One of the best kept secrets in our industry is that despite the ban on cryptocurrencies in China, it has a vibrant “NFT” market. These NFTs have all the qualities of our beloved JPEG with one key difference: they don’t exist on a decentralized blockchain.
Buying NFTs on Ethereum is a bad user experience. You have to open an exchange account, buy ETH, transfer ETH to a crypto wallet, connect your crypto wallet to the NFT marketplace, buy the NFT, and then secure the wallet. The entire operation can take days to complete, and every step is fraught with dangers of mismanagement. On the other hand, to buy a centralized Chinese “NFT”, you need to download an NFT platform app and then check out with your credit card or Tencent’s WeChat wallet. Most of these “NFT platforms” control their own enterprise blockchains, running their own nodes within them, which means that NFT platforms are not interoperable.
The simplified process of purchasing these NFTs facilitates mass adoption. “China Youth Daily” reported that there are currently more than 500 local NFT trading platforms in China, including platforms supported by every technology giant in China: Alibaba’s WhaleTalk, Tencent’s Magic Core, JD.com’s Lingxi, Xiaohongshu R-Space, NetEase’s Planet, Bilibili’s “Bilibili Collection”, etc.
One of the most interesting platforms is Xiaohongshu’s R-space, which pushes the fashion NFT industry forward in a meaningful way by attracting a large number of its own user base to share and collect AR. The tech unicorn’s April collaboration with the prestigious Shanghai Fashion Week drew attention and applause, with the “digital fashion” topic on the platform garnering more than 5.6 million views.
The rise of iBox
By far the largest platform to collect these “NFTs” is iBox, which is not backed by any of the Chinese tech giants. According to Chinese analytics platform MData, iBox’s DAU reached a staggering 500,000, on par with OpenSea’s best days, and about 10 times more than OpenSea’s June DAU of 30K-50K.
OpenSea, LooksRare, CoinbaseNFT Daily Active
As of July 20, the market value of NFTs on iBox was 3.8 billion yuan (about 560 million US dollars), accounting for about 2.2% of the market value of Ethereum NFTs (25 billion US dollars according to Nansen data) (it is difficult to separate the actual market value of OpenSea, But let’s assume it’s closer to $20 billion, which would make iBox 2.8% of that).
According to iBox insiders, iBox made about 10 million RMB (~$1.5 million) per day in its heyday; since they charge a 4% transaction fee, we can estimate their transaction volume up to 250 million RMB (~$1.5 million) per day $37 million), even without accounting for their NFT minting revenue (more on that later). By comparison, OpenSea currently has a daily trading volume of $14.3 million, although at its peak its revenue was as high as $476 million, mainly from Yuga Lab’s Otherdeeds decline. iBox sales have undoubtedly been declining since then, but the numbers are still staggering.
The key is: it turns out that iBox was incubated by Huobi in May 2021 and merged into Hainan iBox Technology Co., Ltd.To replicate the success of OpenSea, Huobi incubated iBox and pooled the exchange’s users onto the platform, forming their first core user base of 100K daily active users. However, just as the NFT market heated up, Huobi founder and largest shareholder Li Lin was investigated by Chinese authorities and forced to sell the platform in January 2022 for 100 million yuan (about $15 million) Xuan Songtao and Tang Lin.
iBox operates in a completely different way than OpenSea. OpenSea is just a platform for trading NFTs, while iBox is both the platform and the only NFT issuer. While select NFT project teams can choose to use OpenSea for minting, the iBox official team will go to find attractive IPs and market NFT projects on their own. iBox’s most successful NFT work is the collaboration on “Westward Journey,” a 1995 two-episode Hong Kong fantasy comedy film directed by Lau Chun-wai and starring superstar Stephen Chow. The former has a mint price of 99 yuan (about $15) and peaks at 10,000 yuan (about $1,500). To date, iBox claims to have acquired more than 500 licensed IPs, spanning the fields of art, streetwear, celebrities, animation, film and television, sports, Chinese national cultural heritage and many more.
Buyers of NFTs can sell them on the secondary market (for some reason, the price of any NFT is capped at RMB 100,000~$15,000). Your digital asset cannot be transferred or displayed elsewhere; it is only visible to other users of the application. iBox repeats this process regularly with new IPs – another source of its incredible revenue, in addition to the 4% platform transaction fee it charges.
iBox’s IP curation has also resulted in a number of breaches. For example, the platform illegally used the image of Taiwanese singer-songwriter Tao Zhe for its NFT collection, which it removed only after Tao’s legal team threatened legal action.
While OpenSea’s standard is the 10K PFP series, most iBox series offer 400 for 100 yuan ($15), and function similar to ArtBlocks’ generative art. This makes it easier for whales to collude and encourages users to form coalitions to buy most of the supply and then vouch for the project.
This has led to numerous allegations of fraud and manipulation by iBox. Many of these allegations were made by the iBox team themselves, according to an insider. Although difficult to prove, insider trading would be trivial since they were the ones who arranged the most important release updates and announced the airdrop.
With the strong development momentum of iBox, the micro-business community also began to flip these NFTs.Unsurprisingly, iBox’s phenomenal growth eventually sparked interest in serial scams. Many professional scammers in China like to engage in multi-level marketing programs, and iBox is the perfect breeding ground for them. According to iBox insiders, these people coordinate the purchase of iBox collectibles, recruit college students and retired aunties, etc. to work for them, and sell the collectibles to their friends, paying them for the number of new entrants they introduce.
Recently, a story has circulated that three such college students took loans to buy three or four hundred “Cyber Cats and Dogs” series, with a total value of about 300,000 yuan (about 44,000 US dollars). Then the reserve price of the collection suddenly plummeted, causing a student to commit suicide. The school allegedly reported the incident to the police.
iBox vehemently denied the story, but in early June it updated its age policy to 21-60, excluding young college students.It’s worth noting that iBox also has a tab on its website where anyone can post rumors publicly, and its official account attempts to disprove many of them.
Overall, the Chinese digital collectibles market has played down the transactional element and instead pushed the collectibles and IP ownership aspects to NFT technology. Unlike iBox, Alibaba’s (Alipay) whale finder only allows free transfer of NFT after 180 days of holding, and then only allows users who complete KYC. New buyers can only transfer NFTs again after 730 days! However, to circumvent these restrictions, transactions of these NFTs are often hidden on secondary platforms such as Alibaba’s own Xianyu, China’s eBay or private WeChat groups, spread by word of mouth through trusted brokers and middlemen. So while the spreads on such deals tend to be large, a grey market still exists.
end of an era
The number of centralized digital collectibles in China has been on a downward trend since March, but the industry’s first major blow came on June 21, when WeChat purged NFT-related public accounts, including iBox’s own official account. account.
In addition, China’s three major Internet associations have also issued stricter regulations. On June 30, under the leadership of the China Cultural Industry Association, nearly 30 Chinese enterprises and institutions jointly launched the “Digital Collectibles Industry Self-discipline Development Initiative”. The goal is to oppose secondary trade and speculation and promote the quality development of the entire industry. The parties involved in this self-regulatory development plan include cultural and tourism professional institutions and associations, as well as Internet technology companies such as Ant Group, Tencent, Baidu and JD.com. In terms of industry coverage, this is by far the most extensive self-regulatory practice in China. More specifically, the association requires platforms to be licensed under strict permissions to ensure the security and control of blockchain technology and compliance with KYC policies.
This black swan has exacerbated the gradual prosperity of China’s digital collectibles market. Instantly sold-out series are a thing of the past, and speculators are waking up from a midsummer night’s dream. With primary sales stagnating, there has also been turmoil in the secondary market, with some trading platforms seeing near zero volumes. Smaller platforms such as HiNFT and iBear that traded less were forced to close their stores. Even Tencent’s Magic Core was forced to halt sales of NFTs after facing increased regulatory pressure, though Tencent issued a statement reassuring users that “owners of existing collectibles can still hold, display or request their return. the property of.”
Surprisingly, however, iBox rejected this development path. On Aug. 12, iBox also raised an undisclosed amount from Yibao Pay amid dwindling user numbers and falling prices.
Despite the nascent growth and trading volume, VCs still appear to be interested in the Chinese NFT space, perhaps not wanting to lag too far behind their global counterparts, who are still actively deploying capital during the crypto winter.
Ultimately, the rise of the internet economy seems unstoppable. That’s why we Chinese want to buy NFTs – stores with digital meme value – even as our government tries to restrict us.
After all, so far, humans have only found two ways to record ownership of digital objects: either some company writes it to a private database, or it records it on a public blockchain. So when critics object to the use of NFTs to record ownership of digital art or collectibles, what they really mean is that they would rather have some company in charge of who manages who and what records.
The beauty of NFTs is that we exclude “who”. You can own the token in a wallet you control, buy and sell it anytime, anywhere, display it in any virtual gallery of your choice, play it in any open Metaverse world, and interact with people from all of them at the same time within the globe.
In the end, the iBox model doesn’t seem to work, and I wouldn’t be surprised if it ends up being a failed experiment.However, the Chinese still want NFTs. Even overseas, markets like Element and X2Y2 are on the rise (both teams have Chinese members/full Chinese support) as people are still optimistic about these tokens and are looking for ways to enter this vertical.
I think iBox’s decline can be explained simply: there is a limit to how much users are willing to trust digital collectibles on iBox because they implicitly understand that these NFTs only exist on iBox’s servers in China. To truly believe in the autonomy of iBox’s digital collectibles, one needs to believe that iBox will survive for decades. It’s hard to imagine.
There is no doubt that Ethereum and other public blockchains will outlive iBox and its countless competitors. After the brutal summer NFT crash, many Chinese NFT platforms have gone out of business, and the NFTs traded on them simply evaporated as if they never existed.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/the-rise-and-fall-of-ibox/
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