Fried domestic “NFT” is to cut leeks


NFT, one of the most cutting-edge and most difficult words on the Internet, is an indispensable piece of the puzzle in the metaverse.

In China, it has a down-to-earth name "Digital Collection". Not only has the shell changed, but the soul has also changed.

On July 20, China’s largest digital collection platform “Magic Core” was rumored to be shut down.

This news not only means that the so-called digital collection is just a picture of life and death, but also reveals the real situation faced by digital collections in the secondary market – only talking about income, not art.

The largest digital collection platform in China, it will not last for 1 year

Magic Core is the largest domestic digital collection platform incubated within Tencent PCG. The app was officially launched on August 2, 2021, and it has been less than a year now.

On July 20, it was reported that Tencent was planning to shut down its “phantom core” business this week, but Tencent has yet to respond.

According to Jiemian News , the news is basically true. As early as the beginning of July, Huanhe’s external business had ceased; on July 21, Huanhe told a reporter from China Times that it had not received a notice and did not deny whether Huanhe would be abolished .

▲ Picture from: Magic Core

The concept of digital collections was born out of NFTs.

NFT is a data unit stored on the blockchain, an electronic certificate of ownership of virtual goods, which can be completely tracked on the blockchain. More generally speaking, NFT gives virtual goods a unique identity certificate, and buyers buy the virtual goods together with the identity certificate, so that virtual goods can be traced, collected, and traded.

Because of the different environments, domestic digital collections and foreign NFTs are not the same thing.

NFTs naturally have certain financial attributes, but my country has always prohibited virtual currency speculation.

Most foreign NFTs have public chains or side chains of public chains, and buyers can freely list them for sale and trade them through virtual currency; most of the domestic digital collections are consortium chains or private chains, and secondary transactions are restricted. Only have the right to collect, (limited) transfer, etc.

▲ Picture from: esquirehk

For the Tencent-born Magic Core, the policy is an insurmountable high-voltage line. It completely prohibits secondary market transactions, and users cannot transfer or resell digital collections.

Its digital collection is a veritable "collection" rather than a financial product. Platform revenue mainly comes from the sharing of digital collections with IP parties after they are released in the primary market.

Alibaba's whale scout also clearly stated that it does not support any form of resale, and only supports buyers to transfer gifts to eligible Alipay real-name friends after 180 days. There are also some platforms where the transfer period varies from 1 day to 30 days.

The transfer of gifts only limits the speculation in the secondary market, not completely impossible. According to Caijing Magazine , buyers can exchange digital collections by gifting on the platform, and transfer transactions through bank cards, Alipay, WeChat and other methods outside the platform.

Some small and medium-sized digital collection platforms simply open consignment services directly, which is equivalent to opening a secondary trading market , but the risk is relatively high, which will be explained later.

Speaking of Magic Core, in June of this year, Magic Core’s digital collections were revealed to be “sold out”, and the pages of many collections were “Ended” instead of “Sold Out”.

▲ Picture from: Magic Core

Magic Core only supports the primary market, and there is no sign of opening the secondary market. Users cannot profit from it, which may be the reason for its decline in popularity or even the closure of the platform.

Although the artistic value of the Magic Nucleus digital collection is higher than other platforms, it is characterized by industry insiders as "talking about art out of the market".

For buyers, if the platform is closed, what will happen to the digital collections they own?

On the one hand, because various domestic digital collection platforms rely on different alliance chains, unlike public chains, which can be circulated across platforms, it is difficult to transfer transactions between different platforms. If the platform is gone, the digital collection will also be gone.

▲ Picture from: Magic Core

On the other hand, according to Tencent Magic Core's user agreement, affected by changes in laws, regulations, policies, etc., even if Tencent terminates all services, it will not be regarded as a breach of contract, and users have no right to ask Tencent to assume any responsibility.

The outlook is not optimistic. The digital collection platform "Yuzang", which was voluntarily shut down on June 27, may be able to give a reference. The way it chooses is that users either keep it by themselves but only provide viewing functions, or refund the original price.

In the secondary market, we only talk about income and not about art

Whether it is NFT or digital collection, liquidity rather than collectibility is what makes players rush.

As mentioned above, Dachang's digital collection platform does not support secondary market transactions, but some small and medium-sized platforms are still wandering in the gray area. Only art, NFT China, iBox, HOTDOG and other platforms support secondary transactions , and the risk is high , but also attracts players.

The transaction of many digital collections in China can be simply understood as "buying at a low price and selling at a high price" or "appreciating the value".

▲ Picture from: Getty Images

It is an ideal situation to buy at the original price in the primary market and sell it at a premium in the secondary market. In fact, it is difficult to get a piece of the pie in the primary market just by luck and speed. Novices who take chances in the secondary market may also buy at the highest point to fulfill others and be the last stick of drumming and passing flowers.

The price of the secondary market is quoted by the holder, and the platform not only has the primary market income of issuing collections, but also acts as a "providing transaction service", charging a handling fee for each resale. The handling fee of the HOTDOG platform is as high as 10 %.

It's not just veteran players that rookies face. The so-called informant groups and leading brothers who transmit internal news may be the dealers or the platform operators; the skyrocketing and plummeting of the market may not necessarily be completely spontaneous by the market.

Closely related to secondary transactions are industry slang words such as airdrops, empowerment, new pulls, and synthesis. These processes are also controllable by the platform.

"Airdrops" generally occur on new platforms that need to attract traffic. New users who complete real-name registration or invite a large number of people can get a digital collection for free. When the market is good, the digital collections of the prostitutes can also sell for a few yuan or even hundreds.

"Empowerment" is often aimed at senior players. The price of empowered digital collections is generally high. Old players can buy in advance without drawing lots, or buy them free of charge.

▲"Synthesis". Picture from: Moyuan Technology

"Synthesis" is like upgrading equipment in the game. The designated digital collections are used to synthesize rarer digital collections. The part of the digital collections used as materials will be destroyed, and the rarity of various digital collections will also affect the price. .

Therefore, it is not so important whether the digital collection is artistic or not, but the gameplay of the secondary market and the new players who are constantly entering the game are important.

There are also some digital collection platforms, which do not even open and operate the secondary market, and simply run away with money.

On the “Mirror Domain Digital Collection” platform, 1,971 digital collections of 188 yuan were sold in one day. The company was founded on May 31 this year, and the business license was cancelled on June 22, setting the fastest running record on the digital collection platform.

The “TT Digital Collection” platform ran away because the boss invested in other digital collection platforms, and his own platform was unsustainable after serious losses.

At the end of June, the "Guangyi Shuzang" platform broke out that it once plummeted by 80%, could not withdraw cash, involved money laundering and other problems, and even rumored that the boss "left his right hand"; on July 11, "Guangyi Shuzang" quietly "resurrected" , while the rights defenders are eager to withdraw cash, they are eager to buy bottoms.

The most interesting thing is that the China Times reported that the digital collection of Guangyi Shuzang has not been put on the chain, and the latest announcement mentioned that it will "improve the problem of the chain.

It is not only Guangyi Shuzang that has withdrawal problems, but more than 130 items can be found by searching "Digital Collection Withdrawal" on Black Cat Complaint.

In an interview with Blockchain Daily, Jiang Zhaosheng, a senior researcher at the Ouke Cloud Chain Research Institute, pointed out:

There is no real and fully compliant secondary market for digital collections in China, and mainstream digital collection platforms cannot and will not open the secondary trading function of digital collections. The secondary markets that currently exist in the market are mostly small trading venues that are formed spontaneously by users or some violations of regulations.

In April this year, the "Initiative on Preventing Financial Risks Related to NFTs" made it clear that the tendency of NFTs to be financialized and securitized was resolutely curbed.

Small and medium-sized platforms have also noticed various rumors and closed the secondary market directly or be more cautious. "Yingjing NFT" closed the "transfer" function in early July; "Moyuan Technology" temporarily closed the "consignment" function, but reopened the "transfer" function.

The "Prosperity Shuzang" platform thoroughly "washed hands with gold", and also painstakingly analyzed industry risks as a past person.

Decentralization is still a long way off, and it’s not something digital collections can do

We often say that web3 means that the Internet is no longer controlled by giants, but is truly collectively owned and truly decentralized.

However, domestic digital collections obviously cannot withstand this expectation. Some of them are not on the chain at all. They hype a web page picture, and the ones that are on the chain are basically the alliance chain.

The consortium chain is a non-completely decentralized blockchain, its security is relatively lower than that of the public chain, but it has certain advantages in hype control, storage and energy consumption.

The reason for the low security is that the consensus mechanism of the alliance chain is determined by the alliance party, and the alliance parties can jointly modify the information on the chain, which does not achieve complete decentralization; at the same time, the alliance party of the alliance chain can control the casting and trading of NFT Regulations restrict second-hand transactions and OTC transactions, so there is a better control over speculation.

Just like the digital collections released by Tencent Magic Core, its data is still held by centralized giants such as Tencent. If Tencent chooses to close the Magic Core and terminate all services, the digital collections on the Magic Core will not belong to the user.

However, foreign NFTs on blockchain public chains such as Ethereum may not be really decentralized.

According to Web3's conception, NFT is minted on the blockchain and should be indelible. But Moxie Marlinspike, founder of encrypted messaging app Signal, believes that Web 3, which is dedicated to decentralization, has not gotten rid of its dependence on servers and is still in a centralized framework.

In his experiments, the encrypted wallet MetaMask is not directly associated with the blockchain, but indirectly displays data by calling the API interface of the NFT trading platform OpenSea . When an NFT is deleted by OpenSea, the NFT also "disappears" from MetaMask, even if it is actually recorded on the blockchain.

▲ Picture from: Reuters

In addition, there are loopholes in NFT’s often-mentioned “value confirmation of commodity rights”. For example, passer-by A takes pictures of a painter’s works on social platforms without consent, casts them into NFTs and makes profits, which is suspected of infringing on the original author’s copyright. .

Zhu Junchao, founding partner of Kenting Law Firm, pointed out that NFTs can use technology to determine the fact that "when something goes on the chain and who will put it on the chain", but before the digital content is minted NFT, the minting platform cannot confirm the digital content copyright attribution.

Therefore, the future of decentralization is still far away, and ordinary people who enter the game may not be able to understand the intricacies of it. The logic of "the world is prosperous, all for profit" is the simplest and most realistic.

References:
1. "The Hidden Corner of Digital Collections" by Photon Planet
2. Financial magazine "No one understands NFT, but some people make money, and some lose miserably"
3. Cinda Securities "NFT: The Virtual World Commodity Circulation Mechanism Behind Digital Collections"
4. China-Singapore Jingwei "Xiao Sa: Will the digital collection platform "Run Road" press the industry pause button? 》

Li Ruoqiuhuang, to exorcise evil. Working email: [email protected]

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