Dragonfly: The Rise and Fall of iBox and the Path of China's "Digital Collectibles"

Original Title: 《++The Rise and Fall of iBox++

Compiled by: Hahaho, DAOrayaki

A "NFT" That Is Not So NFT?

For some reasons, China has prohibited (or at least does not advocate) cryptocurrencies at the regulatory level, but there is a vibrant market for "digital collectibles." These "digital collectibles" are similar to JPEGs (a type of image file format) and have one key difference from NFTs: they are not based on a decentralized blockchain.

Data shows that China is the country most interested in NFTs

Buying NFTs on Ethereum (ETH) is cumbersome and offers a poor user experience. First, you need to have an account on a centralized exchange (CEX), purchase ETH, transfer ETH to a crypto wallet, connect the crypto wallet to the NFT marketplace, buy the NFT, and ensure the wallet is secure and not vulnerable to hacking. The entire process can take several days to complete, with each step carrying the risk of "mismanagement."

In contrast, purchasing digital collectibles with centralized features is much simpler. You just need to download the app of a "digital collectibles" platform and then pay using a credit card, Alipay, or WeChat. Most "digital collectibles" platforms have their own enterprise chains and operate their own nodes, which also means these "digital collectibles" platforms are not interoperable.

The streamlined purchasing process has driven the widespread adoption of this model. According to the China Youth Daily, there are currently over 500 domestic "digital collectibles" trading platforms, including those supported by local internet companies: Alibaba's Whale Exploration, Tencent's Fantasy Core, JD's Lingxi, Xiaohongshu's R-space, NetEase's Planet, and Bilibili's Bilibili Digital Collectibles.

One of the most interesting platforms is Xiaohongshu's R-space, which attracts a large user base (mainly middle to upper-class women) to share and collect AR clothing, driving the development of the fashion NFT industry. In April, the platform collaborated with Shanghai Fashion Week, attracting significant attention, and related "digital fashion" topics garnered over 5.6 million views.

User Kira0131's "NFT" dress

By May of this year, coinciding with the 100th anniversary of the Chinese Communist Youth League, despite the unfavorable environment for cryptocurrencies, the official government minted 54,000 commemorative "digital collectibles" on a blockchain developed by Hangzhou Shunwang Technology, which sold out within an hour.

On July 15, the Beijing Youth Daily reported on the cost estimates for building a custom "digital collectibles" market, including functions such as minting, transferring, listing, and selling (as well as the ability to comply with or avoid regulatory sanctions related to cryptocurrencies). The current price is 150,000 RMB (25,000 USD), and demand continues to grow.

The Rise of iBox

iBox secondary market sales page, sorted by latest listings

So far, the largest "digital collectibles" platform is iBox (without the support of traditional internet giants). According to data from the analytics platform MData, iBox reached an astonishing DAU (daily active users) of 500,000 at its peak, comparable to OpenSea at its height, and about 10 times the daily active users of OpenSea in June (30,000 - 50,000).

OpenSea, LooksRare, CoinbaseNFT daily active users

As of July 20, iBox's "digital collectibles" market value was 3.8 billion RMB (approximately 560 million USD), accounting for about 2.2% of the Ethereum NFT market value calculated by Nansen (25 billion USD) (Note: It is difficult to derive OpenSea's precise market value, but assuming it is close to 20 billion USD, iBox would account for 2.8%).

Total market value of iBox's "digital collectibles" according to Analytics MData (Note: This may be overstated, but since it is not on a public chain, there are no other means to confirm)

OpenSea's daily trading volume is currently 14.3 million USD, with the highest revenue record being 476 million USD earned from Yuga Lab's Otherdeeds. According to insiders at iBox, during peak times, the platform's daily revenue was about 10 million RMB (approximately 1.5 million USD); assuming a 4% transaction fee, the estimated trading volume at that time was about 250 million RMB (approximately 37 million USD), not including the minting revenue of "digital collectibles" (which will be detailed later). Although iBox's sales have been declining since then, the numbers remain staggering.

iBox is a project incubated by Huobi in May 2021 and registered under the name Hainan iBox Technology Co., Ltd. To replicate OpenSea's success, Huobi incubated iBox and directed exchange users to the platform, forming a core user base of 100,000 DAU. However, just as the entire NFT market was heating up, Huobi's founder and largest shareholder, Li Lin, was investigated by the government and was forced to sell the platform for 100 million RMB (approximately 15 million USD) to Xuan Songtao and Tang Ling in January 2022.

The operational model of iBox is fundamentally different from OpenSea: OpenSea is merely a platform for trading NFTs, while iBox is both a platform and the sole issuer of "digital collectibles." Of course, NFT project parties can choose to mint on OpenSea, but iBox's officials actively seek out attractive IPs and promote "digital collectibles" projects themselves. Currently, iBox's most successful "digital collectibles" are from the "A Chinese Odyssey" series, with a minting price of 99 RMB (approximately 15 USD), and the highest price once sold for 10,000 RMB (approximately 1,500 USD). iBox claims to have obtained authorization for over 500 IPs, spanning art, streetwear, celebrities, animation, film and television, sports, Chinese national cultural heritage, and many other fields.

The "A Chinese Odyssey" series collectibles

Buyers of "digital collectibles" can sell their collectibles on the secondary market (for some reason, the price ceiling is set at 100,000 RMB). However, they cannot transfer digital assets to other places (such as wallets) or display them elsewhere (such as on social platforms); they are only visible to other users within the app. iBox uses this old wine in new bottles (new IP) approach to provide the platform with another massive source of income aside from transaction fees.

There have also been violations in iBox's IP curation, such as the illegal use of Taiwanese singer David Tao's image for its "digital collectibles" series, which was removed only after Tao's legal team indicated they would take legal action.

Previous "digital collectibles" advertisement

Interestingly, iBox has also adopted new "tricks," introducing airdrops and whitelist mechanisms to better stimulate collectors' FOMO (fear of missing out).

While OpenSea's NFT collectible supply standard is 10,000 pieces, most of iBox's "digital collectibles" have a supply of 400, with a mint price of 100 RMB (15 USD), functionally similar to ArtBlocks' generative art NFTs. This makes collusion among "whales" easier, as large holders form monopolies, buy up most of the supply, and then promote the project.

iBox homepage

Undoubtedly, this has led to public accusations against iBox: defrauding consumers and manipulating the market. According to an insider, many of these accusations have leaked from within the iBox team; although it is difficult to verify the authenticity of this claim, the platform itself arranges project updates or announces airdrops, making insider trading seem "reasonable."

iBox's astonishing development has also attracted the interest of scam gangs, as many professional scammers like to operate multi-level "marketing plans," and iBox has provided a breeding ground for such scams. According to insiders at iBox, these individuals negotiate to purchase iBox series collectibles and then recruit college students and retired women to work for them, promoting the collectibles to outsiders (classmates, friends, relatives) and paying them based on the number of "heads" they bring in.

A story circulated online: three college students took out loans to purchase over a hundred "cybercat" collectibles, totaling about 300,000 RMB (approximately 44,000 USD). Subsequently, the floor price of the collectibles plummeted, leading one student to commit suicide.

iBox denied the authenticity of the story, but in early June, it updated its age policy to 21-60 years old (effectively excluding college students); at the same time, iBox opened a "rumor-busting section" on its website, allowing anyone to post uncertain information to the forum, with official accounts responsible for verifying the authenticity.

iBox team denies MLM accusations

Overall, the "digital collectibles" market has downplayed the trading aspect, focusing instead on leveraging NFT technology for "collecting" and "IP promotion." Unlike iBox, Alibaba's Whale Exploration only allows collectibles to be transferred for free after 180 days, and only to the user's friends (after KYC verification); new owners can only transfer again after 730 days. To circumvent these restrictions, collectibles are often traded on secondary platforms (like Xianyu, Taobao, or WeChat groups) through word-of-mouth from intermediaries; although the profit margins for such trades are quite large, they remain vibrant.

The Decline

Since March, the trading volume of "digital collectibles" has been on a downward trend. On June 21, the WeChat platform cleared a large number of public accounts related to NFTs, including iBox's official account, which dealt a blow to the industry.

Additionally, the three major associations of China's internet have introduced stricter regulations. Under the leadership of the China Cultural Industry Association, nearly 30 Chinese enterprises and institutions jointly initiated the "Self-Regulatory Development Initiative for the Digital Collectibles Industry" on June 30, with participants including professional institutions and associations from the cultural tourism industry, some state-owned enterprises, and internet technology companies like Ant Group, Tencent, Baidu, and JD. The aim is to oppose secondary trading and excessive speculation, promote high-quality development of the entire industry, and require platforms to accept strict regulation to ensure the "safe development" of blockchain technology, as well as compliance with KYC policies.

This has exacerbated the malaise in the "digital collectibles" market, with no more collectibles being "snapped up" in an instant; it seems the "doomsday" for speculators has arrived. With the stagnation of the primary market, the secondary market has also experienced turmoil, with some platforms seeing nearly zero trading volume; smaller platforms with less cash flow, like HiNFT and iBear, have been forced to shut down, and even Tencent's Fantasy Core has been compelled to stop selling "digital collectibles" under regulatory pressure, although Tencent issued a statement assuring users that "existing collectible owners will still be able to hold, display, or request refunds."

However, VCs still seem interested in the "digital collectibles" space, perhaps not wanting to fall too far behind their global peers, actively positioning themselves in the "bear market."

Conclusion

So far, there are mainly two ways to record data information: storing it in private company databases or recording it on public chains. Therefore, when some people oppose using NFTs to record ownership of digital artworks, they may mean: "It is better for a company to centrally manage 'who' owns what."

The advantage of NFTs is that they eliminate "management" from the recording process. You can control your wallet, control your tokens, freely buy or sell, and choose to display them in any virtual space, interacting with people from around the world in an open metaverse. But currently, in this "land," our choices seem limited.

At this point, the iBox model does not appear ideal, and I would not be surprised if it ultimately fails. We still need NFTs; even overseas, platforms like Element and X2Y2 are still developing (both teams have Chinese members or support Chinese), and we remain optimistic and seek ways to integrate into this industry.

I think the decline of iBox can be simply attributed to: users' trust in these "digital collectibles" is limited because they vaguely understand that these "collectibles" are only stored on iBox's servers: whose digital collectibles are they, iBox's or "mine"?

In my view, one thing is undoubtedly clear: public chains like Ethereum will outlast platforms like iBox. When regulatory "black swans" arrive, the "digital collectibles" market is on the verge of collapse, many platforms will shut down, and the "digital collectibles" on those platforms will evaporate.

Perhaps they never existed.