in Paris just focusing on car tech. And the tech is very strong. It’s just that Tezos has always been quiet, under-the-radar, quietly upgrading every three months like clockwork without much drama. It doesn’t get as much mainstream attraction as Ethereum’s ‘The Merge,’ where you’re doing live upgrades on-chain, merging the current proof-of-work chain with the Beacon Chain, which is proof-of-stake, whereas Tezos has already had that market advantage from day one, being proof-of-stake. And then after that, it’s just about being battle-tested as a public chain and then upgrading smoothly every quarter. So if you have 99.9% uptime and great security and no hacks and no forks, it’s drama-free and there’s not much media attention around that. But then, if WhatsApp or some other big tech company goes down and your Facebook goes down, it’s like, ‘Oh, no! My life is stopped for 30 minutes.’
So it is a thing, and it’s something that people take for granted, that 99.9% uptime story. When people start to build on-chain, it’s something that the developers don’t take for granted. They do say, ‘I appreciate these smooth upgrades where I can deploy projects, and it doesn’t affect my development for solutions. And artists appreciate that because when they mint on Tezos, they appreciate the low gas fees. They appreciate that, ‘Okay, my NFT’s are unchained.’ And if, say, the platform goes down. which actually one NFT platform on Tezos did — the founder of the platform decided to have a hissy fit and he was like, ‘I’m going to take this platform down because I didn’t like something that was being discussed in the governance forums.’ And then after that, the community rallied and they actually managed to retrieve all the NFTs on Tezos. So, it’s amazing how NFTs, in itself, enable artists to just not rely on any intermediary, but on a very solid layer-one that provides the infrastructure for them to have their art stored safely forever.
Lau: So, help us understand. What is the main mission of Tezos, and what does it mean for the ethos of Web3?
Ng: It’s really about the inclusivity, democratization of all digital assets and financial freedom. It’s enabling people to transact peer-to-peer using smart money. It’s enabling people to either launch tokenization projects or explore creative freedoms with NFTs. It’s really building that next generation of capital markets, or the art wall, or a new metaverse, or whatever it is that does not require the traditional rails of the financial markets we see today.
Lau: And it’s also creating a different platform for this art to live both digitally and in the real world. You mentioned it and we were there. Tezos was a big part of this year’s Art Basel in Hong Kong, bringing generative NFTs into the spotlight as the next evolution in the digital art movement. For those who are unfamiliar with generative NFTs, explain what they are, and why bring that to Art Basel.
Ng: So, generative art is a way for an artist to co-create with algorithmic code. They basically enable the participant, the collector, to also participate in this co-creation process.
So, at Art Basel, we had this live generative gallery, where we featured eight generative artists from fxhash.xyz, which is the leading generative art platform, which actually has surpassed Art Blocks in terms of sales and adoption. Basically, what happens when you step into the gallery, there’ll be this QR code that you can scan and, in three steps, you mint a generative NFT that is then displayed on the gallery wall. So, people get excited about that and the art that’s displayed on the wall is actually unique only to your wallet address. So, that’s where people get also really, really excited, because it’s, like, a one-of-a-kind. And even though it’s from, like, an addition, it permutates according to your smart contract wallet address, which is very, very cool to see. And people, like, will hashtag and tweet it and it causes network effects as well. And your friends get excited, so they bring by their friends and they’re, like, ‘Oh, I want to mint this NFT.’ Yeah, it was a thing. Even our main gallery did not get as much attention. Everyone just made a beeline for the generative gallery instead.
Lau: That’s amazing to hear. We did witness that for ourselves. That was really, really, very cool to see. There’s a lot of excitement in the NFT space — digital, generative, all of the above. But, the excitement has spread absolutely in Asia.
There was just a lot of appetite in Hong Kong, but also what we’re seeing really across China. Tezos’s blockchain was among the first six networks to actually be integrated by the Chinese government-backed BSN — that’s the Blockchain-based Service Network — enabling developers to actually build on the Tezos blockchain through BSN. Being selected was absolutely no small feat. Why do you think they chose Tezos, and what has this integration brought to the Tezos network over the past two years?
Ng: It’s amazing to see how China has openly embraced blockchain technology as a form of innovation at the government level. When it comes to the BSN network, it’s a way for us to participate and engage with developers in China in a compliant way. So, this is something that we committed to two years ago when it was announced, and then we’re still currently working with our development team to see how we can help scale the BSN network in a compliant way to continue further engaging with the developer community in China in a way that is compliant with Chinese regulations. That’s very important for us.
Lau: And I want to pick up on that point, because while there’s a lot of NFT activity on Tezos, China’s had kind of a rocky relationship with NFT’s ever since they became mainstream. We heard repeated warnings about the risks of NFTs. Investors were forced to resume trading on WeChat groups before the social media giant decided to ban all crypto- and NFT-related accounts on the platform. What do you think this means for the future of NFTs in China? What are some of the evolutions that we’re seeing amidst all of this tension?
Ng: I noticed the headlines that you mentioned, Angie, are more to do with the secondary sales of these NFT artworks, but I don’t think that would actually stop the creativity of Chinese artists despite this regulation of NFTs. Chinese artists in our community, anyway, are still experimenting with NFTs rather than just buying and selling art.
So, for example, Bai Wei, who is a Tezos advocate and NFT artist, as well — we also featured him at Art Basel Hong Kong in our exhibition. He had his works auctioned at Shenzhen Poly Auction House. Song Ting was another Tezos advocate. She’s a very, very famous blockchain AI (artificial intelligence) artist in China. She’s collected over 1,000 Tezos NFT artworks. She’s also the first NFT artist at China’s Guardian Auction. They’re all still active in the space and actively creating and experimenting. So, in terms of that artistic layer, I don’t see any changes. Secondary markets are definitely picked up in mainstream media on the restrictions, for sure.
Lau: A lot of major companies actually jumped on that technology bandwagon very, very early. You got the Chinese tech giants, Tencent and Baidu, really wanting to engage in this space. So, what we’ve been actually seeing is this self-discipline initiative, trying to kind of navigate and balance. Obviously, there’s such huge demand from the artists that you’ve mentioned, and at the same time, the Chinese government is really concerned about a lot of things in the secondary market. How do you see this, kind of, or does it impact the kind of way the NFT market is evolving in China? I would love your insights here.
Ng: So, there’s this talk about how can we see digital collectibles. What I mean — Web3, metaverse, Industry 4.0, the trends that you’re mentioning, there’s always going to be this market action that we’re seeing from millennials and Gen Zs who want to get in on the action. And when it comes to the China market overseas, Chinese collectors within this millennial and Gen Z segment would appreciate the cultural value and Chinese art that really features these elements of Chinese philosophical culture like the bulls of the year ox are in bits. These are all on external marketplaces outside of China. It’s all inspired by Chinese characters. And it’s something about this market demand for this sort of Chinese-inspired artworks. And that’s a huge draw for Chinese collectors outside of China. So, we’re seeing that trend happening, and I think it’s going to be here to stay.
Lau: It’s here to stay with rules. So, all of the big techs in China are pledging not to establish secondary NFT marketplaces to avoid the speculative nature of NFTs. It’s not necessarily a legally binding agreement, but I think it actually makes the space a little bit more comfortable politically for those projects. Is this something that you have to be thoughtful about, that you have to integrate within the protocol? Are these something that developers have to be wary of, especially with the integration into BSN?
Ng: Despite China’s strict regulations, the Chinese influence has exerted way beyond its borders, and it’s very prevalent in markets overseas and international markets. And people do look to China, even though they’re governed very differently, for inspiration, too. And this year, there’s going to be this metaverse industry professional committee founded by the Chinese government that aims to set the industry standards for its metaverse ambitions. So, they want to talk, they want to integrate, cultivate leading companies and products and strengthen R&D in this area to support the metaverse. It would be very interesting to see how this can be experimented with more open boundaries in an interactive digital reality, and explore more concepts of interoperability between public and private chains. Right now, I do admit there is a lack of interoperability and standardized standardization across blockchains in China, and also overseas, too, like in international markets, because private consulting blockchains in China don’t really interact with each other, even within China itself. But I believe more aggregated networks, like BSN, can help actually move this interoperability standard forward, which will, in turn, help China’s plans for a metaverse more consistent with the idea of a more intended, interoperable, permeable sort of universe digitally.
Lau: We’ve covered BSN from the very beginning. The interoperability angle is a super-strong thesis that everything is now, since then, being built upon.
It is about interoperability. It is about standardization to a degree that allows people to engage. And the third thing, cybersecurity and safety.
We’re engaging in NFTs — the most important acronym for so many people right now, but increasingly the regulators. This is a fairly unregulated, still, market. We’re seeing a lot of bad actors. We saw the insider trading from a former OpenSea employee. We’ve seen rug pulls. We’ve seen phishing attacks. How do you think a regulatory framework should be developed here? I’m curious about the leadership, and also governance and conversations happening amongst developers within the Tezos ecosystem. Think about this: How do you stop fraud and exploits in the industry? And the NFT industry is starting to be rife with it.
Ng: With these issues around insider trading or botting behavior, things like that, I feel it’s a kind of behavior that has existed prior, and the NFT space or the DeFi (decentralized finance) space, even, has brought this up to light even more, at more velocity and scale and transparency. So, it’s enabled communities to self-govern or self-enforce their own rules when it comes to their own NFT marketplaces that they mint on, collect and sell on.
An example would be platforms like, say, fxhash, having a verified checkmark for creators who are legitimate. So, you don’t endorse sales that are fraudulent. There’s also Dutch auctions that prevent botting behavior. So, people just manipulating the prices in the primary and secondary markets of these NFT sales. So, the community is actively experimenting with all these different tools around NFT platforms, which will help make and create a safer space for both artists and collectors to transact, buy, and sell. It’s really amazing to see how there’s so much grassroots experimentation going on at this level and within the community. And then there are the regulators themselves that are looking into this space actively.
So the Chinese government, generally, the regulators, just want to make sure that we, you, don’t destabilize the market when you trade, if left unchecked. I think the Chinese government wanted to introduce new guidelines on secondary NFT trading in what is still an evolving landscape, and it is still very, very new, the NFT space. I think some governments are still observing, but, ultimately, I think that it’s actually enabled the art space to be a lot more transparent because back then, in traditional, you don’t even know what’s happening in the gray market. It’s harder to trace the provenance of the artwork’s originality. It’s like, ‘Is this real?’ Yeah, but at least on-chain, everything’s there. And then, you can see, ‘Did you mint this first or did I mint this first?’ If you claim to be the original minter, it’s like, ‘Oh, let me check the timestamp of when this NFT was minted.’ Yeah. So it’s out there, it’s more transparent, and it’s at least one step forward towards combating these bad actor behaviors.
Lau: That open traceability of cryptos and NFTs really is quite valuable. For a lot of people, it’s almost counterintuitive to how people consider blockchain — the anonymity of it. Actually, you could trace it back. That’s the whole point. The whole point is that you can trace it back to its origin.
Ng: It’s about security, not so much privacy sometimes.
Lau: These are all very important issues, especially when we think about this as a global conversation. And so many jurisdictions and governments, and even political philosophies, are involved and sometimes they’re in conflict. You just take a look at the East and the West, China and the U.S., and that increasing tension between the two, and how blockchain, crypto and NFT development is kind of in the middle. There are just two very different thoughts on how to evolve it and regulate it. Is it a private sector space? Is it public sector? Is it a combination? Is it a hybrid being at the front seat of history, if you will? Katherine, what does the view look like from your perspective?
Ng: Again, amazing question. So, again, I agree on the different philosophies of East and West and how we’re all governing differently. In Asia, we have deference to authority. And then, in the West, it’s a little bit more liberal over there. But, ultimately, it comes down to sovereignty. And then with the Web3 movement, I see this community movement towards self-sovereignty, but, at the same time, it’s enabling self-actualization of goals for the individual and being empowered to do it. But at the same time, they realize, like, ‘Oh, it’s better to do it as a collective.’ So, you have DAOs (decentralized autonomous organizations), all these self-organizing communities coming together around a social cause, and now Gen Z’s are going, ‘Yeah, you know what? My day job is DAO contributor.’ So, corporate governance structures are shifting, not just at corporation levels, but also at government levels, in the way we organize ourselves and take action together. Even within my team at TZ APAC, we’re set up like a company and within the local laws and regulations in Singapore.
But we very much, as a Web3 team, are very autonomous and work almost in an autocratic structure, so everyone feels a lot more empowered to drive their own Web3 projects like this. If my guy in the community wants to run DeFi, then he can go ahead and explore an experiment, share his research with the team, get a positive feedback loop about it, find a great product market fit for projects building on Tezos, help them incubate the idea, things like that. And if someone is from an art background who wants to really venture into the NFT space and bridge artist communities with art agencies in Singapore with art exhibitors, she’s very much welcome to do that, and we would support initiatives like that internally and within the ecosystem, too.
Lau: Leaders evolving our future in your office right now and really having an impact on just how everything is evolving. It was great to see a little bit of what you see, and thanks for sharing all of this with us today. It was great to have you on the show, Katherine.
Ng: You’re welcome. Thank you so much, Angie. Thank you.
Lau: That was Katherine Ng, managing director of TZ APAC. And I want to thank you, everyone, for joining us on this latest episode of Word on the Block. I’m Forkast Editor-in-Chief Angie Lau. Until the next time.
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