Penguin CEO Refutes ‘NFT as a Money-Making Tool’ 6 Key Points in the Development of NFT

Author: Azuma

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

In response, Luca Netz, CEO of the NFT project “Pudgy Penguins,” published a lengthy article refuting this claim. In the article, Luca Netz systematically explained the importance of brand commercialization for the development of NFT projects from six different perspectives. This includes explaining how profits will eventually flow to NFT holders through the “funnel” model, as well as combining supply and demand to explain why some blue-chip NFT projects will gradually return to zero.

As one of the most remarkable NFT projects during the bear market, since Luca Netz took over the project in February last year, “Pudgy Penguins” has not only emerged from the historical gloom but also once refreshed the historical peak of ETH while other PFPs projects continued to decline. It is because of this that Luca Netz’s reputation is constantly rising in the NFT industry, and many project parties regard him as a role model, hoping to replicate the success of “Pudgy Penguins” through imitation and learning.

Considering that Luca Netz has elaborated on his thoughts on the development of NFTs in this recent article, this content may be of some reference value to practitioners in the same field. The following is the original content by Luca Netz, translated by Odaily Sunday Report.

Gary’s viewpoint is very bad.

In the following text, I will explain to you why this way of thinking is fundamentally wrong and why this viewpoint is very bad.

To clearly state my opinion, I will list the 6 main points that directly support “why building a globally renowned brand is the best way for NFT holders to accumulate value”.

Point 1: Marketing

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

NFT needs to be marketed to succeed. Everyone wants instant value conversion, but it is impossible during a deep bear market. When NFT is in a speculative stage, certain announcements may trigger tremendous interest and demand, ultimately accumulating significant value for the NFTs. However, if it were today, the same measures might not be as effective.

Is NFT the only one like this? Not really. Many excellent Layer2 projects are making major announcements, which could have quickly increased the project’s market value two years ago, but today the same 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 no exception.

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

Key Point 2: Emotional Connection

Before we begin, there is some data about collectibles worth quoting. As of today, the total size of the global collectibles market has reached $426 billion. This market is not built on liquidity or instant dopamine secretion, but on emotional connection.

To increase the value of your NFT, you need to optimize two things:

  • First, demand, which can be achieved by implementing various marketing activities to gradually increase project awareness.
  • Second, holding, which is driven by emotional connection. This includes emotional connections with community members, as well as emotional connections with interactive experiences, content, and characters. If we can establish enough emotional connection between the holder and the NFT, the emotional value will eventually surpass monetary returns, making it priceless.

If you can create enough demand and have compelling emotional connections, you can create the best value appreciation mechanism in the world.

Take a look at the image below. If you see your child react like this to a “fat penguin” toy, would you sell it and rush to other shitcoins? Does this reaction make you believe more in the project’s long-term vision?

Key Point 3: Sustainability

This is often the most overlooked point.

Understanding sustainability means understanding what killed your favorite blue-chip projects from 2020-2021, and the answer lies in “dilution.” “Dilution” arises when a project cannot generate external revenue and ultimately leads to the issuance of more NFTs.

Unfortunately, when the growth in demand cannot match the growth in supply, the ecosystem tends towards zero.

Creating a sustainable brand can effectively mitigate the biggest risk of holding NFTs – unnecessary “dilution” in order to maintain and progress the business.

  • Demand > Supply = NFT value rises;
  • Supply > Demand = NFT tends towards zero.
  • Establish a sustainable revenue model -> Invest in marketing -> Create more demand -> NFT value grows.

This is not difficult to understand.

Key Point 4: Touchpoints

Essentially, this is just basic work, but I believe that if you can create enough touchpoints (opportunities for users to interact with the project IP), this will convert into the maximum upward momentum when market conditions improve.

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 NFTs, so what’s the benefit for the holders?”

Yes, they won’t do it today, but I don’t need them to do it now either. However, when the NFT bull market returns and traders start to build their collections, which type of NFT do you think they are most likely to purchase? I believe they are most likely to choose the ones they see most frequently. Once they have a large amount of funds, they will buy them.

More brand collaborations, more products and content, these are excellent ways to create more touchpoints.

Key Point 5: Experiences

Within the NFT culture, everyone desires various free benefits, but unfortunately, these are no longer sustainable as the royalties are consumed.

If I cannot create real external cash flow by establishing a successful brand, I cannot create more and better experiences for the holders without “diluting” their interests. But if I can build a successful brand and supplement the treasury reserves with continuous income, I can use these reserves to provide more and better experiences for the community.

The entire value transmission process is as follows:

  • Create unforgettable experiences for the holders -> Non-holders experience FOMO -> They want to participate -> They purchase NFTs -> NFT value rises -> Holders’ interests grow.

Key Point 6: Game of Institutions

One thing is obvious to me, that is, 90% of NFT traders do not understand what is happening in this field and where the real upward potential lies.

This is both a game for institutions and individual investors. If you think the 150 ETH floor of BAYC is driven by retail demand, then you are clearly mistaken.

What most people don’t know is that the largest funds in the world have made huge investments in intellectual property. Intellectual property is a good tool to resist economic downturns and has proven to be a great asset class for fund diversification.

The question you need to ask yourself is, how can your project attract funds that are currently or will seek to incorporate NFTs into the next generation of intellectual property portfolios? Do you really think game theory and Ponzi economics will excite institutional capital? If you think so, then you don’t understand the true potential of these assets and this game.

  • Attracting arbitrageurs = short-term success;
  • Attracting institutions = long-term success.

In my opinion, in the future, those funds will seek to meet existing intellectual property needs and create new models of Web3 IP that can leverage blockchain technology.

Attracting one institution is far better than attracting 500 arbitrageurs.


I understand that these arguments may seem biased because I am defending my own position, but you must remember that we purchased “Fat Penguin” for $2.5 million with the sole purpose of being the first and setting the benchmark in the NFT field.

Considering this, we have spent many months critically thinking about the best approach to achieve this goal. Ultimately, this is the conclusion we have reached.

If you want a Ponzi shitcoin, go create a better one.

If you want to be part of the new era of culture, community, and intellectual property, then NFTs are your battlefield.

The reason for publishing this article is to refute the claim that “brand commercialization does not benefit NFT holders.” I believe that over time, the NFT field will realize that this is the right way to incubate the next generation of NFTs.

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