Author: Solaire, YBB Capital
The recent downturn in the NFT market is having a profound impact on long-term investors. Wave after wave of sell-offs seems to be sweeping through the entire market, and the continued slump in the NFT market has had a negative impact on the sentiment of long-term holders, with many people selling off high-quality collections. In the past few weeks, about 4.63% of all Azuki collections held by Diamond Hands have been sold, accounting for nearly 1.88% of the total Azuki NFTs on the market. Demand for Bored Ape Yacht Club (BAYC) has also declined, with nearly 2% of assets being sold off by Diamond Hands. The NFT market has been going through a difficult phase since its peak in March of this year, with daily sales volume and the number of independent buyers dropping significantly (data from Cointime). There is a growing chorus of voices suggesting that the PFP narrative has reached its end, and this article will look back at the history of Azuki to reflect on the factors that have contributed to Azuki’s past success and the problems that need to be addressed in the current stage of PFP.
NFT, a new way of connection
The concept of NFT (Non-Fungible Token) can be traced back to 2012 when a type of asset called Colored Coins appeared on the Bitcoin blockchain. These colored coins could represent anything non-monetary, such as stocks, bonds, or collectibles.
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However, the true NFT technology developed on the Ethereum blockchain. In 2015, the Ethereum blockchain was launched, and its smart contract functionality allowed developers to create their own tokens, including non-fungible tokens. In 2017, the CryptoPunks project was released, which was a buyable and sellable collection of unique images based on Ethereum. This can be seen as an early form of NFT and the first Profile Picture (PFP) project.
The so-called PFP typically refers to avatar-type NFT projects, which can be summarized by six main features.
Uniqueness: Every token in a PFP project is unique. This is because they are all NFTs, which means that each token has its own metadata and ownership record and cannot be exchanged with other tokens;
Artistry: Most PFP projects are artworks. Each token represents a unique, digitized avatar or character, with consistent artistic styles but different features;
Community-driven: PFP projects often revolve around an active community. People who hold these PFPs are not only investors but also members of the community, participating in various activities such as online discussions and offline gatherings;
Representation of identity: In many PFP projects, people who hold NFTs use them as representative images on the internet to display their digital identity and community affiliation;
Economic value: Since each PFP is unique and limited in quantity, they can potentially be bought and sold at high prices in the market. This gives holders a potential economic interest;
Interactivity and scalability: Some PFP projects may include game elements, allowing tokens to be used in other applications or platforms. This increases the interactivity and scalability of PFPs.
From a cultural and social perspective, PFP’s features have established a new way of connection. Chen Long, the executive dean of the School of Media, Soochow University, and his research assistant Jingyi Lu proposed in their paper “NFT Digital Collections as Subcultural Capital and Their Significance in Social Interaction” that NFT, as a subcultural capital, is dominating the production and interaction of online subcultures among young people. Based on the fun-as-currency principle, NFT constructs a fluid and inclusive network subculture, creating boundaries between different circles, generations, and other community members within society. The interaction practices surrounding NFT digital collections also have new meanings.
These meanings can be divided into three points: identity, fusion, and connection.
Breaking the boundaries of identity: NFT breaks the isolation of various social circles. Individuals can represent different identities by wearing different NFTs, crossing different communities and social media platforms. Individuals can freely move between different circles, showcasing their digital identities;
Integration of value and culture: People pay attention to the artistic value of NFTs (e.g., as investments or collectibles), as well as their cultural significance (e.g., as artistic expressions or spiritual communications). This blurs the boundaries between value and culture. In NFTs based on digital media and interconnectedness, value and culture intertwine and coexist;
Communities connected by weak ties: People establish connections based on common interests or benefits, even if they may have no intersection in real life. These relatively weak relationships form a huge network that allows the exchange of information and resources. In other words, people may establish connections with others around the world through purchasing, trading, or discussing NFTs. These connections themselves may be weak, but when aggregated, they form a strong social network. The connection of weak ties is unprecedentedly stimulated, and different groups with different identities converge and upgrade their relationships through cultural resonance brought by NFTs, ultimately forming a network society (community) with weak ties at its core.
This article will also retrospectively examine the success and collapse of Azuki from the perspectives of identity, connection, and fusion, which revolve around the cultural and social aspects of NFTs.
Azuki, the Magic of Fusion
Ready to take the red bean? – Azuki’s tweet before its birth
On January 2, 2022, Azuki was launched. Azuki has been successful since its inception and quickly became one of the three giants alongside CryptoPunks and BAYC. Unlike the historical significance of CryptoPunks and the profound understanding of the Western market by BAYC, Azuki’s success lies in the clever integration of artistic value and culture. As an NFT with a strong anime style, its success is not only attributed to its artistic value (acknowledgement of its benefits and painting level), but also to its successful fusion of Eastern and Western cultures. From the details of the artwork, Azuki adopts the style of Japanese anime, combined with American-style bold outlines and various Eastern and Western elements (such as hip-hop, swords, clothing from different ethnic groups). This mixed art well embodies its slogan of “aiming to become the largest decentralized brand established and owned by the community in the Metaverse world,” as well as its values.
◼ Community First: Everything begins with and is dedicated to the community. When we prioritize anything over the community, everything will be in chaos. We will not allow this to happen because the community is always the first value of Azuki;
◼ Become the Top Player in the Industry: Azuki is creative, fearless, and tenacious. It’s easy to follow trends and make gradual improvements, but it’s much harder to be original and innovative. We take a unique approach;
◼ Progressive Process: Good things take time. Decentralized actions cannot overcome difficulties and be accomplished as quickly as centralized actions, but this is a double-edged sword. Decentralization does not mean there can’t be leaders. The core team will provide support and resources for all Beans to grow together, but this cannot be achieved overnight.
Welcome anyone from around the world to join us and co-create the largest decentralized brand. We are attracted to this decentralized vision, just like Web 3 natives.
As of today, in the Garden (Azuki community), there are already 66 communities created by Azuki enthusiasts, which further proves the magical integration power of Azuki.
However, Azuki’s path later became extremely difficult. The misconduct of the project party and conflicts with the philosophy led to their collapse, and the community could not save them time and time again.
Azuki Defense, the Power of Connection
Even a drop of water will quickly evaporate when it falls on hot sand, but when millions of drops of water come together, they can become an ocean. – Marx
Prior to the Elementals series falling, Azuki actually experienced a FUD. In May 2022, ZAGABOND, the founder of Azuki (referred to as ZAGA below), published an article called “A Builder’s Journey” on Mirror, revealing that his team had operated three projects, CryptoPhunks, Tendies, and CryptoZunks, in the past year, all of which ended in failure.
This revelation caused a huge wave in the community. After ZAGA admitted to being behind the three Rug projects, Azuki quickly plummeted to 10 ETH. However, this negative impact did not last long. Supporters believed that entrepreneurial failure was not shameful, and instead, ZAGA’s bold admission of failure and the spirit of daring innovation were very important. Therefore, shortly after the plunge, Azuki quickly rebounded to 16 ETH.
However, in my opinion, the argument that entrepreneurial failure is not scary is not the key to this turnaround. Moreover, this argument has shifted the focus. ZAGA dumped a mess onto the community and Rugged it, rather than simply experiencing a business failure. If the attitude after failure is sincere, it can be understood, but ZAGA only left a black-and-white announcement and disappeared after a few weeks of operation.
Rug is an extremely sensitive term in the world of crypto, let alone being behind three consecutive Rug projects. The key to Azuki’s true turnaround lies in the strong connection of holders, the love for Azuki’s artistic style, and the interest that connects countless unrelated weak relationship groups firmly together, forming an incredibly powerful community. At this moment, as a collective, the internal voices of dissatisfaction may waver and be drowned out due to the connection, and the external FUD seems insignificant in the face of the floor price raised by the community holders.
Azuki’s first life-or-death battle passed safely under the defense of the community, and Jeremy Cahen, the founder of Not Larva Labs, who accused and mocked ZAGA multiple times as a fraudster, became the biggest enemy of the Azuki community.
Looking back, the reason why the first FUD was able to pass safely is not only because of the strength of the connection but also because the points of FUD had not yet impacted Azuki’s own value.
Elementals, the shattering of identity value
Scarcity is the source of value for all commodities. – Adam Smith
It was June of this year when Azuki unveiled its new series, Elementals, through a cool and stunning Western-style animated short film at an offline conference in Las Vegas. The airing of the short film instantly triggered a climax in the community, with holders almost flooding this news on social media.
However, the opening image a few days later brought the entire NFT market to a freezing point. The higher the expectations, the deeper the disappointment. The opening image of Elementals and the various new elements shown in the trailer were almost unrelated. But that’s not the most fatal part. The most fatal part is that the new series is almost a replica of the elements of the Azuki OG series, which can be said to be an officially launched “pirated” series. Furthermore, due to technical issues, there were completely repeated and disordered images of the elements.
The remedy for this situation of image repetition by the project was to directly change the images of the already sold immutable NFTs through URLs in the contract. The issue of the repetition of elements between the Elementals series and the OG series was also directly acknowledged in an announcement, stating that this was how they designed it, and they will also release a green bean based on Beanz (a sub-series of Azuki).
This mysterious operation instantly attracted ridicule from all sides. The once invincible community disintegrated overnight, and some core members of the community even formed Azuki DAO and 20000 E DAO to prepare a lawsuit against the founder to recover the 20,000 ETH obtained by ZAGABOND in the Elementals sale. Ironically, legal assistance and evidence provision may still require the help of Azuki’s public enemy, Jeremy Cahen.
Although Chiru Labs (the Azuki development team) knows how to be cool, they do not understand the identity value brought by Azuki. As ZAGA said in a post-interview, they overestimated themselves and underestimated the community. The damage to Azuki’s economic value and identity value caused by the Elementals series is fatal. As a major blue-chip PFP project, Azuki used to be one of the best avatars on social media. In the past, you could often see famous KOLs and senior players in Web 3 flaunting them around. It symbolized not only a member of the strongest blue-chip community but also a symbol of wealth. However, when the same project releases a low-priced series with almost identical elements, these symbols lose their meaning. I believe that even ZAGA cannot distinguish the difference between the Elementals series avatars and the Azuki series avatars on social media. Wearing an Azuki avatar (or possibly an Elementals avatar, XD) has now become a laughingstock in other communities.
ZAGA did almost everything wrong in the Elementals incident, not only trampling on the meaning of NFTs but also betraying their commitment to the community, and Azuki’s powerful connection shattered from the core.
The balance brought by the game, the sword of Damocles always hangs over our heads
Before writing this article, I have read many thought-provoking articles about the collapse of Azuki, most of which are from the perspective of IP and storytelling, discussing how to do a good job in IP, how to find better storytelling and application scenarios. However, considering the size of most NFT project teams and the sharp decline in royalty income in the current bear market of NFTs, this discussion is meaningless. And Yuga Labs, the only team capable of doing this, has already set an example. Although Yuga Labs’ courage and action as a pioneer are admirable, the metaverse storytelling launched by its flagship project BAYC has not saved NFTs, and the continuous release of new projects and new narratives has only led to a continuous decline in BAYC and its derivative series.
As for finding new application scenarios and new NFT narratives, there doesn’t seem to be a better answer than PFP. From the cultural and social perspectives, PFP narratives naturally have the ability to spread and cohere, which other types of NFTs cannot achieve.
The extreme centralization problem of PFP projects at the current stage is not a secret. We believe that the project team will not do anything malicious. However, from the perspective of the game, as a community of interests, the project team has no reason to change the image or maliciously increase the supply. Unfortunately, this game contradicts the development of the project team. The meaning of NFTs is based on decentralization, but the project team has absolute control over the fate of the project. How can a small team of several or a dozen people guarantee that every major decision will not be wrong? Is the image I purchased really mine or is it stored on the project team’s computer? If the scarcity and unchangeability of NFTs have always been dictated by a central authority, I would rather buy Walt Disney’s stock than expect a small team to constantly create miracles.
The current task is to solve the trust issue and decentralize power. Although the culture created by the project team connects the community, any project needs the community to build up its height. Holders contribute everything to the community, but when there is a problem with the core of the community, they don’t even have the right to be informed.
Here comes a new wave…
And surfing here is different.
Breaking down barriers.
Building open communities.
Creating magic internet money with our friends.
Create magical internet currency with friends.
To those who don’t get it, we tell them: gm.
For those who don’t understand, we tell them: GM.
They’ll eventually understand.
Here’s to the ones with the courage to jump into a peculiar rabbit hole.
Here’s to those who have the courage to jump into a peculiar rabbit hole.
One that pulls you away from a world that’s created by many and owned by few…
One that pulls you away from a world created by many but owned by a few…
To a world that’s created by more and owned by all.
Enter a world created by more and owned by all.
From The Garden come the human beans that sprout into your family.
From “The Garden” come the human beans that sprout into your family.
We rise together.
We build together.
We grow together.
This is the declaration from the Azuki website to the community members. Although it may seem weak at this moment, they have always been the best project in interpreting “We”. Reconstruction still has a long way to go, and we hope that this time ZAGA can treat its community well.