Blockchain game mining legal risks: new currency mining

Introduction:

On February 21, 2023, Binance launched the For the 47th phase of project Portal, users can obtain Portal token PORTAL rewards by staking BNB and FDUSD on the Launchpad website.

The previous Axie Infinity surged from an initial price of $0.1 to $164.9 during the Binance Launchpad sale. The return rate is as high as 1649 times. It is the most profitable project on Binance Launchpad.

So, will there be any legal risks for users with investment methods in cryptocurrency circles such as Launchpad?

Binance Launchpad and Web3 Gaming Platform Portal

Binance Launchpad is a virtual currency investment method. For project parties, they can sell their tokens on the Launchpad platform to raise funds for the project; for investors, they can buy new coins to be listed at cheap prices.

Portal is a Web3 game platform. The website lists more than 200 games, covering various genres such as MMORPG, strategy games, and survival games. Portal Gaming aims to connect games and players on different blockchain networks based on LayerZero, establish a unified Web3 game ecosystem, and provide players with access to a large number of games and game distribution opportunities.

Portal Coin is the universal token of the Portal gaming platform and can be used for platform management, buying and selling items in the game, etc.

Users can obtain Portal token PORTAL rewards by staking their Binance platform tokens BNB and FDUSD, and PORTAL can be mined for a total of 7 days. As of February 27, 2024, according to data from Binance’s official website, the PORTAL mining pool has pledged more than 8 billion US dollars in assets, of which the BNB mining pool has deposited more than 16 million BNB (about 6 billion US dollars); the FDUSD mining pool has deposited Approximately over 200 million FDUSD (approximately US$2 billion) were deposited.

Binance, Huobi, Ouyi and other exchanges have launched many Launchpads, such as Binance Exchange. In addition to Axie, the platform has launched Web3 game projects such as The Sandbox and StepN. All reaped huge rewards.

For the exchange, by launching the Launchpad project, more users will purchase the exchange’s platform currency on the exchange, which will also help improve the The price of the platform currency, for the project side, is also a channel for accumulating users and project currency issuance. For users, there will be profits from selling new coins in the future. Kill three birds with one stone.

So when investing in new currency mining for Web3 game projects, is there any possibility of losing money?

The prerequisite for participating in Launchpad is to hold the platform currency of the exchange. For example, in the Portal new currency mining project, users need to deposit BNB and FDUSD. During this pledge period, if the platform currency held by the user drops, after the mining period expires, although the user will receive the project token reward, he will still lose money. platform currency. Of course, the more you invest, the more you lose.

Assuming that the platform currency price is stable, if the token rewards obtained by users participating in Launchpad are airdrops, then no matter the value of the project token , for users, it is indeed a sure profit but not a loss, but if they need to use the platform currency to purchase new coins, whether the user will make a profit or a loss depends on the price at which the new coins are sold after the new coins are listed in the future. . If the listing price is lower than the subscription price, the user will make a loss; if the listing price is higher than the subscription price, the user will make a profit.

If a user suffers a loss while participating in Launchpad, how can he safeguard his rights?

Just tell the answer: do it at your own risk.

Lawyer Shao’s previous article "What are the legal risks of investing in ICO projects overseas?" 》We have analyzed ICO (Initial Coin Offering). The white paper of the ICO project is almost the only source of information for investors to understand the project. The risk of the project running away is extremely high.

Launchpad is essentially an IEO (initial exchange offering, initial exchange offering), because it is only after the exchange reviews that the project is launched on the exchange. Compared with ICO, the risk will indeed be lower.

But whether it is an ICO or an IEO, there are policy risks in our country. The "Announcement on Preventing Financing Risks of Token Issuance" on September 4, 2017 mentioned that an initial coin offering (ICO), which raises so-called "virtual currencies" such as Bitcoin and Ethereum from investors, is essentially a The act of illegally publicizing financing without approval. Some criminals also issue tokens in innovative forms such as ICO, IFO, and IEO, which are highly concealable and deceptive.

In other words, because this type of investment activity itself is not legal in our country, even if the investment suffers a loss or the platform runs away, it is difficult for users to protect their rights.

For Web3 game project parties, what are the legal risks involved in participating in Launchpad for IEO?

For project parties, the biggest risk caused by policy risks is criminal legal risks. If the project conducts an IEO to domestic customers, it may be suspected of illegally absorbing public deposits. The illegality, publicity, inducement, and non-specificity of the non-smoking charges all meet the characteristics of both ICO and IEO - publicity to unspecified users violates domestic policies, and inducement is legitimate. It is because of the possibility of profit that users will pledge platform coins to obtain new coins.

Conclusion

This article is based on Binance’s recent launch of Web3 Taking the game project Portal as an example, we briefly analyze the gameplay and legal risks of new currency mining. In the next article, let’s talk about staking mining in Web3 games.