On the evening of August 21, a number of we-media companies in the blockchain field, such as Golden Finance, Huobi information, Daily currency reading and Deep Chain Finance, were officially blocked by wechat. All articles and information about blockchain and digital currency posted on the banned official account have been ordered to be blocked. Subsequently, Baidu also implemented a comprehensive blockade on the post bar involving the coin circle, the coin circle bar, digital currency bar, virtual currency bar and other well-known post bar has been all banned, even some unknown cryptocurrency project post bar disappeared without a trace in an instant.
When talking about blockchain, people inevitably think of ICOs (initial coin offerings), because the popularity of blockchain technology is due to the popularity of virtual currencies. So-called ICOs are a common way of raising money for cryptocurrency projects, with startups raising money by publicly pre-selling crypto tokens to enthusiasts and investors. Generally speaking, there are two main ways for speculators to gain benefits through token trading, one is mining and the other is investment. The reason why the above public accounts and tieba were banned by the official platform is that startups use public accounts and other related channels to illegally raise funds to obtain benefits, and the closure of relevant blockchain, token and other communication channels also shows the chaos of the blockchain token market.
After regulation, ICOs are in sheep’s clothing
In fact, the ban on virtual currency, on September 4, 2017, led by the People’s Bank of China net letter office, the ministry and state administration for industry and commerce, the China banking regulatory commission, securities and insurance regulatory commission issued by the seven ministries and commissions such as “for the issue of financing to prevent tokens announcement” (hereinafter referred to as “notice”), points out that in scrip issue is essentially a kind of illegal behavior of public finance, without approval And to all kinds of token issuance financing activities to ban requirements.
After the announcement, the start-up platform of the coin circle faces two choices. One is to “go to sea” and continue ICO projects in countries with relatively loose regulatory policies. For example, Huobi moved to Singapore after the regulation and set up subsidiaries in Hong Kong, and also launched the South Korean version and; The other is to continue to exist in the domestic market by stealth and continue to carry out ICO projects in the face of legal risks, just like the platforms mentioned above. There are three reasons why coin issuers are willing to take such risks with icOs.
One is to capture the mentality of investors who want to “get rich quick”. Bitcoin is undoubtedly known as the most successful ICO project in the coin community. Bitcoin has gone from 1,300 bitcoins per DOLLAR in 2009 to a peak market value of $20,000 today. Taking history as a guide, bitcoin has generated such huge margins in recent years that many investors are particularly jealous and have invested in various ICO projects. In their view, the current virtual currency market has been relatively mature, under such a big wave, they know they are leek, but always flatter the principle of “be first, make money and run” into the market, and then enter the market to try to make themselves into a wave.
The second is to issue tokens under the cover of blockchain technology. The implementation of the coin issuing supervision policy makes people shift their attention from virtual currency to blockchain technology, and such a shift also provides opportunities for domestic coin issuers to hide ICO projects. 2018 is known as the first year of China’s blockchain, and according to public data, since the second half of last year, up to 485 new blockchain media and we media have been added. More surprisingly, the number of public accounts with the word “blockchain” in the name has exceeded 400,000, which has even exceeded the low threshold of health care wechat public accounts. In the hot wave of blockchain technology, coin issuers who fish in troubled waters have a good living environment.
Third, ICO does not need to register a business license. Different from the initial public offering method (IPO) of joint-stock companies, ICO does not need to register relevant business licenses in the financing process. Meanwhile, ICO platforms are third-party neutral platforms, and investors bear all risks in the project by themselves. In addition, most of the supporters on the platform are not professional about virtual currency, and the blind investment behavior of following the trend has led to the wild growth of ICO platforms.
Under these three market conditions, coin issuers have put on the sheep’s clothing of “blockchain” and cut leek crazily in the gray area of empty hands. Visibility issuing by the public, and smaller in the post bar with lower threshold, such as the spread of the channel to get market flow, while well-known large bigwigs use their IP, even if the project content in general, the white paper, can in a short span of days get hold thousands of market financing, moreover after several hours of lectures alone could win a large number of investors into the office.
After the “Announcement” supervision, coin issuers from speculation to speculation chain, and then through the formation of group chat and other ways to issue coins, a variety of tokens also appeared in the market. In the face of such a rapidly growing token platform, someone once described the heat of the coin circle, “the coin circle is too hot, the chain circle is not enough.”
Blockchain is no refuge, and the gray area is darkening
Many ICOs have survived regulation in the domestic market by using blockchain technology, the underlying technology of virtual currencies. ICO platforms treat blockchain as a refuge. In this gray area, the sheep’s head of “blockchain” is hung, but the dog meat of “virtual currency” is sold. As more and more platforms came to the shelter, the chaos in the shelter ushered in the darkest moment of the second wave of supervision for the “asylum seekers”.
On one hand, coin issuers are eager to achieve, the market appears fake chain bubble crisis. For money, only when it can be circulated in the market can its true value be realized. Early ICO platforms use blockchain technology to constantly improve the management and circulation of money, and these issued virtual currencies can be converted into legal coins in the market to realize their value. For example, Bitcoin can be used to buy pizza at the initial stage, while Ethereum can be used to buy aviation insurance.
However, as the number of investors gradually increases, the price of virtual currency also rises with the rising tide, and the coin issuers, who control the majority of mining machines, are gradually lost under the drive of interests. ICO platform from carefully prepared white paper to no white paper can easily obtain investment phenomenon, it is enough to see that the ICO project of coin issuers has tended to profit.
Take Tea Chain, the world’s first credible and efficient tea trading platform, for example, which launched a large-scale publicity campaign in Shanghai at the end of July. Bookmakers use lectures, advertorials and other forms to promote the advantages of “tea chain”, the tea chain into the blockchain anti-counterfeiting traceability, trust transactions. However, the project manager was accused of ordering the company’s employees to misappropriate investors’ funds in a premeditated scheme that involved hundreds of millions of yuan in fraud. Coin issuers in order to circle money has been regardless of eating phase, multifarious “air chain” has become their empty – handed white Wolf circle money means.
Secondly, the lack of professionalism of currency speculators leads to a vicious circle in the investment market. Interest is not only driven by coin issuers, high returns are a huge temptation for high-interest investors. However, for these inexperienced virtual currency investors, they can only choose blind investment due to their lack of professionalism. After the number of participants reaches saturation, large players or coin issuers who hoard virtual coins start to sell, increasing the amount of coins available for trade in the market and reducing the market value of the currency. The big players end up making millions, while the smaller players fall off a cliff and lose everything. Even Bitcoin, a virtual currency that has been on the market for nearly a decade, has fallen below the $7,000 mark in just a few months, after peaking at $20,000 a coin.
But even with such warnings, investors are piling in. And when they are in it, they know that they need new entrants to minimise their losses, so they try to attract new leeks. The increasingly frequent harvesting of the “leek garden” has failed to create much value for the big players, leaving only chicken feathers everywhere.
How to do a qualified investor in the face of a chicken feather?
Investors, who tend to be keen first movers, may also become blockchain martyrs. How do investors practice a pair of sharp eyes in the pseudo-blockchain investment circle of token prevalence?
First, take the law as the bottom line and follow national laws and regulations. Public data shows that 48.3% of netizens believe that the announcement has impacted token trading platforms, while 47.3% of netizens believe that it is the beginning of relevant departments to rectify the chaos in the token market, which will be conducive to cleaning up the whole of China’s token market. In the first half of 2017, the total number of projects funded by virtual currency in China reached 2.6 billion yuan, and 105,000 people participated. But the token is not the currency in the legal sense, there is no national reputation as endorsement, it is easy to rise and fall and even issuers run away. Therefore, investors should take national laws as the bottom line when investing and protect their rights and interests when choosing investment products.
Second, when the tide goes out, you never know who’s swimming naked. This is the coin circle will brag from the media platform founder Bi Weilun used to cheat leek, also applies to leek how to do a qualified blockchain investor. According to data, there are nearly 86,000 blockchain projects on the site, but only 5% of them are alive and 90% of them are inactive. Investment in the coin-sphere is based on blockchain, with pseudo startups luring investors into the market with huge investment returns. The most famous ponzi scheme in the currency circle belongs to Wright China. They claimed that future transactions between wechat, including wechat merchants, would use their “wechat business coins” for settlement. Later, it was revealed that they ran away after raking in 200 million yuan, and the registered address of the company was empty. Investors should also be careful to avoid the beauty trap when facing investment products with gorgeous appearance.
Third, we should be alert to the “return of the ghost” in the currency circle. At the end of the day, after ICO was severely regulated by the state, virtual currency trading platforms change their practices, and there are not a few institutions that issue coins in the coat of blockchain. In the name of “financial innovation” and “blockchain”, criminals absorb illegal funds by issuing so-called “virtual currency”, “virtual assets” and “digital assets” in order to infringe the legitimate rights and interests of the public. A qualified investor should be on the alert for coin issuers to perform the magic of “borrowing from the chain” again, so as to avoid becoming a leek waiting to be cut.
Baidu, Tencent and other large platforms on the ban of coin issuers, let the savage coin circle ushered in a moment of cleansing. But even in the current situation, there is no lack of investors who want to take the opportunity to “pick up the slack”. In the current market, as of August 21, CoinMarketCap’s total market value of digital currencies was more than $211.5 billion, down three-quarters from its peak. Even if the bubble of the currency circle is beautiful, it will eventually burst under the irradiation of the sun. Investors who want to enter the currency circle in defiance of the country’s ban and carve up the “cake” need to be rational and do not become the leek to be cut by the makers in the pseudo blockchain.
Article/Liu Kuang public account, ID: Liukuang110, this article first leek finance