Source: China Consumer Daily
The $2.9 million purchase of NFT (NonFungible Token), the highest bid at auction was only $280, this anecdote made the NFT, which created countless myths of sudden wealth, finally walk off the altar.
Regarding the bubble risk of NFTs, the China Internet Finance Association, the China Banking Association, and the Securities Association of China jointly issued an initiative on preventing financial risks related to NFTs on April 13. The initiative proposes to resolutely curb the tendency of NFT financialization and securitization, not to include financial assets such as securities, insurance, credit, and precious metals in the underlying commodities of the NFT, and to issue and trade financial products in disguise.
Yin Zhentao, director of the Financial Technology Research Office of the Institute of Finance of the Chinese Academy of Social Sciences, told the China Consumer Daily reporter that the initiative of the three major associations not only affirmed the potential value of NFTs, but also prompted the risk of NFT speculation, laying a good foundation for further strengthening the supervision of the NFT field.
The NFT market continues to heat up
NFT is the encryption of a picture, electronic album or other digital work through blockchain technology, making it unique, avoiding the possibility of being tampered with and copied, thus forming a set of effective confirmation system.
In March 2021, Twitter's first tweet, NFT, was sold on crypto asset marketplace platform Valuables and bought by cryptocurrency entrepreneur Sina Estavi for $2.9 million. The NFT thus "went out of the circle" into the public eye, and the market continued to heat up. According to data, the transaction volume of NFTs in 2021 exceeded $23 billion.
There has also been an NFT boom in China, but domestic platforms use the term "digital collection" more often to refer to NFTs. Since last year, Internet giants including Tencent, Ali, NetEase, Baidu and other Internet giants have entered the game. Among them, Ant Group established a digital collection platform "Whale Detective" in August last year, and Tencent also launched the "Phantom Core" platform in the same period. Since then, Platforms such as Ali Auction, Baidu Super Chain, Unique Art, and Zebra Copyright have also launched digital collections.
Also scrambling to get in are digital collectors. On March 25, TME Digital Collection and Tengger released "Paradise" 25th anniversary digital vinyl, only 3 minutes after the sale, 8,000 copies of digital vinyl were sold out; on March 29, the Chinese Kung Fu series digital collection - Kung Fu Guardian, jointly created by Songshan Shaolin Temple Martial Arts Hall, Huaguan Culture and Yishu Shuzang, was sold out in 10 minutes on the line; on April 2, on the occasion of World Autism Awareness Day, the first digital collection released by The Paper, the original animated video "The Original Animation Video" A confession of love from an autistic child to his mother sold out in only 54 seconds.
Sold out on the go-live, it's synonymous with a hot digital collection. A few days ago, the reporter of China Consumer Daily tried to buy a digital collection on a platform, and on the day of sale, he pinched the shelf time of the goods to enter the purchase page, and the system prompted "too many customers, please wait." When you exit and click again, "Sold Out" is marked under the product image.
Digital collection player Xiao Zhang told the "China Consumer Daily" reporter that like the previous spring transport train tickets, digital collections should also be grabbed, hand speed, network speed, operation experience... These are all important.
Bubbles are seriously risky
While digital collections are rushing to be issued and purchased, the risk of NFT speculation is gradually emerging.
The reporter saw on some digital collection platforms that an ordinary picture of digital collections has been marked with a high price of more than 10,000 yuan. At the same time, although the mainstream platforms do not officially allow the resale of digital collections, private transactions in domestic digital collections have always existed. Some digital collections with an original price of less than 10 yuan have been speculated to thousands of yuan on some second-hand platforms, and the sellers have made hundreds of times more profits.
However, this hype comes at risk of not finding a successor. On April 7, SinaEstavi sold its first tweet NFT for $48 million on crypto asset market platform OpenSea, only to receive seven bids, with the highest bid price being less than $300. From $2.9 million to less than $300, the NFT is worth almost zero in a year.
In addition to the huge bubble brought about by the hype, NFTs also have other risks such as scams and runaways. On April 1, Jay Chou posted on social media that the boring ape "BAYC #3738" NFT he held had been stolen and suspected of being a phishing attack. According to the blockchain on-chain data tracking, Jay Chou's 4 NFTs have been sold by the attackers, making a profit of about $540,000. Xiao Zhang told reporters that recently a digital collection platform ran away, and some users lost nearly one million yuan on this platform in order to copy the bottom.
Curb the tendency of financialization and securitization
In order to prevent financial risks and protect the rights and interests of consumers, the three major associations jointly called on member units to jointly launch an initiative on April 13 to resolutely curb the tendency of NFT financialization and securitization.
The initiative proposes to practice the concept of science and technology for good, reasonably choose application scenarios, standardize the application of blockchain technology, give play to the positive role of NFTs in promoting industrial digitalization and digital industrialization, ensure that the value of NFT products is fully supported, guide consumers to rational consumption, and prevent inflated prices from deviating from the basic value law. At the same time, the true, accurate and complete disclosure of NFT product information protects consumers' right to know, the right to choose and the right to fair trade.
The initiative calls on all member units to adhere to the bottom line of behavior, do not include financial assets such as securities, insurance, credit, precious metals and other financial assets in the underlying commodities of the NFT, and issue and trade financial products in disguise; do not weaken the non-homogenization characteristics of NFTs by dividing ownership or creating batches, and carry out token issuance and financing (ICO) in disguise; do not provide centralized transactions (centralized bidding, electronic matchmaking, anonymous transactions, market makers, etc.), continuous listing transactions, standardized contract transactions and other services for NFT transactions, and set up trading venues in disguise Do not use bitcoin, ether, TEDcoin and other virtual currencies as a pricing and settlement tool for NFT issuance transactions; carry out real-name authentication of issuers, sales and purchase entities, properly save customer identity information and issuance transaction records, and actively cooperate with anti-money laundering work; do not directly or indirectly invest in NFTs, and do not provide financing support for investment in NFTs.
Yin Zhentao said that while affirming the role and value of NFTs, the core of the initiative is to curb the tendency of NFTs to financialize and securitize and prevent the resulting financial risks. "Turning cultural and artistic products into digital assets adapts to the development of the digital economy era." However, if the cultural product NFT is turned into a financial product, or hyped into an investment product, as well as the packaging, splitting and securitization of NFTs, it will bring risks. Yin Zhentao said.
In Yin Zhentao's view, there are three types of typical NFT scams: one is to package NFTs as financial products to encourage or induce everyone to speculate and speculate; the other is to trade similar stocks through non-licensed exchanges or websites; and the third is to finance and invest on behalf of borrowers.
There are still legal gaps in the digital collection
The reporter learned that in October 2021, the National Copyright Exchange Center Alliance, together with the China Academy of Art, the Hangzhou Internet Notary Office in Zhejiang Province, and the leading Domestic Internet enterprises, jointly issued the "Self-Discipline Convention for the Digital Cultural and Creative Industry". In this first self-regulatory convention in the NFT industry, the participants expressed their resolute opposition to all forms of digital collection speculation, resolutely resist any form of illegal acts in the name of digital collections, which is actually virtual currency-related activities; resolutely resist any form of illegal and illegal acts such as equity transactions and standardized contract transactions of digital collections, and oppose the financial productization of digital collections.
It is worth noting that the WeChat platform has recently taken action to regulate digital collections, and several small programs and public accounts of digital collections have been banned. In this regard, Tencent's WeChat team said on March 30 that according to relevant national laws and regulations, in order to prevent the risk of speculation in virtual currency transactions, the WeChat public platform recently standardized and rectified the public accounts and mini programs that hype and secondary sales of digital collections.
Yin Zhentao pointed out that at present, in China, the supervision of digital collections is still in a blank area, so the three major associations have taken the form of initiatives to call on member units to strengthen self-discipline. For consumers, if they do not consume from the perspective of supporting the digital culture industry, but try to make a profit by speculating on the purchase and sale of digital collections, they are likely to lose money and are not protected by law, so investment needs to be cautious.
The initiative also calls on consumers to establish a correct concept of consumption, enhance their awareness of self-protection, consciously resist NFT speculation and speculation, be vigilant and stay away from NFT-related illegal financial activities, and effectively safeguard their own property security. If relevant illegal activities are found, they should be reported to the relevant departments in a timely manner.
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The first NFT infringement case was pronounced
On April 20, the official WeChat public account of the Hangzhou Internet Court disclosed that the court held a public hearing on the same day to hear the dispute between Qice Company and Hangzhou Yuanhe And Ze Technology Co., Ltd. for infringement of the right to disseminate the information network of works, and ordered the defendant to immediately delete the "Fat Tiger Vaccination" NFT works published on the platform involved in the case, and at the same time compensate Qice Company for economic losses and reasonable expenses totaling 4,000 yuan.
It is understood that the case involves the "I am not a fat tiger" (hereinafter referred to as a fat tiger) animation image created by the IP for cartoonist Ma Qianli. The plaintiff, Qice Company, is authorized to enjoy the copyright property rights and rights protection rights of the "I Am Not a Fat Tiger" series of works worldwide. The plaintiff found that on the "meta-universe" platform operated by the defendant, some users cast and released the "Fat Tiger Vaccine" NFT, which was priced at 899 yuan. The NFT digital work is completely consistent with the illustration work posted by Ma Qianli on Weibo, and even in the lower right corner, it still bears the author's Weibo watermark. Qice Company sued Hangzhou YuanheZhou Technology Co., Ltd. to the court, demanding that the defendant stop the infringement and compensate for the loss of 100,000 yuan.
The defendant argued that it was a third-party platform, that the works involved in the case were uploaded by the users of the platform themselves, and did not need to be liable, and that after the post-mortem review found that the infringement was discovered, the works involved in the case had been punched into the address black hole and fulfilled the obligation to notify and delete.
The Hangzhou Internet Court held that the NFT platform operated by the defendant company, as an NFT digital works transaction service platform, failed to fulfill its duty of review and care, had subjective fault, and its conduct had constituted assistance to infringement. Accordingly, the Court rendered the above-mentioned judgment.
The Hangzhou Internet Court pointed out that in the absence of clear provisions in the current law, this case actively explored the nature of NFTs and NFT digital works, the definition of behavior in the NFT trading mode, the attributes of the NFT digital works trading platform, and the way to bear the liability for determining and stopping infringement, and formed corresponding judicial review standards, which are typical cases of new types involving NFT digital works.
The judge presiding over the case said that during the trial of this case, it was clear that the transaction of NFT digital works was controlled by the right of dissemination of information networks, that the NFT digital works trading platform should bear a higher obligation of review and care, and that the principle of "exhaustion of rights" in the field of copyright was not applicable to the transaction of NFT digital works. Since the NFT digital works cannot be deleted on all blockchains once the transaction transfer is completed, the court has also innovated the form of taking on the cessation of infringement of NFT digital works, that is, the infringing NFT digital works are disconnected on the blockchain and entered into the address black hole to achieve the effect of stopping infringement.