From Punks, Apes to Penguins: How Avatar NFTs Become a New Cultural Paradigm

Recently, avatar NFT projects represented by CryptoPunks are particularly popular, with an average transaction price even reaching hundreds of thousands of dollars.

Coingecko analyst Benjamin Hor wrote an article on the recent craze such as CryptoPunks, Bored Ape Yacht Club, Pudgy Penguins and other typical projects and the reasons behind them, and explored why they can become a new cultural paradigm.

People have always compared the past few weeks to the DeFi summer of 2020. In addition, NFT is a new hot spot. We have seen explosive growth in many projects in the NFT field. In the beginning, Axie Infinity led the Play-to-Earn revolution. This is followed by a series of NFT art (sometimes affectionately/maliciously called JPEG), which reflects CryptoPunk’s iconic avatar-based style.

You may be wondering: What happened here? Do people really spend thousands of dollars on profile pictures (PFP)? Well, if you are talking about CryptoPunks (Punks), it is not very accurate. People are spending millions of dollars.

From Punks, Apes to Penguins: How Avatar NFTs Become a New Cultural Paradigm

Source: Larva Labs

The top 2 auctions took place in March 2021 and each sold for as much as 7.6 million U.S. dollars, but in the last month, many other punks were also purchased for millions of dollars-this does not even include June 2021 Punk at a public auction for $11.8 million. The question then becomes, why do people invest life-changing money in JPEG?

Answering this question is not easy, because it involves many different areas. We can try to clarify something that is working, but pretending that we have all the answers is a delusion at best. Instead, we will try to share our observations, whether as observers or active participants.

We will first record the journey of three projects: CryptoPunks, Bored Ape Yacht Club and Pudgy Penguins. Then we will discuss the cultural impact of these projects in the crypto space. Finally, we will explore why they took off and what they mean for this new digital age.

CryptoPunks (punk)

From Punks, Apes to Penguins: How Avatar NFTs Become a New Cultural Paradigm

Punk has a long and glorious history. In 2017, co-creators John Watkinson and Matt Hall issued 10,000 punks, all of which were generated through the program and received for free (recipients only need to pay a small casting fee).

According to the creator’s planning elements, the features are randomized and assembled through the generator. Different characteristics have sprung up like bamboo shoots after a rain, some are rarer than others. Some are aliens (only 9 such punks) and apes (only 24 such punks), and most are ordinary humanoids.

Despite Ethernet Square, one of the first items on the NFT (CryptoKitties than even a few months earlier), but almost no activity. According to Hall, within a few days of the release, fewer than 30 punk people were claimed. Over time, more and more people began to understand this project, especially Mashable’s articles, and all punks were eventually cast out.

The community is small but full of enthusiasm. However, punk owners have slowly but surely become status symbols. Provenance always brings value to any collectibles market, and blockchain technology is no exception. Taking punk conveys two things: you are either an NFT/Ethereum OG (a veteran) or a part of history. The owners recognized the social status it gave and began to change their profile pictures on social media platforms (such as Twitter, Discord, etc.) to punk.

Fast forward a few years, and punk is still flying under the radar. At the same time, NFT hype is already gaining momentum in 2020. Virtual worlds like Decentraland and The Sandbox (often called Metaverses) have increased the focus on NFTs. However, the real catalyst came when the Top Shot NFT market was launched in October 2020.

Top Shot is a collaborative project between Dapper Labs (the team behind CryptoKitties) and the NBA. The basketball game video collection packaged into collectible “moments” is a product and has seen huge demand. The NFT officially authorized by the NBA has gained tremendous recognition and marked the first successful involvement of a sports organization in the NFT.

With the growth of NFT hype, we have seen a lot of sales of other artistic NFTs. Sotheby’s, a top auction house founded in 1744, further legitimized the movement by auctioning NFT artworks, including Beeple’s historic $69 million auction. Although the natives of crypto have begun to accumulate, when celebrities, venture capitalists, and business people joined the hype, the real attention turned to punk.

Even Three Arrows Capital, one of the most successful crypto venture capital firms in the field, has begun acquiring punk in the past few weeks, pushing the average selling price to a new high-its current average selling price is $180,000.

From Punks, Apes to Penguins: How Avatar NFTs Become a New Cultural Paradigm

Source: CryptoSlam

Punk has become a symbol of prestige and digital culture, and is the intersection of NFT history and art. Many projects try to imitate their success, but they are rare. However, one project stood out. Of course we are talking about BAYC.

Bored Ape Yacht Club(BAYC)

From Punks, Apes to Penguins: How Avatar NFTs Become a New Cultural Paradigm

For a long time, avatar projects often relied on the old-school vibe, pixelation and low resolution of punk. However, BAYC is a refreshing change because the founder wanted to create something with a larger storyline.

Imagine 10,000 extremely rich and boring apes in 2031. What do they do? In the legend of BAYC, these apes hang out in the swamp club and “become weird.” The features/designs of each Ape are deeply inspired by the 80s and 90s, drawing inspiration from the punk rock and hip-hop genres.

As an Ape holder, it also grants membership privileges, such as access to Tuya Board and exclusive commercial use rights to its NFT.

Although the initial minting price was 0.08 ETH, the average selling price has soared since then-the current average selling price is about $50,000.

From Punks, Apes to Penguins: How Avatar NFTs Become a New Cultural Paradigm

Source: CryptoSlam

So why did BAYC succeed? In addition to the novel Internet club benefits, it is worth noting that a strong community was formed from the beginning. According to Ape OG Joshua Ong:

“I’ve been there since day one. There is a magic in the community, everyone just connects with each other,” he said. “As Apes, we started to change our profile picture. We started to follow each other on social media, such as’Ape follow Ape’.”

Most of the initial buyers were also Top Shot collectors, and they had formed their own group before BAYC-which led to a quick friendship. Most importantly, there are enthusiastic members in the community. One member launched a publication called “the Bored Ape Gazette”, while another member named their Ape “Jenkins the Valet” with a complete background story. There are even baseball merchandise and crowdfunding for ape-man-themed novels.

Since its launch in April 2021, the project has achieved many milestones, including airdropping dog-based NFTs to all Apes and donating more than $850,000 to orangutan charities.

With interactive communities, good chemistry and openness, a strong culture develops organically. The overall atmosphere attracts many others who want to be part of the brand, the Apes family. With the development of the community, BAYC was eventually regarded as the second punk.

Pudgy Penguins (Pudgy Penguins)

From Punks, Apes to Penguins: How Avatar NFTs Become a New Cultural Paradigm

We have seen the influence of the strong NFT community from the beginning. But not at the beginning, what will happen? Enter Pudgy Penguins.

Pudgy Penguins was launched less than a month ago, in July 2021. There are 8,888 penguins available for competition, each with a minting price of 0.03 ETH. Like most NFTs, each penguin has different characteristics/rarities, such as skin, clothing, and hairstyle. The road map does not actually exist, and it will probably only attract buyers who like this artistic style.

From Punks, Apes to Penguins: How Avatar NFTs Become a New Cultural Paradigm

Source: Nansen

All penguins are fully minted within the first 20 minutes, which indicates that there will be broader interest. The average selling price stagnated in the next two weeks and even fell to the mint price of 0.03 ETH. However, in the third week, both the transaction volume and the average selling price rose rapidly.

The average daily sales price hit a record high of 3.8 ETH, and the weekly transaction volume exceeded that of existing companies such as Punks and BAYC at the peak. Pudgy Penguins’ enthusiasm even appeared on the New York Times and billboards. However, since then, people’s interest seems to have slowed down.

So what happened? Why would Pudgy Penguins take off without a “social foundation”?

Although there are public allegations that the project may be manipulated, including claims that CoinGecko and the New York Times have been bribed to promote them (author’s note-CoinGecko is not sponsored), we believe that there are other factors at play.

According to CL of eGirl Capital: “Memes are difficult to define. They are like…very memorable units, usually associated with humor or other information, imitation, social cues, wide-ranging influence and fluidity, and possibly perceived It is a kind of cultural element that is connected through non-genetic means. This is a global language that connects generations.”

When gathering communities through memes, you provide global appeal. Many people want to be part of the “memetic movement” because it provides a medium of relevance through a sense of humor. We have seen this situation elsewhere through meme coins and stocks.

The GameStop/AMC legend demonstrates the power of virtual communities driven by a single “memetic” purpose. Despite the lack of business fundamentals, the share prices of both companies were pushed up by a group of anonymous individuals on Reddit because they wanted to punish hedge funds that shorted the two companies. The power of memes even requires regular market reports from business news sites and detailed retail strategy breakdowns of Barclays’ options trading.

Pudgy Penguins seems to follow the same trajectory. Although it is impossible to clearly prove/refute the existence of the cabal, we can look at specific data indicators to help justify its organic growth.

From Punks, Apes to Penguins: How Avatar NFTs Become a New Cultural Paradigm

Source: Nansen

According to the distribution of holders (as of August 18, 2021), we can see that the threshold of a unique wallet address is close to 50%-which indicates that the accumulation of whales is limited, but driven by actual demand.

From Punks, Apes to Penguins: How Avatar NFTs Become a New Cultural Paradigm

Source: Nansen

In addition, let us consider the number of diamond hands (the total number of NFTs belonging to addresses that did not sell any NFTs from this set). As of August 18, 2021, the market seems to have stabilized because 470 penguins belong to holders who have not sold any penguins at all. Since the average selling price has fallen by more than 60% from the peak, this indicates that there are fewer traders and more holders.

Despite all this data, some people may wonder, will Pudgy Penguins survive? Unlike Punk and BAYC, the Penguins team has not yet established their global chain. The project has only been established for less than a month, and it is too early to draw conclusions. The strength of the community is crucial, and the founders can execute their planned roadmap well. In any case, if we learn anything in 2021, never underestimate the power of memes.

Think further

When observing the development of these projects, certain things come to mind.

We explored some social dynamics in the previous article and found that human beings always have an innate desire to collect things. However, what we grasp is entirely based on taste. In some cases, just look at the traditional collectibles market to see how big the industry is.

More importantly, collections have clearly evolved from tangible to intangible. Everest Ventures Group (EVG) first emphasized this through gamer and avatar costumes.

According to EVG, the longer the time spent in the game, the more emotional attachment -this applies to all aspects of the game, especially the community. Many players increasingly rely on their virtual properties and their respective communities. Some people even prefer their virtual community to reality, which makes the appearance and good community perception in the game crucial.

In the past month, this has been further verified in the meta-universe. In June 2021, Decentraland will allow users to customize and sell their own virtual clothing (wearable devices) for users who are avatars in the game to wear. Reuters interviewed a kimono designer, Hiroto Kai, who sold kimonos for approximately US$140 each and eventually made US$15,000-20,000 in just three weeks. According to Kai:

“This is a new way of expressing yourself. It is an art of walking. This is its charm… When you have a piece of clothing, you can wear it to parties, you can wear it to dance, you can Show off that this is a status symbol.”

In short, people are willing to spend $140 on “fake” clothes, which cost as much as real clothes, or even higher. Not only that, people are willing to pay for all kinds of things, including memes like Overly Attached GF, Doge, and overpriced Unisocks.

As the NFT world expands, we see exactly the same phenomenon happening. The only difference this time is that it happened on social media platforms. People don’t get skins in the game, but change their PFP to indicate that they get their own NFT.

However, the key difference is that not everyone plays the same game, but almost everyone is on Twitter, Facebook, etc. Therefore, PFP has the most important audience in the digital space.

With the expansion of coverage, PFP becomes a better tool to promote one’s digital identity. People are spending more and more time online. Digital identity (if not) is more relevant than our physical identity. For many people, PFP is more important than Rolex. On the Internet, our digital identity is shown to the world 24/7. In contrast, in the material world, our diamond-encrusted watches can only be seen by a small part of society at any time.

Establishing a PFP after your NFT means that you have decided to treat yourself as a member of an exclusive NFT tribe, similar to the way some people identify themselves based on their preferred religion or political beliefs.

Exclusivity and like-mindedness follow. Social signals take the form of community recognition, and community members will begin to associate with you and promote their support (for example, follow on Twitter). Members even began to role-play or change their way of speaking. For example, Penguins uses #HUDL instead of #HODL.

Bigger picture

In addition to collectible features (such as scarcity and aesthetics), it is clear that NFT projects are highly dependent on social foundations. However, the composition of social fundamentals may vary from person to person. We believe that there are three main types: capitalism, community, and culture.

The capitalist aspect is the most obvious aspect. Many people in this field will buy NFTs, hoping to rise quickly. Just look at Nansen’s profit rankings and you will see the profitability of major NFT players

Force.

From Punks, Apes to Penguins: How Avatar NFTs Become a New Cultural Paradigm

Source: Nansen

It is not surprising that almost any type of collectible (such as the sports shoe market) has speculative value. However, the more interesting observations are the communication and cultural aspects.

Punks reiterated the value of provenance—as the project matures and its influence expands, its perceived value and price also soar. This led to a unique group-crème de la crème and NFT elite. People who buy punk are paying for this community. In other words, exclusivity brings desirability.

BAYC has long been considered a community that was initially priced by Punks. However, over time, the project has flourished with powerful interactive social features (such as graffiti boards), enthusiastic/close communities, and other novel features (such as merchandise sales rights).

Penguins challenged our preconceived notions about the conditions needed to form a community. The project does not have any roadmap or plan at all, but is based on the biggest product of the Internet, our focus on memes. Unlike most projects, the community is formed after the memetic culture is established. However, it remains to be seen whether this community will continue.

If we consider the entire sequence of events, we can infer some fascinating social insights.

First, there are no boundaries or logic in terms of value. We have seen this in the diamond industry. Natural diamonds are functionally similar to man-made diamonds, but with an average premium of 30%.

Since the 18th century, the diamond industry has been controlled by De Beers, which controls 80% of the market. By influencing the masses through marketing and advertising, society has now accepted diamonds (ideally natural) to present precious gifts as engagement rings. If De Beers can convince the world that diamonds are essential for engagement rings, it seems reasonable that the same principle applies to NFTs.

People have given NFT value through shared consensus. For example, NFT is replacing engagement rings. In addition, unlike De Beers, both Punks and Apes show that the community can build a brand, and culture and value will follow. If you have enough Penguin, even memes can produce value.

If we take a step back and analyze this, we will see the symbolization of communities, cultures and even ourselves. However, it is difficult to say whether this is a good thing.

On the one hand, NFT allows us to decompose the abstract social structure into dollars and cents-which provides a variety of exciting opportunities for the development of decentralized brands and communities.

On the other hand, some people may say that we are approaching a digital dystopia and may end up like Bing in “Black Mirror”.

In any case, we at Coinceko have long believed that almost everything will eventually be tokenized-the crypto cat is out, and we can’t stop it.

So next time you ask yourself why people are willing to invest millions of dollars in NFTs, remember this: the boundaries between the virtual world and reality are getting blurred, and there may be a series of identities, cultures, and communities that provide intangibles. Social value. Su Zhu, the co-founder of Three Arrows Capital, gave a wonderful summary of this paper:

From Punks, Apes to Penguins: How Avatar NFTs Become a New Cultural Paradigm

 

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