The Final Chapter and Reboot of NFTs

Author: YBB Capital Researcher Zeke

I. The Collapse of NFTs

The last gasp of NFTs ended with the issuance of tokens for Pudgy Penguins, while the recent token launch of Doodles on Solana barely made a splash. Yuga Labs' downsizing continues, this time affecting even its most iconic IP, Cryptopunks. The BitCoin NFTs that were part of the last revival wave are nearly worthless now; these once-crazy narratives have indeed faded into obscurity, with no one paying attention anymore.

The vision of 10k PFPs was once beautiful, with a perfectly sized community helping a grassroots IP project reach the world, which is completely different from traditional IP projects that first invest heavily in content support. For example, Disney's Marvel Universe, Star Wars, and various animated characters often require years of accumulation and countless funds to deeply embed these IPs in people's hearts, ultimately turning them into gold mines.

NFTs, however, are entirely different. The entry barrier is extremely low, and the speed of creating an IP and assetizing it is quite fast. Creators only need to pay some gas fees to list their artworks for sale on Opensea, with no galleries, no toy companies, no film studios, and no need for any professional teams; an IP and a new artist are born.

Three or four years ago, we also witnessed some grassroots IPs gaining popularity in the top entertainment circles of Europe, America, Japan, and South Korea. A grassroots artist could achieve a turnaround through NFTs. For me, as a Gen Z who grew up watching Japanese anime, being able to participate in IP investment and incubation that ordinary people could not access before through Crypto is indeed a dreamlike experience.

However, after the "crazy nesting dolls" of BAYC and the disastrous release of Azuki's sub-series Elemental, the ambiguous status of NFTs gradually became clear. They do not resemble equity or investments; rather, they are more like expensive luxury goods with membership benefits. Meanwhile, project teams expect us to continuously purchase sub-series to support their ongoing investments in the IP's value core roadmap. The seeds of contradiction were sown here; project teams know that creating content is expensive, but without content, the IP will die. The sub-series released every few months continuously drain the blood of OG series holders, tormenting everyone in the community, and the feedback from content may take many years to arrive, or perhaps that feedback will never come. The cracks began to widen, and those beautiful fantasies started to shatter with the decline in floor prices, leaving behind only various conflicts.

II. The Ace MCN in the IP World - PoP MART

If we view NFTs as luxury trendy toys for Gen Z, the reasons for their rise and fall become clearer. In the fast-food era, lacking content isn't necessarily a bad thing; after all, some designs can quickly attract buyers based solely on appearance. For instance, Azuki's art style aligns well with Asian aesthetics, and under this consensus, this grassroots-produced NFT series could follow BAYC to become the third-largest blue-chip.

In the real world, well-known trendy toys like Bearbrick, B.Duck, and Molly also lack content support but became popular due to their unique appearances.

However, trends are always fleeting; without content as a value core, these IPs could become outdated at any moment. Limited by the culture of the crypto world and the extremely low success rate of NFTs, project teams often revolve around a single IP to create derivatives. But the reality is that the core hasn't even taken shape before the trend passes.

Of course, there are PFP projects that have sufficient content support, such as Japanese NFTs. In the past, I have seen at least four or five projects holding well-known Japanese anime IPs hoping to make a splash in the NFT market, but they seem to have overlooked that the fan base for these IPs is almost completely incompatible with this circle. Secondly, the surrounding products of Japanese anime are already abundant, so why would fans spend hundreds of times the price to purchase a small image? Most importantly, this small image can only be an image, and the future potential for empowerment is zero. Even if you purchase a high-value NFT, you can only gain access to the "SIDE-G" of the Gundam metaverse. The profits from models, games, and animations have nothing to do with you, and the community won't be part of the IP incubation; in fact, within the entire Gundam fan community, you might even be considered an outsider. In this regard, the pain points of GameFi are quite similar.

Thus, PFP projects have become a false proposition, with only the pragmatic little penguin still striving. So, does the small image have another way out? I believe PoP MART may provide a different answer.

Originating from a small store in Beijing's Euro-American Shopping Center, it turned around by representing Sonny Angel. This single series contributed nearly 30% of PoP MART's sales at the time, and a year later, the envious copyright holder reclaimed exclusive agency rights, but this move instead led to the birth of an IP empire.

Wang Ning (founder of PoP MART) had a simple idea at that time: create proprietary IPs that cannot be taken away by others. In 2016, PoP MART collaborated with Hong Kong designer Wang Xinming to launch its first self-owned trendy toy series—Molly. This pouting little girl quickly became a nationwide sensation, driven by the uncertainty of the blind box gameplay and dopamine stimulation. PoP MART began its first rocket-like ascent, and by 2019, the annual sales of the Molly IP alone reached 456 million yuan, becoming the core source of income for PoP MART at that time.

This strategy, combining Japanese capsule toys with high-end trendy toys, also became common in the later years of the NFT boom. Basic elements designed by artists are handed over to project teams to be combined into series images for sale and operation. NFTs are generally released in blind box formats during their initial phase, with project teams releasing various rare combinations of images to enhance players' purchasing desires.

The only difference is the form of release, but tens of thousands of NFT projects and various blue chips have generally failed. Yet PoP MART is now experiencing a second spring; why?

I once attributed the reason to the difficulties of landing and high purchasing thresholds. The former seems to have no issues currently, while the latter is not entirely true. NFTs also had their Free Mint period, with Goblintown and MIMIC SHHANS being golden dogs of that time, where creators earned substantial profits solely from transaction commissions. Many NFTs during the inscription era were even more decentralized on this basis, yet this did not prevent the decline of NFTs. Joining or forming an IP community is very simple; the challenge lies in sustainability.

Therefore, I believe we may be facing a model error. After the first rocket-like ascent, Molly did not make PoP MART a legendary brand; the company's stock price, like NFTs, fell from 2021 to 2024. However, PoP MART has made a comeback, relying on a complete wall of IPs. Today, PoP MART has 12 proprietary IPs, including Molly, DIMOO, BOBO&COCO, YUKI, and Hirono, along with 25 exclusive IPs such as THE MONSTERS (including Labubu) and PUCKY, SATYR RORY, and over 50 non-exclusive co-branded IPs with Harry Potter, Disney, League of Legends, etc.

People's preferences are always fickle, and the life of an IP is limited, but what if I have hundreds of choices? Today, Labubu is exploding in popularity in Europe, America, and Southeast Asia, with the value retention of its surrounding dolls comparable to plastic Maotai. Yuga Labs' ideal state ultimately materialized in Web2, and this was not a coincidence.

We should rethink what an IP business is, what the roadmap for NFTs looks like, and why PoP MART can achieve such heights without content support.

III. Pudgy Penguins

I participated in an event for Pudgy Penguins in Hong Kong last year; this NFT project has always been so enthusiastic towards its community.

The success of Pudgy Penguins lies in being pragmatic, pragmatic, and still pragmatic. NFTs themselves do not have any technical distinctions; no matter how cleverly designed the minting process is, it ultimately results in a JPG. The difficulty of NFTs lies in the realization of IP, which is hundreds of times more challenging than creating 10K PFPs. Yuga Labs wants to create a Metaverse, and Azuki wants to create anime. Okay, that's cool, but these projects, which start with costs in the hundreds of millions, will only ask community members to cough up money.

This extremely compressed world is too restless; everyone is eager for quick success. Holders want to make big money, and project teams want to reach the top in one step. Few blue-chip projects are willing to bow down, and in the end, the more impatient they are, the worse they fall. The original team of Pudgy Penguins was once a similarly impatient grassroots team, and after suffering a reputational blow, they sold the little penguins at a low price.

At this point, the little penguins met their true owner, Luca Netz, a worker with years of experience in physical marketing, who brought the little penguins back to their rightful height. Luca Netz is genuinely building a brand; he operates a company for NFT holders. From marketing to plush toys to future games, every step of the little penguins is solid. The company can profit, and holders can profit too. None of this is particularly special; it is simply doing what it should do. Thus, it is proven that grassroots IPs can exist in Web3; it is just that there are too many project teams that cannot lower their status.

Therefore, I dislike the term "falsification," as if certain things should never exist. Electric vehicles were once considered foolish, and Siri on my phone was also quite silly. But that doesn't prevent green license plate cars from filling the entire city today, and AI needs no further mention.

Many so-called falsified tracks will still be explored in Web3 in the future; it just lacks a suitable project team.

IV. The Path

The path to success is simple, yet also very difficult. The next stop for PFPs must eventually break free from some inherent logical frameworks of Crypto; to become the next Web3 Disney requires substantial accumulation. Whether the scarcity of NFTs has been counterproductive in the process of reaching the masses is something I have discussed in my previous articles. If we define it as a trendy toy consumer product, then the limitations of 10K may be too great. If we define it as a unique asset and fundraising method in Web3, then IP must ultimately be transformed into tangible consumer products to fulfill its promises to the community, rather than a bunch of bizarre sub-series.

Given the unique culture of the crypto world and the attributes of NFTs, it is indeed unfortunate to cling to an IP until old age. How can we further develop these PFPs? How can we expand a project into an IP factory? This may require us to accept some new concepts and introduce more technologies and gameplay.

V. Is Token Issuance the Final Stop?

What is the significance of NFT token issuance? I still do not understand. This situation resembles an exploitation of the lower tier by the upper tier, as well as a dilution of the value of OG NFTs; I can only interpret it as the project seeking a convenient liquidity exit.

From APE to DOOD, without exception, they resemble variants of air coins. Their empowerment often involves staking to receive some on-chain trading dividends, purchasing items in the Metaverse, or governance rights. Ideally, it is a perfect cycle among holders, stakers, and developers. However, in reality, it resembles a form of air, caught in a vicious cycle of NFT price drops, diminishing gold mining returns, and token depreciation.

For OG NFT holders, although tokens dilute some dividends and rights, most will receive a large airdrop at TGE, so no one complains. However, in the long run, as mentioned in the fourth section, this is a form of dilution, and distributions like Azuki's Anime are outright theft.

Short-term hype is important, but the long-term survival of the project is even more crucial; do not let token issuance become the final stop.

Conclusion

In this fast-paced, dopamine-driven era, we have witnessed the rise of many emerging IPs in Web2. NFTs should have thrived in this environment, given their many irreplaceable characteristics. Four years ago, I viewed them as cyber Maotai, but the reality is that they have become cyber tulips. Few are willing to manage the ruins, but I believe that beneath the ruins lies the next Labubu.