The group of people who used to speculate on sneakers is now speculating on digital collectibles

Author: 0x555, Rhythm BlockBeats

"The hype around sneaker flipping and collectible toys has long faded; now the buzz in the community is all about flipping digital collectibles," said sneaker enthusiast Lao Liu.

In September 2019, news broke that the Supreme 19 FW season-opening giveaway paratrooper toy was being resold for over 2000 yuan in the secondary market, causing a stir in the sneaker community. Limited edition sneakers and trendy collectibles were wildly speculated upon, creating countless wealth myths.

However, with the subsequent regulatory restrictions on "wearing shoes instead of flipping," the current sneaker and trendy toy market has lost its former heat and is even somewhat bleak. Sneaker players now only occasionally keep an eye on the release of limited edition sneakers, turning their attention to another market—digital collectibles.

"Let me show you how profitable this stuff can be," Lao Liu sent a screenshot of a digital collectibles secondary market quote, "These images that used to cost only a few bucks or were even free can now sell for tens of thousands. Can you believe it?"

Screenshot of digital collectibles secondary market quotes circulating in WeChat Moments

The name NFT has spread to every corner, becoming a more mainstream concept than Bitcoin in blockchain applications. As the entertainment, sports, and luxury goods sectors drive this market, which is now valued at over $17 billion, the concept of digital collectibles has also gained traction.

With major companies like Tencent and Baidu establishing their presence in China, this concept has rapidly emerged. The performance of related concepts in the A-share secondary market has been astonishing, while in another non-public trading market, even more exaggerated wealth effects are unfolding. NFTs and digital collectibles, two seemingly interchangeable terms, actually have completely separate markets and players.

The New Get-Rich Dream of Young People

"Digital collectibles can earn 70,000 times; can NFTs do that?" asked Xiao Wang, a post-2000s digital collectibles enthusiast, when discussing digital collectibles and NFTs.

On September 24, 2021, Ant Group announced that, following a report from a netizen, it had taken down a transaction involving Ant Chain and Alibaba Auction that was suspected of online fraud. A user with the ID "Street Dance Genius" posted bidding information related to the "Asian Games Torch" on the auction platform. Ant Chain stated that "Street Dance Genius" included details of a digital torch collectible on the auction page, confusing buyers about the difference between digital collectibles and physical torches, which constituted fraud. Therefore, the platform removed the corresponding illegal products and took appropriate action against the user. The Asian Games Torch NFT was limited to 21,000 pieces, priced at 39 yuan, but at that time it was speculated to 3 million yuan in the secondary market, attracting over 15,000 onlookers.

Asian Games Torch NFT

This limited Asian Games Torch NFT is exactly what Xiao Wang referred to as a "digital collectible that can earn 70,000 times." Although this transaction ultimately did not go through, players do not share this view. "If it weren't for the official intervention from Ant, everyone thought it was very likely to be sold at that price," Xiao Wang said.

The exaggerated 70,000 times did not materialize, but hundreds of times still exist.

As early as June 23, 2021, Ant Chain's Fanli launched the first digital collectible "Dunhuang Feitian and Nine-Colored Deer," designed and issued by the Dunhuang Research Institute, with a sale price of 9.9 yuan + 10 Alipay points. It was later speculated on Xianyu to over ten thousand yuan, with one piece even reaching 1.5 million yuan, but less than a day later, Xianyu hurriedly took down all related products.

The disappearance of public trading platforms further fueled players' ambitions. Players formed off-market trading groups, and the "Feitian" digital collectible was speculated from thousands to tens of thousands, with different numbers fetching different prices. "Yesterday I sold it for 7,500, and today it's already 10,000; I missed out on over 2,000," lamented a player who made a 750-fold profit.

"Dunhuang Feitian and Nine-Colored Deer" digital collectible

"Most digital collectibles are priced at dozens or even a few yuan; even if you lose, it won't be much. I've looked into NFTs, but they're too expensive; I can't afford to lose," Xiao Wang said, sounding a bit dejected.

Indeed, most NFT projects now consider a pre-sale price of around 0.1 ETH (about 2,100 yuan) to be quite cheap after obtaining whitelist qualifications through various methods. For an ordinary college student like Xiao Wang, who only has a monthly living expense of 2,000 yuan, this is quite a stretch.

Digital collectibles are undoubtedly an excellent "NFT alternative" for him, allowing him to enjoy the fun of purchasing and collecting digital art at a relatively low cost for investment and financial management.

Profit screenshot of a recently sold digital collectible by Xiao Wang

Xiao Wang shared a profit screenshot of a recently sold digital collectible, saying, "What if I strike it rich?" This may represent the get-rich dreams of many young people like him in the community.

The New Plaything of Young People

"When I click on it, it shows that this thing belongs to me," said Jessica, a digital collectibles enthusiast, with uncontainable excitement in her voice. It gives her a feeling akin to owning a real artifact, stemming from humanity's most primitive desire for possession. "In a sense, I have traversed thousands of years to own it, establishing a connection with it and the ancient civilization, heroic stories, and grand history behind it."

Talking about her digital collectibles, Jessica mentioned that one of them is a digital collectible of the "King of Yue Sword," authorized by the Hubei Provincial Museum.

Digital collectible of the "King of Yue Sword" launched by the Hubei Provincial Museum

This is just one of the more than 50 collectibles she owns. During her leisure time, she opens the digital collectibles platform to zoom in and out to carefully observe the details of the collectibles. If it's a 3D work, she can also rotate it for viewing. Through 3D technology, one can see the patterns, gems, and engravings on a 3D "King of Yue Sword" up close; "the only difference is that you can't actually touch it."

Digital collectibles of "Twelve Zodiac Cultural Relics" released by Whale Explore

The issuance of digital collectibles is not difficult to see, as many authoritative institutions endorse and top IPs support them. Previously, CCTV and the legal media "Shanghai Securities Journal" entered the digital collectibles space, enhancing consumer investment confidence. Later, during the Spring Festival, Ant Chain's digital collectibles platform Whale Explore collaborated with 24 museums to issue 3D digital collectibles such as "Tiger Cultural Relics," "Twelve Zodiac Cultural Relics," and "Treasure of the Museum."

With the dual celebration of the Spring Festival and the Winter Olympics, digital collectibles, as a new form of celebration, have rapidly entered the public eye, expanding their influence, and the value of digital collectibles has begun to be discussed by the public. On January 19, digital collectibles ranked tenth on Baidu's hot search list, and the Baidu index for digital collectibles soared. "I just signed up for the lottery for Feng Zikai's digital collectible yesterday; it's probably hard to find such cultural relics' IPs in foreign NFTs, right?" Jessica introduced the advantages of domestic digital collectibles.

Baidu Index keyword "digital collectibles" search trend

When discussing asset confirmation, NFTs deployed on public chains like Ethereum have the advantage of decentralization. The blockchain is a distributed ledger where all data is public and transparent; once written into a block, it cannot be modified, thus ensuring the confirmation of individual NFT assets.

In contrast, domestic digital collectibles platforms like Whale Explore (Ant Chain) and Huanhe (Zhixin Chain) predominantly use consortium chain technology. Consortium chains treat a few equally empowered participants as validators, rather than being an open system like public chains that allows anyone to validate blocks.

The drawbacks of consortium chains are evident; transaction rules and asset ownership are not actually controlled by users but by these digital collectibles platforms.

"Who cares if it's a public chain, consortium chain, or private chain? With so many authoritative institutions backing it, big companies can't just run away like some NFT projects," Jessica stated. Most digital collectibles investors, like her, do not care whether the digital collectible truly belongs to them or to the platform. With large platforms and authoritative institutions backing them, they are more willing to believe that digital collectibles are safer compared to NFT projects that occasionally face fraud issues.

A massive consumer base has created this new market. Rhythm BlockBeats has discovered that new digital collectible projects are being released hourly in the community. On just April 1, there were 33 new digital collectibles released, priced from 10 yuan to 30,000 yuan. Some platforms even created detailed schedules for new products, complete with recommendation indices. The strategies used in stock and sneaker trading are being replicated in the digital collectibles market.

Image source: Forty Views

The Disconnection Between NFT and Digital Collectibles Markets

"Snagging digital collectibles is easy; I even taught my parents to do it with me, but I still haven't figured out how to buy NFTs," complained Kevin, born in 1990.

Compared to digital collectibles, the barrier to entry for NFTs is too high. Participating in NFTs requires a lot of foundational knowledge: learning about wallets, private keys, addresses, whitelists, minting, and more, as well as knowing how to access the internet securely, make transfers, distinguish between various public chains, and be wary of various scams and phishing links in the Crypto World. Even the language barrier is a significant deterrent for many investors.

Domestic digital collectibles platforms are easy to operate

For example, on a certain domestic digital collectibles platform, participating in a digital collectibles sale only requires three steps: entering the website, clicking to enter the lottery, and obtaining the qualification to make a payment. For many digital collectibles enthusiasts, digital collectibles provide a more accessible collecting opportunity, while the learning cost for purchasing NFTs is too high.

Sales information about digital collectibles on a sneaker news platform

"Digital collectibles are basically being paid for by young people," Kevin revealed. In the digital collectibles group he joined, very few people are over 35, with more than half being post-95s. When discussing why young people have such enthusiasm for digital collectibles, Kevin stated that some young people view this as a way to manage finances; these individuals have also experienced "sneaker flipping" and "collectible toy flipping," and the new trend is digital collectibles.

Currently, many sneaker news platforms have also integrated digital collectibles interfaces. In addition to monitoring the release of sneakers and trendy toys, various digital collectibles platforms are also included in their monitoring lists.

The simplicity of operation on major digital collectibles platforms lowers the entry barrier for new players entering the digital collectibles market. Additionally, the entry of trendy news platforms allows players to stay updated on digital collectibles sales information, further boosting the market's momentum.

The Hierarchy and Regulation of Digital Collectibles

"Isn't what you're doing with NFTs illegal?" asked Alex, who had just been exposed to digital collectibles for a month.

This question may seem somewhat amusing at first glance, but it reflects the confusion of many digital collectibles enthusiasts and is precisely the "Sword of Damocles" hanging over many NFT practitioners.

China has always had strict regulations on virtual currencies. As early as last year, the National Development and Reform Commission and 11 other departments announced that "mining" activities related to virtual currencies would be officially classified as an eliminated industry. At the same time, the central bank and 10 other departments clarified that virtual currencies do not have the same legal status as legal tender, and related business activities are considered illegal financial activities.

Although NFTs are not equivalent to virtual currencies, given the similar blockchain technology foundation shared with fungible tokens and the risks of speculation and financial productization associated with NFTs, regulatory intervention may occur in the future regarding the minting, issuance, sale, and circulation of NFTs as their applications become more widespread.

The development path of digital collectibles in China follows a business model distinct from overseas markets, exploring and establishing localized rules and standards in aspects such as issuance, sales, and circulation.

First, mainstream domestic digital collectibles platforms like Whale Explore emphasize that digital collectibles are supported by the actual value of specific artworks and do not possess any monetary attributes such as payment functions.

Second, unlike overseas markets that use virtual currencies for pricing and trading, domestic digital collectibles are priced and traded in yuan, which greatly stabilizes their value.

Third, mainstream domestic platforms are built on consortium chains, allowing blockchain technology providers to design their usage and trading rules. Digital collectibles issued on these platforms can be designed from the source to be non-transferable (i.e., not opening a secondary trading market), enabling domestic digital collectibles to achieve true "de-monetization."

In practice, strict "limited transfer" has reduced speculation to some extent, but it has also led to rampant off-market trading. A gray and black industry has emerged, with off-market trading becoming a hotspot for scams, and frauds similar to "fake guarantors" occurring frequently, with amounts ranging from hundreds to tens of thousands of yuan.

In response to issues like Whale Explore's 180-day transfer restriction, some players have even attempted to profit by drafting trading contracts for early sales, transferring goods after lifting the transfer restrictions. However, whether such contracts hold any legal validity is a big question mark. "The effectiveness of a contract is based on law. Although the contract may stipulate clauses for triple compensation, if the platform does not support resale, it has no legal effect; it's all just waste paper."

In this regard, Whale Explore's customer service responded: "Whale Explore does not support any form of resale; please beware of fraud risks."

The wealth effects created by NFTs and digital collectibles are quite similar, yet they are two distinctly separate markets, filled with prejudice and a hierarchy for various reasons. Indeed, Lao Liu, Xiao Wang, Kevin, Jessica, and Alex are a group of speculators, a group of young people with a strong curiosity about new things.

After 180 days, when the transfer restrictions are officially lifted, what will happen is unpredictable—but what can be known is that the experience of snatching digital collectibles brings them not only financial gains but, more importantly, the simple and primitive joy of collecting—just like stamp collecting.