The Rise, Fall, and Rebirth of NFTs: The Transformation from Virtual to Physical

1. The End of the NFT Boom

The last wave of the NFT market climaxed with the token issuance of Pudgy Penguins. Recently, the token issuance of Doodles on Solana has only garnered limited attention. Yuga Labs continues to downsize, even involving its core IP Cryptopunks. The Bitcoin NFT projects that were once highly regarded during the last revival wave of NFTs have also nearly gone to zero, and these once-crazy concepts are now ignored.

The original vision of the 10k PFP project was promising: a moderately sized community driving a bottom-up IP project to a global scale. This is in stark contrast to traditional IP projects which require significant financial investment and long-term accumulation. The barrier to entry for NFTs is very low; creators only need to pay a small gas fee to sell their works on Opensea, without the support of galleries, toy companies, or professional teams, thus giving birth to a new IP and artist.

However, with the excessive expansion of BAYC and the disastrous launch of Azuki's sub-series Elemental, the positioning of NFTs has gradually become clearer: they resemble an expensive luxury item with accompanying membership benefits, rather than equity or investment. The project parties also hope that holders will continuously purchase sub-series to support their expensive IP development plans. This creates a contradiction: the project parties understand that content development is costly, but without content IP, it is difficult to survive. The frequent issuance of sub-series continuously consumes the patience of OG series holders, while the returns from content may take years to materialize, or may never be realized at all. As the floor price drops, the beautiful fantasies shatter, and internal contradictions within the community intensify.

2. IP Giants in the Real World: PoP MART

Viewing NFTs as luxury trendy toys for Generation Z makes the reasons for their rise and fall even clearer. In an era dominated by fast-food culture, a lack of content support is not a fatal flaw. Simply relying on appearance can quickly attract buyers; for example, Azuki's artistic style aligns well with Asian aesthetics, and under this consensus, this grassroots project can also closely follow BAYC to become the third-largest blue chip. Similarly, well-known trendy toys in the real world, such as Bearbrick, B.Duck, and Molly, also lack content support but became popular due to their unique shapes.

However, trends are always fleeting. Without content as a value support, these IPs may become outdated at any time. Limited by the cultural constraints of the industry and the extremely low success rate of NFTs, project parties often keep making derivatives around a single IP. But the reality is that by the time the core has yet to take shape, this wave has already passed.

In contrast, PoP MART may offer another approach. This small store originating from Beijing has transformed by acting as an agent for Sonny Angel. After the copyright owner reclaimed exclusive agency rights, PoP MART began to build its own IP empire.

In 2016, PoP MART collaborated with a Hong Kong designer to launch the first self-developed trendy toy series, Molly. This pouting little girl character quickly became popular across the country. Stimulated by the uncertainty of the blind box gameplay, PoP MART began to grow rapidly. By 2019, the annual sales of the Molly single IP had reached 456 million yuan, becoming the company's core source of income.

This model, combining Japanese gashapon with high-end trendy toys, became quite common during the later NFT craze. Basic elements designed by artists are combined by the project team into a series of images for sales operations. The initial phase of NFT launches usually also adopts a blind box format, where the project team releases various rare combinations of images to stimulate purchasing desire.

The only difference is the way they are released, but why do tens of thousands of NFT projects and blue chips generally fail, while PoP MART is experiencing a second spring?

The key point is that PoP MART has not pinned its hopes on a single IP. After Molly brought the first wave of growth, the company did not stop there. Now, PoP MART has 12 proprietary IPs including Molly, DIMOO, BOBO&COCO, 25 exclusive IPs including THE MONSTERS, and over 50 non-exclusive co-branded IPs such as Harry Potter and Disney.

People's preferences are always fickle, and the lifespan of a single IP is limited. But what if you have hundreds of options? Today, Labubu has become a sensation in Europe, America, and Southeast Asia, with its surrounding dolls having a value retention ability that can be called "plastic Moutai." The ideals of Yuga Labs have ultimately been realized in Web2, and this is no coincidence.

We need to rethink what the IP business is, what the development path of NFTs is, and why PoP MART has achieved such success in the absence of content support.

3. The Pragmatic Path of Pudgy Penguins

The success of Pudgy Penguins lies in pragmatism. NFTs themselves are difficult to set apart technically; no matter how cleverly the minting process is designed, it ultimately remains a JPG image. The real challenge for NFTs lies in the realization of IP, which is hundreds of times more difficult than creating a 10K PFP. Yuga Labs wants to build a metaverse, and Azuki wants to create anime; these sound cool, but they all require huge investments, and project teams often only seek funding support from the community.

In this highly compressed world, everyone is eager for quick success. Holders crave high profits, and project teams want to reach the top in one leap. Very few blue-chip projects are willing to be down-to-earth, and as a result, the more impatient they are, the harder they fall. The original team of Pudgy Penguins was also once so impatient that they sold the project at a low price after their reputation was damaged.

It wasn't until encountering the new owner, Luca Netz, a professional with years of experience in physical marketing, that the little penguin got back on track. Luca Netz is truly building a brand, operating a company for NFT holders. From marketing to plush toys and future games, every step of the little penguin is solid and steady; the company can be profitable, and the holders can benefit. There is nothing particularly special about this; it's just doing what needs to be done. It has been proven that the bottom-up IP model is feasible in Web3; there are just too few project parties willing to lower their stance.

4. Future Development Path

The path to success seems simple but is actually difficult. The next stage of development for PFP requires breaking through some inherent thinking frameworks in the crypto space. To become the next Web3 version of Disney, a significant accumulation is necessary. Whether the scarcity of NFTs has a counterproductive effect during the process of going mainstream is a thought-provoking question. If NFTs are defined as trendy consumer goods, then the limitation of 10K may be too great; if defined as assets and fundraising methods unique to Web3, then IP ultimately needs to be transformed into tangible consumer goods to fulfill commitments to the community, rather than endlessly launching sub-series.

Based on the unique culture within the circle and the inherent attributes of NFTs, a long-term focus on a single IP may be difficult to sustain. How can we innovate based on the existing PFP? How can we expand a single project into an IP factory? This may require us to embrace some new concepts and introduce more technologies and gameplay.

5. Issuing Tokens: The End or a New Beginning?

The meaning of issuing tokens for NFT projects is still unclear to this day. It seems more like an exploitation of the lower tier by the upper tier, and also a dilution of the original value of NFTs. I can only understand it as the project seeking a convenient way to exit with liquidity.

From APE to DOOD, these tokens are all variants of air coins without exception. Their functions typically include earning on-chain transaction dividends through staking, rights to purchase items in the metaverse, governance rights, and so on. Ideally, this should be a perfect cycle for holders, stakers, and developers. However, in reality, it often falls into a vicious cycle of NFT devaluation, declining mining returns, and token devaluation.

For original NFT holders, although the tokens have taken away some rights, they usually receive a large airdrop during the token generation event, so few people complain. However, in the long run, this is indeed a kind of dilution, and the distribution method like Azuki's Anime is even more blatant plunder.

Short-term hype is certainly important, but the long-term development of the project is more crucial. Don't let the token issuance become the final destination of the project.