Crazy Wankecoin Investigation: Virtual War and Gambling of Interests between Xunlei and Cryptocurrency Players

At 4 p.m. on November 21, Eastern Time, Xunlei, a Chinese stock listed on the Nasdaq, closed with a surge of 13.01%. Such a single-day increase is already the "new normal" for Xunlei. In just three months, under the leadership of the new CEO Chen Lei, Xunlei's stock price rose by more than 450% through a blockchain experiment "Wanke Cloud". But what rose even higher than Xunlei's stock price was the virtual digital asset "Wanke Coin" originally intended to be used to incentivize "Wanke Cloud" users. With the pursuit of many players and exchanges, the increase was more than 10 times. Pandora's box has been opened, and how Xunlei tames the alienated "Wanke Coin" will be related to the ultimate success or failure of this blockchain experiment.

The annual "Double Eleven" shopping spree has just ended. Sun Yuanhang, who lives in Wuhan, excitedly announced in his circle of friends, "Not only did I not spend any money on this Double Eleven, I also made 1,200 yuan."

The money he made came from reselling the shared computing smart hardware called "Wanke Cloud" produced by Xunlei. Among the more than 6 million pre-order buyers on JD.com that day, Sun Yuanhang successfully grabbed two Wanke Clouds at a price of 399 yuan, and resold one of them on a second-hand platform for 1,600 yuan.

But he soon regretted it. As the supply and demand relationship continued to be tense, the original price of 399 yuan for the Wanke Cloud was called over 3,000 yuan on platforms such as Taobao. What made him even more frustrated was that the Wanke Cloud could earn about 10 Wanke coins every day through daily operation. Based on the current price of 9 yuan per Wanke coin on multiple platforms that specialize in trading Wanke coins, the machine he resold could bring him more than 30,000 yuan in income a year.

What kind of magic does Wanke Cloud have that attracts so many players to flock to it?

Everything starts with Xunlei's transformation. For a long time, Xunlei, which was labeled as a "download tool", was unknown and almost forgotten in the mobile Internet era. But in mid-2017, with the arrival of the new CEO Chen Lei and the launch of a blockchain experiment, Xunlei quickly became the "first blockchain stock", and its stock price soared nearly 6 times.

One Cloud is the core of this blockchain experiment. Through this hardware device, Xunlei makes full use of users' idle bandwidth, expands its own CDN (Content Delivery Network) at a very low cost, and obtains larger cloud storage space and bandwidth. Accordingly, when users contribute bandwidth resources, in addition to obtaining cloud storage and other functions through One Cloud hardware, they can also obtain virtual digital assets rewarded by One Cloud based on blockchain technology - One Coin. According to One Cloud's development team, NetMind Technology, One Coin can be exchanged for more value-added services in the entire Xunlei ecosystem, such as expanding cloud storage space, exchanging for unique content and network acceleration capabilities published by other users, etc.

A chief analyst of a South China securities firm exclaimed that such a design is extremely brilliant and achieves a win-win situation for Thunder, users and broadband operators.

What they did not expect was that just a few weeks after Xunlei launched its Wanke Cloud business, due to Chinese regulators halting ICOs and shutting down Bitcoin exchanges, some players set their sights on the newly launched Wanke Coin, which was originally intended for the Xunlei system, and tried to copy a series of Bitcoin trading methods to the Wanke Coin.

Some virtual currency trading platforms also joined in, unilaterally listing Wanke Coin online for players to buy and sell. Under the hype, Wanke Coin rose more than 10 times.

Why did a blockchain experiment combined with its own business turn into such a trend? What measures will Xunlei take in the future when playing games with the market? On the evening of November 21, in an exclusive interview with Tencent Finance, Xunlei CEO Chen Lei admitted that before the Wanke Cloud product was launched, it had anticipated that it might attract the attention of some cryptocurrency players or speculators. "So we clearly stated on the official website at the beginning that we would not do ICO, launch a trading platform, or encourage users to trade Wanke coins to convey our attitude."

Chen Lei revealed that the problem of scalpers reselling the currently abnormally high prices of Wanke Cloud hardware will be solved by increasing production capacity, opening up unlimited reservations, and other means.

Regarding the even crazier hype of Wanke Coin, Chen Lei said that Thunder had previously taken measures such as sending a lawyer's letter to the third-party trading platform, reporting to the Ministry of Industry and Information Technology to seal up its IP address, and canceling the Wanke Coin reward plan for users who engaged in transactions.

On November 22, Xunlei went a step further and launched the real-name authentication system for Wankecoin wallets, further restricting the operating space of speculative players. Chen Lei said that under this system, currently active big players will be forced to show up.

"We will continue to introduce measures to eradicate speculative behavior before they cause any impact, so players who try to make a profit by speculating in cryptocurrencies will end up with nothing," he said.

The players were not willing to surrender. On November 22, a photo of Wankecoin investors holding a banner to defend their rights went viral, and Xunlei was once again dragged into the whirlpool of public opinion. Later, Xunlei's official Weibo account announced that this was a premeditated and purposeful plan and activity to discredit Xunlei.

The virtual war between the two sides has just begun. How Xunlei tames the alienated "Wanke Coin" will determine the ultimate success or failure of this blockchain experiment.

Blockchain Experiment

Chen Lei is the initiator of this blockchain experiment. After joining Xunlei as CEO of its wholly-owned subsidiary NetMind Technology in 2014, Chen Lei bet on the CDN business and named it Star Domain CDN.

CDN (Content Delivery Network) relies on edge servers deployed in various places. Through the load balancing, content distribution, scheduling and other functional modules of the central platform, users can obtain the required content nearby, reduce network congestion, and improve user access response speed and hit rate.

But unlike the current mainstream self-built CDN network nodes, Chen Lei mobilized hundreds of millions of users through a series of products, contributing idle bandwidth that is not often used in the home and selling it to large traffic demanders after specific technical processing.

To put it simply, this business model is like Didi or Mobike in the bandwidth industry, where users share bandwidth in exchange for services and rewards provided by Thunder.

In 2015, NetMind Technology launched its first generation CDN product, “Money Maker”. To encourage users to actively join this model and contribute bandwidth, Xunlei offered cash and issued corresponding rewards to users. However, under this model, the cash reward model brought considerable cash pressure, and users did not have a strong willingness to participate due to insufficient rewards.

In 2017, the new generation of product One Cloud was born, and Chen Lei's blockchain experiment also kicked off. In the reward mechanism of One Cloud, the virtual digital asset One Coin designed using blockchain technology replaced the previous cash reward system.

The output mechanism of Wanke Coin is that the daily output in the first year is about 1.64 million. The daily output is fixed and halved every year, totaling about 1.5 billion. The output is scored based on the contribution of mining machine hardware capabilities, upstream bandwidth, shareable storage size, effective online time, etc., and the Wanke Coin of the day is distributed to mining machines across the network according to the score weight.

"Wanke Coin is similar to point rewards. Its main purpose is to allow users to use various services within the Thunder system after obtaining reward coins. It is not used for transactions." Chen Lei said.

The road to alienation

Wanke Coin, which was originally designed to be non-tradable, has changed its established direction due to the participation of many speculative players.

After Chinese regulators quickly halted ICOs and shut down Bitcoin exchanges, these players set their sights on the newly launched Wanke Coin and attempted to copy a range of Bitcoin trading methods onto the Wanke Coin.

Due to limited production capacity, One Cloud has been in short supply since its release. Scarcity has created room for speculation. On trading platforms such as Taobao, a One Cloud hardware unit originally priced at 399 yuan was once sold for 3,000 yuan. However, the nearly eight-fold price difference did not dampen the enthusiasm of players, and thousands of transactions were made.

It is simpler and more violent than reselling Wanke Cloud hardware. Some players dislike the limited profit from reselling Wanke Cloud hardware, so they simply bypass the hardware and choose to trade cryptocurrencies on some exchange platforms.

On November 4, a digital currency exchange called CEX announced the launch of WanKe Coin for trading, and abbreviated it as WKC (WanKe Coin).

The announcement instantly triggered a wave of activity in various Wankecoin exchange groups. Some players with a keen sense of smell began to initiate private transactions, purchasing Wankecoins held by players in various exchange groups and on the Xianyu platform at high prices.

Big players in the cryptocurrency circle are also gearing up. In early November, a well-known cryptocurrency player raised funds in his WeChat Moments: "I have discovered a project that may be the only one that can earn dozens of times more in the second half of the year. If you want to invest, don't waste your time. The minimum subscription is 500,000, and let's push up the price of Wanke Coin together."

What's worse, after buying the Wanke Cloud hardware from ordinary users at high prices, they built a "mining farm" with hundreds or even thousands of machines, which runs 24 hours a day, and then sold the Wanke coins they received as rewards.

The influx of numerous speculators and funds led to a surge in the price of Wanke Coin on the trading platform, from the initial RMB 0.1 to a maximum of RMB 10, a hundred-fold increase.

Thunder Sniper

Wanke Coin, which was originally designed to circulate within the Thunder system, has been transformed into a carnival for speculators.

"Speculators will use any possible means." Chen Lei cited an example, saying that recently, suspicious people often put up banners with words such as "Wanke Coin Fraud" outside the Xunlei office building, but they would immediately remove them after taking pictures. "The purpose is to spread rumors and cause panic for their own interests, and then take Wanke Coins from players at a low price, and then sell them for profit when the price is high."

Chen Lei realized that this was a "war" and that after speculators enriched themselves, it was Xunlei's brand and reputation that were damaged. Therefore, targeted sniping was necessary to cut off speculation.

"We have introduced a number of policies this month," said Chen Lei. The first one is to target the reselling of OneCloud hardware. Partner JD.com has launched the highest level of anti-cheating system, and one person can only buy one. On the OneCloud official website, an anti-cheating question bank has also been launched, which is updated weekly to create obstacles for scalpers. At the same time, Xunlei negotiated with suppliers to increase production capacity and launched unlimited pre-sales in late November to correct the abnormal price system in the market.

Secondly, promote the real-name system for the Wanke Cloud reward program and the Wanke Coin wallet. "Once a user is found to have engaged in private transactions, the reward qualification will be cancelled in the system to curb the influential big players in the market."

Third, with regard to overseas third-party trading platforms, in addition to issuing lawyers' letters, Chen Lei revealed that Xunlei is currently actively communicating with regulatory authorities to reach cooperation with them to cut off similar trading platforms from the source.

“These trading platforms are all based overseas, which is illegal, and we are blocking domestic access through reports.”

He pointed out that Xunlei will continue to come up with "big moves" in the future, and players who try to "rip off leeks" by speculating in cryptocurrencies will end up with nothing if they do not turn back from their mistakes.