5% of NFT scammers make 80% of profits

With the support of Jay Chou’s traffic, NFT will become popular again at the beginning of 2022.

On January 1, the metaverse platform Ezek and Jay Chou’s streetwear brand launched the first limited-edition NFT project Phanta Bear (phantom bear), and the project with a total price of 62 million yuan was snapped up in about 40 minutes. As of 12:00 noon on January 7, the floor price of Phanta Bear NFT on the trading platform was 0.9 Ethereum (about RMB 18,727), an increase of 246% compared to the issue price.

Why are consumers willing to pay high prices for images like Phanta Bear? The Times Weekly reporter recently lurked in several NFT exchange groups and communities and found that domestic NFT traders are mostly young people, and their daily exchanges are more focused on the “investment” attribute of NFT products.

“My friends around me have made hundreds of thousands of dollars in the past year by trading NFT avatars.” Li Jie (pseudonym), a player who hoarded more than a dozen NFT images, told the Times Weekly reporter that he recognized the collection value of NFT images and started NFT products. Hope to sell at a higher price in the future.

The full name of NFT is Non-Fungible Token (Non-Fungible Token). It is regarded as an entry in the blockchain and is a unique asset in the digital world. It can be bought and sold and used to represent some commodities in the real world. The way it exists is invisible. In foreign countries, most of the NFT primary issuance platforms support buyers to remit the purchased NFTs to the secondary trading market platform (such as: Opensea) for trading. Users can buy and sell NFT collectibles again in the secondary market to Earn the difference.

Since 2021, the NFT market has exploded and transactions have surged. As of early December 2021, the cumulative transaction volume of NFT trading platform OpenSea in 2021 reached $12.91 billion.

However, there is no shortage of scams and information leakage risks in NFT transactions. “Some scammers will implant fraudulent websites in the hidden links of NFTs. When the collectors enter the fraudulent websites, the wallet password can be read through some technical means, and the assets will disappear.” Li Jie told the Times Weekly reporter.

In this wave of NFT craze, the real winner in the end is likely not to speculate in the NFT field. A report by research firm Chainalysis pointed out that NFT transactions are dominated by retail investors, with about 5% of users earning 80% of the transaction profits.

Will the NFT market be another speculative “tulip bubble”?

attractive wealth effect

Everything can be NFT, music, pictures, even a poem can become an NFT as long as it is uploaded on the chain. Tianfeng Securities Research Report pointed out that digital collectibles are one of the fastest application scenarios for NFT landing. At present, the application fields of NFT are mainly concentrated in the fields of collectibles, artworks and games.

“The technical threshold for digital products to be put on the chain is not high, as long as the smart contract is called.” Mark, a technician from a crypto asset exchange, told the Times Weekly reporter that community operations are more important in NFT circulation, and those with active trading volumes There is often a large community behind the NFT digital collectibles that believe in the same culture, so that people are willing to pay.

NFT trading surged and the market went crazy. Behind the “crazy” is the wealth effect and celebrity effect brought by NFT.

Before Jay Chou entered the game, the Korean phenomenal boy group BTS (Bulletproof Youth League), director Wong Kar Wai, singer Lin Junjie, Brazilian football legend Pele, NBA star Curry, etc. all tried to sell their “assets” in the form of NFT.

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Phanta Bear’s quotation on NFT trading platform OpenSea (Source: Screenshot of OpenSea’s official website)

Take BTS as an example. The parent company behind it, HYBE, announced its entry into the NFT market as early as November 2020, planning to sell BTS members’ electronic cards. The cards can be collected or traded, similar to the limited-edition physical photo cards fans already collect. But the difference is that these cards play music when clicked, or the content of member interviews.

After the outbreak of the new crown epidemic, online performances have developed rapidly, and NFT has become a new peripheral product that stimulates fans’ consumption. Virtual apparel is another popular area of ​​NFT trading.

DressX is the world’s largest virtual (clothing) fashion platform, which estimates the potential market for virtual clothing to be as high as $31 billion. Its co-founder Daria Shapovalova said publicly: “Gamers are known for buying ‘skins’ in games, and our customer base is dominated by millennials and Gen Z. They love new things and buy virtual clothes to spruce up their social accounts.”

More domestic NFT transactions are mainly young people, and their daily communication is more about the “social” and “investment” attributes of NFT products. Xiao Liu, a post-90s NFT player, told the Times Weekly reporter that NFT products are more of a status symbol. “In the metaverse world, we also need some digital products to dress up our virtual images. The prospect of the OpenSea trading platform is very worth looking forward to.”

OpenSea is the world’s largest NFT trading platform. The platform allows users to buy, sell and mint various types of NFTs, and OpenSea takes a 2.5% commission from each transaction amount.

“In the past year, the price of many NFT images has increased very considerably. A friend bought a popular NFT image early last year, invested tens of thousands of yuan, and earned hundreds of thousands.” NFT image player Li Jie (pseudonym) told the Times Weekly reporter Express.

It is difficult for retail players to make money

The investment attributes of NFT attract many players to enter the market, but it is not easy for retail players to make money.

Times Weekly reporters found in several NFT exchange groups lurking recently that the daily exchanges of group members basically revolve around the ups and downs of NFT digital collections. A group of friends told the Times Weekly reporter: “You can think of NFT as an alternative investment product. Buying and selling NFT digital collections is no different from speculating in coins and shoes.”

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The rise and fall of the most actively traded NFT digital collections on the OpenSea platform in the past 7 days (Source: Screenshot of OpenSea’s official website)

In September 2021, a report issued by the research agency Chainalysis stated that among all NFT transactions, the transaction volume from retail investors accounted for 81% of the NFT trading market. According to the report, about 5% of users earned 80% of secondary market trading profits, and the remaining 95% of users fiercely grabbed the remaining 20% ​​of profits.

“Many players who invest in NFT have come from the currency circle, but the risk of investing in NFT is greater than that of speculating in currency. NFT products have weak liquidity, and there are not enough opponents to receive the goods.” Mark said.

In addition, there is no shortage of scams and information leakage risks in NFT transactions.

The Times Weekly reporter found in the latent NFT exchange group that people in the group published advertisements such as “registration of the most popular NFT digital collection operation platform”, “NFT project lottery”, and “NFT airdrop” from time to time. These advertisements are accompanied by links and QR codes to induce users to download the app or register for the platform.

The Times Weekly reporter completed the registration on a platform called Odin NFT, which prompted the task to get a cash red envelope. A platform user told the Times Weekly reporter that the platform needed to invite multiple friends to register with their real names to complete the withdrawal earlier.

In addition, NFT transactions also have the risk of funds being stolen. “Some scammers will implant fraudulent websites in the hidden links of NFTs. When the collectors enter the fraudulent websites, the wallet password can be read by some technical means, and the assets will disappear.” Li Jie told the Times Weekly reporter. .

A week ago, Todd Kramer, the owner of a New York gallery, said on social media that 15 NFTs worth about $2.2 million had been stolen by a phishing scam.

There are also some fake or flawed projects on NFT trading platforms. “Last week, I invested in a project called VultureSwap. Due to some loopholes in the contract, it was hacked and the project fell by more than 90% on the day it went live,” said Mark, who lost tens of thousands of yuan in just a few hours.

“There are also some project parties that will directly take the investors’ money and run away.” Mark added.

Based on existing regulatory policies, the virtual currency value and hype value of NFT assets are strictly limited in my country.

Xiao Sa, a partner of Beijing Dentons Law Firm, said recently that, different from overseas NFT trading platforms, there are no scenarios such as secondary NFT transactions, transfer gifts, etc. in China at this stage, and NFTs have not yet experienced the trend of financialization. However, the strong domestic supervision of financial behavior will not change. Based on the current risks of NFTs, we should focus on improving the legal compliance awareness in investing in NFTs, and strengthen the supervision and prevention of potential risks in the industry.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/5-of-nft-scammers-make-80-of-profits/
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