Opportunity Dividend + Notes: Let's Talk About Shanghai's Official Support for NFT Trading Platforms

Author: Oasis Chinese

On July 19, 2022, at 19:30, the Oasis Network held a Twitter Space event themed "Opportunity Bonus + Precautions: Discussing Shanghai's Official Support for NFT Trading Platforms."

On July 12, the Shanghai Municipal People's Government Office issued the "14th Five-Year Plan for Digital Economy Development in Shanghai," clearly stating that Shanghai will cultivate new data elements, including digital content and digital trade, during the 14th Five-Year Plan period. It supports leading enterprises in exploring the construction of NFT trading platforms and researching the promotion of digitalization of assets such as NFTs, global circulation of digital IP, and protection of digital rights in Shanghai.

The news immediately sparked widespread discussion in the community: What signals does Shanghai's support for exploring the development of NFTs release? What are the characteristics of NFT development in China? What are the criteria for determining excellent NFT projects?

In response to this series of questions, we are fortunate to invite Yuan Jie, Director of Investment Promotion at Conflux, Yi Ge, Analyst at Ti Capital, and Zhang Feng, Partner at Wan Shang Tian Qin Law Firm, as guest speakers to discuss NFT-related topics with the host, William, Ecosystem Product Manager for Oasis China.

This article is a review of the highlights of this AMA event, with some content edited.

Self-Introduction Segment

First, let us welcome our guests and please introduce yourselves.

Yuan Jie:

Hello everyone, I am Yuan Jie from Conflux. My work at Conflux, as indicated by my title in this event, mainly involves investment promotion for the Conflux ecosystem, bringing in and serving ecological partners. I am very happy to share with you today.

Yi Ge:

Hello everyone, I am Yi Ge, currently working at Ti Capital, based in Shanghai. As an analyst, my main research focus is on NFTs and GameFi. I also serve as a Mod, Ambassador, and white paper translator for several projects I am interested in within the industry, hoping to grow together with everyone through practice.

Zhang Feng:

Hello everyone, I am Zhang Feng, a partner at Wan Shang Tian Qin Law Firm. I entered the blockchain market in 2017 and currently provide project consulting, document drafting, and other non-litigation services in the blockchain field. Of course, I also handle some civil and criminal litigation cases, and I have years of practical experience in data compliance, cybersecurity, and artificial intelligence.

Q&A Sharing Segment

Question 1:

In the overall development environment in China, what signals do you think Shanghai's support for exploring the development of NFTs releases? What impacts will it bring?

Yuan Jie:

In fact, Shanghai has publicly supported the development of public chain technology even before this announcement of the 14th Five-Year Plan. One of the entities managed by us at Conflux, the "Tree District Blockchain Research Institute," has been developing with the support of the Shanghai Municipal Government. I believe the release of this 14th Five-Year Plan further clarifies which scenarios can be developed on public chains, with NFTs being a key focus of support from Shanghai.

Previously, many people in China had objections to using public chains, including many opposing voices. Now, the Shanghai Municipal Government has given a clear signal to support public chain technology and has indicated that non-financialized NFTs/digital assets/copyrights, and possibly game props in specific environments, are supported by the Shanghai Municipal Government.

It used to be said that as long as there was no prohibition, it could be done. However, China has repeatedly imposed strict bans on digital currencies nationwide, prohibiting the circulation of ERC20 tokens and native tokens of public chains in China, but it has not explicitly banned other things outside of tokens.

However, because it seems that ERC20 tokens and public chain tokens have been banned, many people generally feel that nothing can be done on public chains. This overly conservative attitude is not what the Shanghai Municipal Government hopes for, so they have given a positive signal again, encouraging everyone to boldly explore scenarios such as NFTs, the metaverse, DID, distributed storage, and Web3 on public chains.

For example, Conflux can be seen as a special zone for technological development, where everyone can freely experiment and wait for the industry to develop and for more mature industry rules to emerge.

This situation is very similar to the reform and opening-up of the past. When Deng Xiaoping proposed reform and opening-up, although the slogan was shouted, people were still afraid to act. It was only after Deng Xiaoping's southern tour and the establishment of Shenzhen as a special zone that more people gradually dared to try new production methods.

Currently, the slogan and policy encouraging everyone to develop NFTs/Web3 on public chains have already been announced. What remains is to see how entrepreneurs, capital, and users, the main market players, can form a vibrant and high-value market situation. This is my understanding, and I will share it here. Thank you.

Yi Ge:

First of all, since NFTs, especially those on Ethereum, still emphasize their financial attributes, I personally believe that this announcement from Shanghai is negative for secondary market trading. As an important financial hub in China, Shanghai will inevitably implement stricter regulatory measures.

However, on the other hand, this should be positive for technological exploration. The policy has created a favorable environment, encouraging everyone to actively explore the possibilities of bringing off-chain assets on-chain, storage, communication, sensory devices, and helping specific industrial chains traceability and patent confirmation. At the same time, a more competitive market environment is being cultivated, attracting more specialized individuals to enter Shanghai. Based on China's outstanding development capabilities, many practical applications that combine with the real economy may emerge, but the financial and trading aspects may be somewhat weakened.

Zhang Feng:

First of all, this certainly acknowledges the value of NFT technology applications in the development of the digital economy to some extent. In this plan, when discussing the cultivation of new data elements, it emphasizes the development of digital trade, specifically mentioning that NFT technology products are a new form of asset digitalization, global circulation of digital IP, and protection of digital rights. Additionally, in the development of blockchain digital new infrastructure, it mentions the role of NFTs in the digital transformation of virtual digital assets, artworks, intellectual property, and games.

Secondly, this also recognizes the role of NFT technology products in the confirmation of digital content rights to some extent. However, due to China's macro financial regulations and the characteristics of the domestic market, there often exists a situation where lax regulation leads to chaos and strict regulation leads to death. Therefore, it is mentioned that leading enterprises should undertake the construction of NFT trading platforms. What are leading enterprises? I understand them to be enterprises that possess the funds, technology, talent, and relevant management systems that match their business activities, have the ability to assume responsibility, and have long-term foundational development strategies.

Thirdly, this plan also places special emphasis on blockchain applications, proposing to lay out the infrastructure related to the next generation of the Internet, Web3, in advance. For example, it proposes to proactively layout new network forms, explore cutting-edge technologies such as multi-platform OpenID (digital identity recognition framework), distributed data storage, decentralized DNS (domain name resolution system), and end-to-end encrypted communication, accelerating breakthroughs in core technologies of distributed networks, and strengthening the forward-looking research and deployment of 6G, IPv6, Wi-Fi6, and quantum communication, thereby constructing a third-generation Internet technology application ecosystem for data interconnectivity. I believe these will provide a good technological and related development environment for the development of NFT technology.

Question 2:

What is your view on the development of the NFT market in China? What are the main focus areas for its development? How does China's NFT development differ from that overseas?

From the perspective of institutional investors, regarding the differentiated product of privacy NFTs currently promoted by Oasis, what do you think its development prospects are?

Yi Ge:

First of all, whether domestically or internationally, the development of NFTs is still in a very early stage, so everyone is in a phase of feeling their way across the river.

China's NFTs share three major common points with those overseas:

• Traceability: Characteristics of blockchain technology
• Narrative: Consensus, cultural dissemination;
• Scarcity: Limited releases.

As far as I know, our country regulates various virtual currencies, but NFTs do not meet the three major functions of modern monetary theory: Medium of exchange, Measure of value, and Store of value. They are neither virtual currencies nor financial products, so in my view, NFTs should be considered a technological medium.

I have observed that, compared to NFTs, digital collectibles are currently developing more vigorously in the Chinese market. Well-known platforms for issuing digital collectibles based on non-token blockchain consortium chains include Tencent's Huanhe, Alibaba's Whale Exploration, and JD's Lingxi. I understand that digital collectibles are currently an attempt by major IP holders to combine new technology with cultural dissemination, but I am not optimistic about these closed products that cannot circulate freely across multiple platforms; they are too dependent on the issuing platform.

It is evident that digital collectibles issued on consortium chains are NFTs stripped of their financial attributes. I have not conducted deeper research on digital collectibles and will refrain from commenting on their unknown aspects.

Regarding Oasis's privacy NFTs, I previously learned about them by watching a video of Linda Lu, the head of the Oasis ecosystem, introducing Army of Minion at the Coindesk Consensus Conference. NFT owners can access the underlying mathematical functions that create their Minion and store them as private data:

"Oasis Parcel has a complete permission and computation layer that allows you to set access policies for holders of data privacy NFTs. For example, you can set a time-based policy that only allows NFT holders to access at specific times; you can set access for specific computational tasks, which means you may not be able to download the NFT, but if you have a private seed for the NFT, you can use it to run a private machine learning model to generate additional art NFTs."

This reminds me of EIP-4907, which also sets a time-limited access permission. Handing NFTs over to specific individuals for a certain period may be a scenario that various protocols will explore in the future.

Question 3:

The Shanghai Municipal People's Government Office's issuance of the "14th Five-Year Plan for Digital Economy Development in Shanghai" is bound to trigger a frenzy in the NFT market.

In the face of a mixed NFT market, from a legal perspective, how should we correctly view this event? What precautions should we take?

Zhang Feng:

First, leading enterprises exploring NFT product trading platforms will mark the beginning of regulatory authorities exploring relevant regulatory policies for NFT product issuance and trading. A series of measures related to the issuance and trading of NFT products, including relevant national standards, industry standards, and of course, international standards, will gradually be established to form a regulatory system for NFTs.

Second, for other smaller platforms, compliance will inevitably be the only choice in the long run. They will adopt some gradual strategies based on their own situations, but if they ultimately cannot comply, they may only be able to exit the market. Therefore, in the long run, there are only two paths: either comply or exit.

Third, for users, they should be cautious about participating in smaller or more speculative platforms. On the other hand, they should correct their investment strategies and invest cautiously. Of course, everyone has the right to choose an investment approach that suits their characteristics.

Question 4:

Conflux is one of the earlier public chains to layout NFTs in the industry, and since the release of the "Plan" by the Shanghai Municipal Government, we have seen Conflux actively respond by launching a series of activities. Could you please introduce this to us?

And what NFT market development experiences do you think Oasis can learn from Conflux?

Yuan Jie:

First of all, some enterprises within our ecosystem have already taken action in response to Shanghai's new policies. A representative case is the project Tao Pi (淘π) incubated by our Tree District Research Institute, which has launched its own secondary platform and will gradually integrate digital products from other primary issuance platforms within the ecosystem. This reflects the benefits of a public chain ecosystem, allowing access to products from other platforms and further mutual prosperity.

Secondly, some wallets that are natively integrated with a universal identity system can further eliminate barriers and achieve further mutual prosperity. These wallets are localized for Chinese users, allowing them to log in using their mobile phone numbers and verification codes, while also assigning an address to the user, meaning the user and the wallet share the private key.

Additionally, Conflux has made layouts in Web3, DID, and the metaverse, and interested users can learn more.

The continuous development of Conflux in the NFT space is key to our comprehensive filing and qualification documents, as well as our frequent communication with the government, which allows us to genuinely provide services and assistance to entrepreneurs.

Based on the domestic market situation, we have been helping entrepreneurs who choose to build within our ecosystem by providing technical support, early seed users, market operations, and compliance under the regulatory framework, allowing them to start their ventures at a very low cost without fear of sudden bans, gradually acquiring their own users, which indeed helps solve problems for entrepreneurial enterprises.

As for the topic of learning from experiences, I believe Oasis could perhaps establish a GR department in the future to actively communicate with domestic government departments, focusing more on solving problems for entrepreneurial enterprises, enabling them to survive in China's business environment.

Question 5:

What do you think is the most important criterion for determining the quality of an NFT? And in the face of a bear market, what strategies should ordinary users adopt for NFT investment?

Yi Ge:

I will analyze this question from the perspective of "what to consider when establishing a good NFT project" and summarize the following five elements:

1. Establish the use case of the NFT project

Who will become the audience for this NFT? The NFT community is gathered around a consensus of culture or ideology. Therefore, an engaging story (the core concept of the project) can ensure the project's longevity, and a strong sense of purpose can help ignite the enthusiasm of community members to promote it.

2. Find a suitable public chain

Consider aspects such as TPS, gas fees, security, scalability, and supported NFT marketplaces when choosing a suitable public chain for your NFT project. Choosing to issue NFTs on Ethereum may attract a larger potential community of users and technical convenience, but it also comes with greater competition from similar NFT projects.

3. NFT design

The artistic design of the NFT project should align with the theme the project wants to express. Sometimes a specific art style can help the community find specific users. For example, the macaron-colored doodles were eye-catching at the time. Additionally, pay attention to the design of the NFT's utility; many projects emerging in the market are exploring the possibilities of innovating NFT usability.

4. Design of the minting mechanism

To reduce gas wars, many projects adopt a whitelist model, allowing early supporters of the community to mint ahead of time and avoid high gas fees during public releases. The minting price and method determine the cost for users to purchase NFTs. Many times, users may choose to reduce the number of mints because they do not have enough ETH to pay for gas. The private minting rounds for whitelisted users significantly reduce such occurrences. Some projects also choose to use premint as a means to distribute NFT pass airdrops to accurately reward NFT holders.

Designing a relatively fair release environment to enhance community confidence in the project is a question that every project team is constantly exploring and thinking about.

5. Build an active and engaged community

The community is one of the key factors determining whether a project can succeed. Does the community culture resonate with everyone? Are the community members genuine and active? Does the team regularly hold AMA sessions to answer questions? These are all essential factors for establishing a healthy community.

The above standards provide a basic framework, but the growth of a project also requires timing, location, and human factors.

• Timing: Liquidity, the overall market environment;
• Location: Trends, aesthetics are on point, mechanisms have no loopholes;
• Human factors: The community.

Here’s a suggestion: If ordinary users cannot deeply study or actively participate in building, it might be better to go to places with more people (blue chips), at least there is liquidity; if newcomers have limited funds, they might as well try to grind for whitelists, immerse themselves in the community, and exchange time for profit margins.

Yuan Jie:

If everyone is into collectibles, I would suggest focusing on leading platforms that are just beginning to digitize their IPs. Because when they narrate their IPs in Web3, they will definitely be willing to spend heavily to collaborate with their partners for promotion, and there is a window of opportunity to seize.

Zhang Feng:

For creators, NFTs are carriers of information expression, platforms for showcasing creative culture, and open spaces for intelligent communication. For participants, NFTs are carriers of expression and interaction. For the content expressed, NFTs are carriers of art and content. For the relationships between subjects, NFTs are carriers of social interaction and collaboration. For product carriers, NFTs are carriers of use and service. For incentive appreciation, NFTs are carriers of incentives and investment.

I believe there are three indicators: openness, intelligence, and credibility. Whether it achieves co-creation, sharing, and co-governance across three dimensions.

In an analysis I wrote discussing the new track for the development of the metaverse in Shanghai, I mentioned that the Shanghai Municipal Government's current attention to the intelligentization of the digital economy may not be sufficient, and perhaps this is something they plan to address next. However, I believe that if we can pay more attention to and make better use of massive data, it will help the digital economy achieve more efficient and scientific development.

Question 6:

For the last question, we would like to ask the three guests and all friends present to share what strategies and habits we should adopt to further enhance the security of our NFT assets.

Yi Ge:

Ensuring wallet security is the most important step in on-chain transactions. Never disclose your private key; if this step is not done well, everything else is in vain.

Secondly, some small reminders: do not list some strange airdrops; regularly clean up authorizations in MetaMask; remain vigilant about information in official Discord/Tg channels of project parties to avoid trap links; use blank wallets for free mints; never click on strange links, and do not be deceived by dazzling airdrop links.

Yuan Jie:

Verify activity/airdrop links, and try to find activity links from the project's official social media platforms, such as their official Twitter, and verify the authenticity of the project's official Twitter. Many phishing/counterfeit accounts should be approached with caution; use professional security plugin tools; be wary of any airdrop information that actively reaches out to you.

Zhang Feng:

I feel that asset security can be divided into two aspects: first, learning and mastering the relevant knowledge and skills, understanding wallets, contracts, blockchain data, application operations, and other related knowledge and skills related to blockchain NFTs. For example, mnemonic phrases should not be screenshot; they should be written down, and attention should be paid to backup; private keys must never be disclosed.

Second, grasp some necessary legal knowledge, such as not purchasing products with high infringement risks, and not buying products or services from platforms or service providers with weak credibility and serious lack of user rights protection. Be alert to fraud and market manipulation, and never directly participate in or even plan such activities.
Thank you to the guests for their answers, leading us to further understand the opportunities and precautions regarding Shanghai's official support for NFT trading platforms. Thus, this Space session comes to an end. Thank you to the guests for their wonderful speeches, and thanks to everyone present for their active participation, as well as the strong support from the media partners of this event.