"Fat Penguin" CEO refutes "NFT is a money-making tool": 6 main points of NFT development

Author: Azuma

On August 5th, Twitter KOL Gary posted that investors should be aware that the commercial expansion of PFPs-like NFTs will only help project parties generate income, but will not bring any benefits to holders, so PFPs should not be regarded as stocks .

In this regard, Luca Netz, CEO of the NFT project "Pudgy Penguins" (Pudgy Penguins), published a long article to refute it. In this article, Luca Netz systematically expounded the importance of brand commercialization to the development of NFT projects in six levels, including explaining how the benefits will eventually flow to NFT holders through the "funnel" model, and explaining the relationship between supply and demand. Why some blue-chip NFT projects will gradually return to zero.

As one of the most outstanding NFT projects during the bear market, since Luca Netz took over the project in February last year, "Fat Penguin" has not only stepped out of the historical haze, but also once refreshed ETH when the floor price of other PFPs projects continued to fall The historical peak of the standard. It is precisely because of this that the reputation of Luca Netz continues to rise in the NFT industry, and many project parties will regard it as a role model and role model, hoping to replicate the success of "Fat Penguin" by imitating and learning its operation.

Considering that Luca Netz sorted out his thoughts on NFT development in detail in this recent article, this content may have certain reference significance for practitioners in the same track. The following is the original content of Luca Netz, compiled by Odaily Sunday Daily.

Gary's point is very bad.

In the following, I'll explain to you why this way of thinking is fundamentally wrong, and why it's such a bad idea.

In order to clearly express my views, I will list 6 points that directly support "why building a globally recognized brand is the best way to accumulate value for NFT holders".

Point 1: Marketing

NFT is a limited resource, and as interest and demand grow, the NFT you hold will naturally accumulate value.

NFT needs marketing to succeed. Everyone wants instant conversion of value, however during deep bears, this is not possible. When NFTs are in the hype phase, some announcements may generate huge interest and demand, eventually accumulating huge value for NFTs, but if it is today, the same measures may not be so effective.

Is this only for NFTs? Not really. Many excellent Layer 2 projects are releasing some major announcements. These announcements may have rapidly increased the market value of the project two years ago, but today's equally important announcements will hardly have any impact on the secondary market.

In a bear market, every asset class has the same characteristics, and we are not alone.

As can be seen from the vulnerability model in the figure below, marketing can amplify the top of the funnel, which is also the starting point for the accumulation of NFT demand and value. Over time, the value will gradually flow down the funnel from the top, eventually to the holders of the NFT.

Point 2: Emotional Connection

Before we begin, there is one statistic worth citing about collectibles. Today, the total size of the global collectibles market has reached 426 billion US dollars. The construction of this market is not based on liquidity or instantaneous dopamine secretion, but on emotional connection.

To add value to your NFT, you need to optimize two things:

• One is demand, which can be achieved by implementing various marketing activities to gradually increase the popularity of the project.
• The second is holding, which is driven by emotional connection. This includes not only the emotional connection with community members, but also the emotional connection with interactive experience, content, and characters. If we can establish enough emotional connections between holders and NFTs, the value of emotions will eventually Will outweigh the monetary gain, making it priceless.

If you can create enough demand, and have enough compelling emotional connection, you can create the best value-add mechanism in the world.

Take a look at the screen below. If you saw your kid react like this to a "fat penguin" toy, would you dump it and rush to other shitcoins? Does this response give you more confidence that the project is building its long-term vision?

Point 3: Sustainability

This is often the most overlooked.

Understand sustainability, and understand what is killing your favorite blue-chip projects in 2020-2021, and the answer lies in "dilution". "Dilution" stems from a project's inability to generate external revenue, which ultimately leads them to issue more NFTs.

Unfortunately, when the increase in demand fails to match the increase in supply, the ecosystem tends towards zero.

Creating a sustainable brand can effectively reduce the biggest risk of holding NFT - unnecessary "dilution" in order to maintain business maintenance and progress.

• Demand > Supply = NFT value rises;
• Supply > Demand = NFT tends to go to zero.
• Build a sustainable revenue model -> invest in marketing -> create more demand -> NFT value growth.

This is not difficult to understand.

Point 4: Touchpoints

Essentially it's groundwork, but I believe if you can create enough touchpoints (the opportunity for users to engage with a project's IP) this will translate into the biggest upside when market conditions turn better .

Let's take Pudgy Toys as an example. I often hear doubts about Pudgy Toys: "Luca, no one will buy your toys and then buy your NFT. What good does it do for the holder?"

Yes, they don't today, but I don't need them to do it now, but when the NFT bull market returns and traders start to build collectibles, which NFT do you think they are most likely to buy? I think they are most likely to prefer those NFTs that they see most often, and once they have a lot of funds, they will buy it.

More brand partnerships, more products and content, these are great ways to create more touchpoints.

Point 5: Experiences

In the system of NFT culture, everyone is eager for various free benefits, but unfortunately, with the consumption of royalties, these are no longer sustainable.

If I don't create real external cash flow by building a successful brand, then I can't create more and better experiences for holders without "diluting" their interests. But if I can build a successful brand that replenishes the treasury reserves with ongoing revenue, I can use those reserves to provide more and better experiences to the community.

The entire value transfer process is as follows:

• Create a free memorable experience for holders -> FOMO sentiment of non-holders -> they want to participate -> they buy NFT -> the value of NFT goes up -> benefits for holders grow.

Point 6: Institutional Game (Game)

It is clear to me that 90% of NFT traders do not understand what is going on in this space and where the real upside is.

This is as much an institutional game as it is a retail one, and if you think BAYC's 150 ETH floor is driven by retail demand, you're clearly wrong.

What most people don't know is that the largest funds in the world are making huge investments in intellectual property. Intellectual property is a good tool against recessionary cycles and has proven to be a good asset class for funds to diversify.

The question you need to ask yourself is, how can your project attract funds that seek to include NFTs in their next-generation IP portfolios, now or in the future? Do you really think game theory and Ponzi economics will get those institutional capitals excited? If you think so, then you just don't understand the real potential of these assets and the game.

• Attract arbitrageurs = short-term success;
• Attract agencies = long-term success.

In my opinion, those funds in the future will be looking for Web3 IP that can satisfy existing IP needs and can use blockchain technology to create a new model.

Attracting 1 institution is far better than attracting 500 arbitrageurs.

Summary

I know these arguments may seem biased because I'm defending my position, but you have to remember that we bought "Fat Penguin" for $2.5 million and we bought the project for the sole purpose of It is to become the first and set a benchmark for the NFT field.

With this in mind, we spent many months thinking critically about how best to approach this goal. Ultimately, this is where we came to the conclusion.

If what you want is a Ponzi shitcoin, send a better one.

If you want to be part of the new era of culture, community and intellectual property, then NFT is your battleground.

The reason for publishing this article is to refute the claim that "brand commercialization will not bring benefits to NFT holders". I believe that over time the NFT space will realize that this is the right way to incubate the next generation of NFTs.