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Controversial digital collections: the next game of drumming and passing flowers?

  Ma Le first came into contact with domestic digital collections in mid-May. That afternoon, a friend suddenly sent a poster with a QR code on WeChat, inviting him to scan the code to join a digital collection platform. Ma Le clicked on the picture, and on the black and gray background, “Limited Sale, Creation Medal, Only Once” was printed in large golden characters.
  ”Domestic NFT (Non-Fungible Token)”, which was Ma Le’s understanding of “digital collection” at that time. Friends sent three messages one after another: “New Taiwan”, “White Prostitution Airdrop” and “Crush”. After a simple inquiry, Ma Le found that NFTs are indeed defined as “digital collections” in China, but the technology and models behind “digital collections” are quite different from the NFTs he understands. They are all regarded as “leek platforms” for “harvesting” speculators.
  However, this year’s “618”, e-commerce platforms such as Tmall and JD.com have jointly launched digital collections with brands and promoted their marketing. The strong limelight of the digital collection confuses Ma Le. He found that as early as June 2021, Ant Group released the “Ant Chain Fan Granule” applet, and soon co-branded with the Dunhuang Art Research Institute to launch a limited edition of 8,000 NFT payment code skins, priced at 9.9 yuan plus 10 Alipay points. Two months later, Tencent launched China’s first digital collection trading platform “Magic Core”. In December 2021, Ant will also upgrade the applet to a digital collection app “Whale Scout”. Since then, NetEase, QQ Music, JD.com, Bilibili, and Tmall have all laid out the industry by issuing NFTs or launching trading platforms.
  What surprised Ma Le even more was how tight these digital collections were in the market. The price of the collections sold by the big factory for the first time is not high, coupled with the social excitement driven by marketing, it is understandable that they were sold out. On the domestic digital collection e-commerce platform iBox, little-known collections or cultural and creative series can also be priced between 10,000 and 30,000 yuan, and some even exceed 60,000 yuan, and almost all collections are on the platform. The status of the homepage is “Sold Out”.
  Unlike NFTs that use public chains and cryptocurrency transactions, domestic digital collection platforms emphasize the use of alliance chains and legal currency transactions for compliance reasons. On April 13, 2022, China Internet Finance Association, China Banking Association and China Securities Association issued the “Initiative on Preventing NFT-related Financial Risks”, proposing six norms to curb the “NFT financial securitization tendency”, including financial products. Not to be NFT, not to weaken the non-homogeneous characteristics, not to provide centralized transactions for NFT transactions, to set up trading venues, not to use virtual currency, real-name authentication, and not to directly or indirectly invest in NFTs.
  Ma Le has limited knowledge of blockchain technology, but in his opinion, NFT has attracted attention precisely because of its immutable, traceable, and decentralized characteristics based on public chain issuance. But now, he couldn’t understand, “Even this premise doesn’t hold, how much value is there still in digital collections?”
Transaction comes first

  ”Traditional artworks are highly heterogeneous, and there are great differences between different artworks. They cannot be replaced with each other, and it is easy to form a seller’s monopoly. In addition, the liquidity is relatively poor, the transaction frequency is low, the transaction rate is average, and the transaction costs are high. While NFT and digital The emergence of the collection has provided a safe and effective way to confirm and transfer rights in areas with low liquidity.” Yu Jianing, executive director of the Metaverse Industry Committee of China Mobile Communications Federation, told China News Weekly that after the localization of NFT The resulting digital collections, whose value can be compared to traditional art trades.
  The authenticity of traditional collections is difficult to identify and the process is complicated, but since the birth of NFTs and digital collections, they have had on-chain certificates that cannot be tampered with, which greatly reduces identification and transaction costs, and greatly improves circulation. Yu Jianing believes that although digital collections “have certain Chinese characteristics”, due to the use of blockchain technology, their centralized characteristics do not affect their uniqueness, authenticity, and permanence as NFTs on the public chain. , which can effectively protect the rights and interests of creators and holders.
  Player Wang Zijian is very aware of the difference between domestic digital collections and NFTs issued based on public chains, but he is not worried. “We play digital collections to make money,” Wang Zijian told China News Weekly. Compared with the technology behind it, he pays more attention to selecting those platforms that can increase the value of the collection and realize it among the more than 500 collection platforms.
  ”I have a friend who bought a collection of tens of thousands of yuan on ‘Magic Core’, which can only be appreciated by himself. It cannot be realized at all. It is equivalent to a waste of investment.” Magic Core is an NFT issuance established by Tencent Zhixin Chain. platform. Compared with “Phantom Core”, “Whale Scout”, which can be donated after 180 days of collection, is a better platform in Wang Zijian’s eyes, “equivalent to opening a trading hole”. Platforms such as iBox and Unique Art are favored by many players because of their “more mature secondary market” and the ability to sell collections at high prices.

On May 9, 2021, “The Great Pythagoras – NFT Encryption Art Exhibition” was held in Beijing Susan Cultural and Creative Park. The exhibition aims to convey the involvement of daily life in consciousness by showcasing the works of 12 NFT artists. The concept of in-depth exploration in the realm of time, space and digitization. Photography / reporter Hou Yu

  Wang Zijian felt that the high price of domestic digital collections could not stand up to scrutiny, but switching from the international market to the domestic market was a helpless move due to reality, “Playing digital collections is because it is still in the early stage in China and has room for value-added, and NFTs are already very mature overseas. , the industry has been a bit cold.”
  The world’s first NFT project CryptoPunks was born in June 2017. Two Canadian software developers have put 10,000 procedurally-generated pixel avatars on Ethereum, making them verifiable, transferable, and owned by others.
  In 2020, digital artist Beeple will stitch 5,000 pictures created every day since 2007 into a JPG file. This NFT named “Everydays: The First 5000 Days” sold for $69.34 million on March 11 of that year. The transaction at Christie’s made NFT the focus of the public and ushered in a market explosion.
  The first time the player Xiaoxue purchased NFT was in August 2021. She worked for a blockchain content platform in China. She bought a little penguin with sunglasses for 0.014 ether and replaced it with an avatar. In many Web 3.0 communities, discussions about NFT projects continue from 2021 to the beginning of this year. “The skyrocketing price is the simplest and most rude way to attract everyone’s attention, and everyone will chat only when the price is high.” Xiaoxue told China News Weekly.
  According to NFTGO data, as of June 2022, there are 2,910 collection series and more than 29.76 million collections worldwide. The total market value of NFTs reached its highest point on January 20, 2022, at about $35.05 billion, which is equivalent to the market value of Ferrari car company. On March 12, 2021, CryptoPunks #3100 was sold at a sky-high price of 4,200 ETH (about $7.42 million), once again pushing the market to a climax. Xiaoxue found that the value of the little penguin NFT he bought had increased by more than 100 times.

  As a non-fungible token, uniqueness and indivisibility are the biggest features that distinguish NFT from cryptocurrencies such as Bitcoin and Ethereum. In the last round of the cryptocurrency bull market, when the prices of Bitcoin and Ethereum were untimely high, many speculators with insufficient funds began to buy in units of 0.01 or even 0.001 tokens so that they could also ride the wealth express.
  However, the indivisible nature of NFT determines that once its price is high, speculators with insufficient funds will be blocked from the door of blue-chip NFT, and the liquidity of the market will be greatly reduced. “The popularity of blue-chip NFTs is the carnival of a small group of people.” Xiaoxue summed up “China News Weekly”. In China, considering compliance risks and insufficient funds, it is impossible to squeeze into the blue-chip project circle with high value-added space, many players and speculators turn their attention to the domestic digital collection market as a “replacement”.
  Many young speculators increase the probability of getting an “airdrop” from the project party by participating in the project and retweeting it. “Airdrop” is also one of the many “slang words” in the NFT market, which refers to the distribution of gifts or red envelopes to specific personnel by the project. Players look forward to advancing the time of holding NFT collections indefinitely through “airdrops”. After all, the lower the price of collections, the greater the space for value-added, and the greater the possibility of obtaining the ultimate input-output ratio.
  In January 2022, after both the trading volume and market value reached their peaks, the trading volume of NFTs began to decline sharply, and the collections began to face the dilemma of price and no market. As of press time, the NFTGO market sentiment index with a full score of 100 shows that the current NFT market popularity is only 30 points. Among the 24-hour transaction numbers, there are nearly 17,000 buyers and nearly 20,000 sellers. The overall market is oversupplied. . In 30 days of trading, nearly 280,000 people made profits and more than 450,000 people lost money.
  ”The sharp drop in the prices of various NFTs is affected by the fluctuations in the overall financial market and the crypto market. In fact, this is the stage of bubble cleaning that is bound to occur in the development of an emerging industry.” Yu Jianing told China News Weekly .
What exactly did $43 million buy?

  At the DoubleFat Crypto Art Exhibition in March 2021, artist Leng Jun’s painting “Hsinchu” was “burned” and made into an NFT chain. In this case, the NFT corresponds to the ownership of “Hsinchu”. In order to make the ownership undisputed, the artist chose to let the original painting disappear. The artwork only exists in the digital world, and the holder of the NFT has the full value of the work.
  ”If the physical object and the NFT belong to different owners, there may be property rights disputes in the future, and problems like ‘double payment’ may also occur, that is, the same asset is sold twice, causing a series of potential problems.” Yu Jianing told “China News Weekly”.
  According to NFT data analysis platforms NFTGO and Messari Research, as of February 2022, 44% of NFT transaction volume came from avatars, 45% came from games, art and collections, and the remaining 11% came from utility assets, metaverse, land and social media . The ENS series sells secure domain names in the decentralized world, The Sandbox LAND sells 166,464 pieces of land in the Metaverse, and the GEN.ART Membership sells 5,100 memberships. Of course, an NFT could also be an audio piece, a painting by Cai Guoqiang, and a New York Times op-ed.
  ”From the perspective of development prospects, digital collections are one of the development directions that are most in line with the metaverse.” Yu Jianing believes that everything can become a “value machine” that empowers everything through “on-chain”, and NFT-related technologies will be digital Cultural IP realizes assetization and economic security, and can even build a bridge connecting physical world assets and digital world assets.
  Today, CryptoPunk #3100 is the rarest collection on exchanges, with a price tag of up to 35,000 ether, or about $43 million. To onlookers, CryptoPunk #3100 is nothing more than a tiny alien pixel avatar. Why are people willing to pay sky-high prices for an avatar or a picture?
  ”CryptoPunks can be considered as ‘digital antiques’ witnessing the historical development of the metaverse. Now anyone can draw a batch of pixel avatars and issue NFTs on the blockchain, but no one can travel back to 2017 to issue a similar set of NFTs .” Yu Jianing believes that the scarcity and value consensus of CryptoPunks lies in its guiding role in the development of the NFT market. In addition, due to being on the public chain, CryptoPunks as a digital commodity have been confirmed on the chain, and the scarcity and ownership have been clarified, and then they can be circulated and traded.
  If a man would pay $19 million for CryptoPunk #3100, what would he get?
  ”In OpenSea (the world’s largest NFT trading market), the NFT you buy is a digital number. You don’t buy pictures, and you don’t buy anything you can see. What you really buy is just a number.” After understanding the NFT contract code and issuance process, blockchain entrepreneur Lin Tao came to a conclusion. After working in Alibaba and Sequoia Capital for a year, he entered the blockchain industry to start a business.
  ”We all think that NFTs run on the blockchain and cannot be tampered with, but in fact, a large number of NFTs just store their numbers on the blockchain, and the corresponding presentation layers are advanced using external interfaces.” Lin Tao wrote in a technical analysis article.
  ”That means that the NFT you hold in your hand can actually be changed to another look that you don’t know at all. Maybe you still held an NFT with a rarity of 0.01% and a value of 1 million yesterday, as long as the project party If you want, he can change it into a piece of shit for you today.” Lin Tao said.
  ”The storage and transaction of the counterpart still requires a third party, which has nothing to do with decentralization at all, and actually buys nothing.” Han Tian, ​​a cryptocurrency speculator, scoffed at NFTs.
  The technical accident of Ali NFT’s “blind box” to “bright box” sale quickly confirmed Lin Tao’s analysis. In this accident, the project team wrote a string to locate the real situation inside the blind box into the front-end public folder. After the code was picked up, the real content of the NFT “blind box” was completely exposed, so that players who knew the inside story could Buy high-rarity collectibles in bulk at low prices. After the incident, the project team urgently disrupted and replaced the original string corresponding to the content, and announced the remedy. “This is equivalent to announcing generously. As the project party, you have the right to modify the NFT in your hands at will. Not only does it depreciate your own project, but morally, it does not follow the consensus that Web3.0 cannot be tampered with and is decentralized.” Lin Tao was quite angry.
  ”Under normal circumstances, the information on the chain is difficult to be tampered with. If the NFT counterpart is arbitrarily modified by the project party, it is likely that a ‘backdoor’ has been left in the smart contract. Be sure to pay attention to whether an audit company conducts security audits on the project code. .” Yu Jianing said.
Unpredictable running risk

  ”The current digital collections and NFTs are not a commodity, but a financial product, which has great hype. Whether it is practitioners or players, most people want to add value to their purchases of NFTs.” Lin Tao told China News Weekly “.

  Since the birth of the blockchain, players and practitioners have experienced the ICO frenzy, the sharp rise and fall of cryptocurrencies, and the De-Fi technology boom. In the face of NFTs on the tuyere, many people will refer to the “tulip mania” in the 17th century. The blown bubble burst, leaving only pain.
  ”The entry threshold for NFT is extremely low. Ordinary people can buy a picture simply because it looks good, and buying it is equivalent to adding value to it.” Lin Tao compared NFT with De-Fi, a blockchain lending technology that attracted much attention last year, “De-Fi -Fi involves complex financial knowledge, and NFT only needs to register a wallet. Once the threshold is lowered, many people will rush in. Once the price rises, the probability of being cut off is very high.”
  The most common “cutting leeks” “The way is rug. In the “Slang List” of the “Web3.0 Survival Guide: Anti-Fraud and Anti-Fraud Security Manual” published by the “NFT Pioneer”, a special note was made to rug: the full name should be “rug pull”, which is literally translated in Chinese as “pulling the carpet” ”, usually referring to the volume run.
  In the nascent web 3.0 world, people really have no way of constraining the project side. For an NFT project, as long as it can create “scarcity” and gather the value consensus of some people, the project party can sell it on the open market. Primary market transactions receive a 5% to 10% “royalty” share. A set of limited 10,000 pixel avatars can be directly generated with a set of open source image generation tools; to run the project on the blockchain network, only a set of codes that can generate and trade NFTs on the blockchain need to be developed ; To operate a project, in addition to social media such as Twitter, you also need your own official website.
  Both practitioners and speculators believe that the decisive factor for the success of NFTs is operational capabilities. Different from the extremely detailed prospectus issued during the IPO, in the world of Web3.0, the project party’s roadmap (the product blueprint of NFT, showing the project party’s long-term plan) only needs to describe the vision and promise the future rights of NFT. . There is no need for any discussion as to whether and how long these rights can be realized. Under the operation Twitter of the project party, the players urged the project party to vigorously market, link stars, and create topics like fans in the fan circle maintain idols.
  ”There is no way to predict whether a project will run away in the end.” Xiaoxue said that her self-protection method is to carefully read the statement of the project party before purchasing, and then go to Discord (a real-time communication tool used by cryptocurrency projects and communities, project The party will release the most important information updates on the Announcements channel) to see if the project party’s community is operating actively, and whether the interaction and attention on Twitter are frequent. In addition, you can also determine whether the project is intentional or not based on the quality and style of the official website and NFT itself. “There is no other way, only time can judge. If you buy a potential collection, it is called investment, otherwise it can only be called shopping.” Xiaoxue said.
  A marketing director of a blockchain security company told China News Weekly that doing security audits for projects has also become a permanent business for the company. In what form will this security audit end up in the project, and will it become a strong endorsement of the project? Hearing “China News Weekly”‘s question about this, the director immediately became vigilant, saying that he “does not answer questions other than technology”.
  ”The end result of ‘killing the chicken to get the eggs’ is that everyone is holding their money bags tightly, and no fresh blood is willing to enter the market, making the market a zero-sum game in the end.” Lin Tao said bluntly.
Utopias and the hard-to-regulate ‘dark forest’

  In Lin Tao’s view, in the future, NFT can become an access license to enter a specific social circle. In addition, it can also be used as a key to open its own database. With NFT, members can serve organizations with specific goals and get rewards based on their contributions. Members can also vote on community governance based on NFT identity authentication. Such a distributed organization is called DAO in the Web3.0 world. .
  In short, NFTs should be the means of production leading to a utopian future, a small step towards a more ideal Web 3.0 world where data is decentralised and owned by individuals.
  Yu Jianing believes that the layout of digital collections by listed companies such as Tencent and Alibaba is precisely because of the broad future application scenarios and huge market of digital collections and blockchain technology in copyright protection, digital art collection, asset digitization and other fields. In addition, Generation Z, regarded as the “natives of the Internet”, is to fully accept digital art and early users of the Metaverse. The layout of digital collections helps to gain the attention of Generation Z, which can be the key to its layout in the Metaverse. The starting point can also get more ecological traffic for it.
  ”Hundreds of years ago, people knew that it was a good thing to issue a token that could directly connect with potential investors, but the reason why there was regulation later was because people found that without regulation, who gave the most attractive promises, Whoever can stand firm in the market will eventually become a liar’s ‘arena’ where bad money drives out good money.” Han Tian believes that the decentralization of Web 3.0 is contrary to the community governance run by smart contract coding. “Only with basic mutual trust can there be no need for a third party.”
  ”The combination of NFT and DAO has obvious advantages, such as community identification, community management, joint collaboration, etc. But from the overall legal framework, the track is currently in the The supervision of various countries has not been fully clarified, and the asset characteristics of the two represent that they will face a certain degree of compliance difficulties. At present, the Wyoming State Assembly in the United States has approved the DAO Act, and the governor has signed the DAO Act, making it clear that DAO is a limited liability company; DAO’s smart contracts are high According to the company’s articles of association; the rights of DAO members are positively related to the proportion of the amount of encrypted assets held by the DAO’s total encrypted assets at the time of decision-making. In addition, some rural areas in Japan have begun to explore the DAO management model.”
  At present, practitioners hope to switch the Web 2.0 world centered on the mobile Internet to Web 3.0, and use the blockchain as the underlying technology to meet people’s daily communication and governance. But some people think that blockchain technology can only meet the needs it can meet, and the ambition to subvert Web 2.0 is as ridiculous as “finding a nail with a hammer”.
  Due to the rapid progress of blockchain technology, high barriers to entry, complicated operations and high learning costs, with the rapid increase in the number of blockchain applications, security issues have become increasingly severe and difficult, which is why blockchain practitioners are always keen to share All kinds of safety tips, making all kinds of manuals. A blockchain security engineer told China News Weekly that in the past year, as the NFT market became hot, he began to solve security problems for more and more project parties.
  ”Web3.0 Survival Guide: Anti-fraud and Anti-fraud Safety Manual” lists 23 typical cases of fraud and theft, including Jay Chou’s “boring ape” BAYC #3738 theft case. Numerous technical analysis shows that Jay Chou inadvertently operated the “set approval for all” step and was transferred to another address by others, and the corresponding operations were often completed under the cover of phishing websites.
  In order to package the project, there are also project parties who try to disguise it as a project bet by a giant whale, so that players and speculators can follow the giant whale to buy. Lin Tao once reviewed the corresponding operations to the players, and as a result, he successfully created the illusion that Vitalik Buterin, the founder of Ethereum, transferred an NFT to himself.
  ”Digital collections belong to a new type of business format, and laws, regulations and regulatory policies need to be improved. At the same time, the platform also needs to review and supervise the content issued. With the increase in the number of products issued on the platform, the supervision of massive products is faced by the platform. The pressure is there.” Yu Jianing suggested that ordinary players should strictly control risks on the basis of full attention and understanding. “It is not recommended to invest too much money. We should view the positive value of NFTs rationally, and also identify speculation, hype, fraud, pyramid schemes and even illegal fundraising that use NFTs as gimmicks. Do not act in a hot-headed manner and be fully aware of it. To the potential risks and possible losses that may be faced by participating in the collection.” Yu Jianing said.
  ”The world of Web 3.0 is a dark forest.” Lin Tao said, “Everyone who enters the game thinks he is a hunter, but in fact you may just be a little white rabbit being hunted.”

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