The End and New Beginning of NFT: Evolution from Trendy Toys to IP Factory

1. The Decline of NFTs

The last boom of the NFT market ended with the token issuance of Pudgy Penguins. Recently, the token issuance of Doodles on Solana also failed to create much of a ripple. Yuga Labs continues to scale back its operations, even involving its core IP Cryptopunks. The Bitcoin NFT projects that were in the spotlight during the last wave of NFT resurgence are now nearly worthless, and the once-crazy narratives have long since faded away, leaving them unattended.

The vision of 10,000 PFP projects was once beautiful - a moderately sized community driving a bottom-up IP project to go global. This is in stark contrast to the traditional IP model, where a large amount of money is invested up front to create content. For example, Disney's Marvel Universe, Star Wars, and various animated characters often require years of accumulation and huge investments to deeply resonate with people and ultimately become a gold mine.

NFT is completely different; its threshold is extremely low, and the speed of IP creation and monetization is very fast. Creators only need to pay a small gas fee to sell their works in the market, without the need for galleries, toy companies, movie companies, or any professional teams. An IP and a new artist are thus born.

A few years ago, we also witnessed some bottom-up IPs gaining popularity in the European, American, Japanese, and Korean entertainment circles. Ordinary artists can also achieve a turnaround through NFTs. For someone like me, a member of Generation Z who grew up watching Japanese anime, being able to participate in IP investment and incubation through cryptocurrency, which was previously hard to access, is also a dreamlike thing.

However, after the insane "nested doll" behavior of BAYC and the disastrous release of the Azuki sub-series Elemental, the vague positioning of NFTs gradually became clearer. They are not so much a form of equity or investment, but rather more like an expensive luxury item that comes with membership benefits. The project teams also hope that we continuously purchase sub-series to support their ongoing investment in developing the IP core roadmap. This contradiction arises - the project teams know that creating content is expensive, but without content, the IP will die. They release a sub-series every few months, constantly exhausting the patience of the original series holders and tormenting the entire community. Waiting for content to bring returns may take many years, or this return may never come. The cracks begin to widen, beautiful illusions are shattered as the floor price drops, leaving only various disputes.

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

If NFTs are seen as luxury trendy toys for Generation Z, the reasons for their rise and fall become clearer. In the era of fast food culture, a lack of content may not necessarily be a bad thing, as the appearance alone can quickly attract buyers. For example, the artistic style of Azuki aligns well with Asian aesthetics, and under this consensus, this grassroots NFT series can follow BAYC closely to become the third-largest blue chip. In the real world, Bearbrick(, the Bearbrick), B.Duck, Molly, and other well-known trendy toys also lack supporting content, yet they all became popular due to their unique appearances.

However, trends are always short-lived, and an IP without content as its value core can become outdated at any time. Limited by the culture of the cryptocurrency space and the extremely low success rate of NFTs, project parties often create derivatives around an IP. But the reality is that the core hasn't taken shape yet, and this wave has already passed.

Of course, there are also some PFP projects with sufficient content support, such as Japanese-style NFTs. In the past, I have been in contact with at least 4-5 projects with well-known Japanese comic IPs, and they want to make a big splash in the NFT market. But they don't seem to take into account that the IP fan base is almost completely incompatible with this circle. Secondly, there are too many Japanese anime peripherals to count, why should fans pay hundreds of times the price for a small picture? The most important thing is that this small picture can only be a picture, and the imagination space for future empowerment is zero. Even if you purchase a Gundam NFT, you can only get access to the Gundam metaverse "SIDE-G". Bandai's profits from models, games, and anime have nothing to do with you, and the community will not be a member of the IP incubation, and it will even be considered an outlier in the entire Gundam fan base. At this point, the pain points of GameFi are actually very similar.

At this point, PFP projects have become a false proposition, with only the pragmatic spark of Little Penguin continuing to strive. So, does the small image have any other way out? I believe PoP MART may provide a different answer.

This small store originating from Beijing turned around thanks to its agency of Sonny Angel. Just this series contributed nearly 30% of PoP MART's sales at that time. The envious copyright holder reclaimed the exclusive agency rights a year later, but this instead facilitated the birth of an IP empire.

The founder of PoP MART, Wang Ning, had a very simple idea at the time - to create proprietary IP that could not be taken away by others. In 2016, PoP MART collaborated with Hong Kong designer Wang Xinming to launch the first self-owned toy series, Molly. This pouting little girl character instantly became popular across the country. Through the uncertainty stimulation of the blind box play and dopamine-driven excitement, PoP MART began its first round of rapid growth. By 2019, the annual sales of the single IP Molly had reached 456 million yuan, becoming PoP MART's core source of income at that time.

This model, which combines Japanese gashapon with high-end trendy toys for collaborations, became quite common during the NFT boom in the following years. The basic elements are designed by artists and then handed over to the project team to combine them into a series of images for sale and operation. The initial phase of NFT launches usually adopts a blind box format, where the project team releases various rare combinations of images to stimulate players' purchasing desire.

The two only differ in the form of release, but tens of thousands of NFT projects and various blue-chip ones have generally failed. So why is PoP MART迎来第二春?

I once attributed the reasons to difficulties in implementation and high purchasing thresholds. The former indeed seems to be a problem at present, but the latter is not necessarily true. NFTs have also gone through a period of free minting, with Goblintown and MIMIC SHHANS being the star projects of that time, where creators made a fortune just from transaction fees. Many NFTs from the inscription era are even more decentralized on this basis, but this cannot stop the decline of NFTs. It is easy to form or join an IP community, but the challenge lies in continuity.

So, I think we might be mistaken about the model. After the initial rapid growth, Molly also did not make PoP MART soar. The company's stock price dropped all the way from 2021 to 2024, just like NFTs. However, PoP MART turned around thanks to a whole wall of IPs. Now, PoP MART has 12 proprietary IPs including Molly, DIMOO, BOBO&COCO, YUKI, and Hirono, 25 exclusive IPs including THE MONSTERS( with Labubu), PUCKY, SATYR RORY, and more than 50 non-exclusive co-branded IPs such as Harry Potter, Disney, and League of Legends.

Human preferences are always elusive, the life of an IP is limited, but what if I have hundreds of choices? Nowadays, Labubu is surging in popularity in Europe, America, and Southeast Asia, and the value retention capability of its surrounding dolls is known as "plastic Moutai." The ideals of Yuga Labs were ultimately realized in Web2, and all of this is not a coincidence.

We should rethink what the IP business is, what the roadmap of NFT is, and why PoP MART can achieve such heights without content support.

III. The Success Path of Pudgy Penguins

The success of Pudgy Penguins lies in being pragmatic, pragmatic, and again pragmatic. NFTs themselves are difficult to form technical barriers; no matter how cleverly the minting process is designed, it ultimately results in a JPG image. The real challenge of NFTs lies in the implementation of IP, which is hundreds of times more difficult than creating 10K PFPs. Yuga Labs wants to create a metaverse, Azuki wants to create anime; these ideas are cool, but the initial funding for these projects requires hundreds of millions, and they will only seek funding support from the community.

This highly compressed world is too restless; everyone wants to succeed quickly. Holders want to make big money, and project teams want to achieve instant success. Very few blue-chip projects are willing to lower their stance, and as a result, the more impatient they are, the worse they fall. The original team of Pudgy Penguins was once a similarly restless grassroots team, and after their reputation was damaged, they sold the project at a low price.

At this time, the little penguin met its true owner, Luca Netz. This practitioner, who has years of experience in physical marketing, has brought the little penguin back to its rightful height. Luca Netz is truly building a brand, operating a company for NFT holders. From marketing to plush toys to future games, every step of the little penguin is solid, the company can be profitable, and the holders can also profit. All of this is quite ordinary; it is just doing what it needs to do. It has been proven that bottom-up IP is viable in Web3, but there are just too many project parties that can't humble themselves.

So, I really dislike the term "falsification" as if certain things should never exist. Electric vehicles were once very immature, and the voice assistants in phones were also quite clumsy. But that doesn't prevent the entire city from being filled with new energy vehicles today, not to mention AI.

Many so-called discredited tracks will still be attempted in the future of Web3, but there is a lack of a suitable project party.

4. Future Development Path

The path to success seems simple, but in reality, it is difficult. The next phase of PFP's development must break through some inherent logical frameworks of cryptocurrency. To become the next Web3 version of Disney requires significant accumulation. Whether the scarcity of NFT has acted as a counterproductive force in the process of becoming mainstream is a question I discussed in a previous article. If defined as trendy consumer goods, then a scale of 10K may be too small; if defined as assets and fundraising methods unique to Web3, then IP ultimately needs to be transformed into tangible consumer products to fulfill commitments to the community, rather than a bunch of strange sub-series.

Based on the unique culture of the cryptocurrency circle and the attributes of NFTs themselves, focusing on a single IP is truly a helpless situation. How can we further innovate based on these PFPs? How can we expand a project into an IP factory? This may require us to embrace some new concepts and introduce more technologies and gameplay.

5. The Significance of Token Issuance

The significance of issuing tokens for NFTs remains unclear to this day. This practice seems more like an exploitation of the lower ranks by those in higher positions, and it also dilutes the original value of the NFT. I can only understand it as a convenient way for projects to seek liquidity exit.

From APE to DOOD, without exception, they all resemble variations of air coins. Their functions often include staking to earn on-chain transaction dividends, purchasing metaverse items, governance rights, and so on. Ideally, it is a perfect cycle among holders → stakers → developers. But the reality is that it resembles more of a bubble, trapped in a vicious cycle of declining NFT prices, mining yields, and token prices.

For original NFT holders, although the tokens have taken some dividends and rights, most of them received a large airdrop during the token generation event (TGE), so no one complained. However, in the long run, this is indeed a kind of dilution, and distributions like Azuki's Anime are even more blatant plunder.

Short-term popularity is important, but the long-term sustainability of the project is more crucial. Don't let the token issuance be the final stop.

Conclusion

In this fast-paced, dopamine-driven era, we have witnessed the rise of many emerging Web2 IPs. NFTs should have thrived in this era, as they possess many irreplaceable characteristics. Four years ago, I regarded it as the Moutai of the digital age, but reality has proven it to be more like a digital tulip. Few are willing to seek opportunities in the ruins, but I believe that beneath the ruins lies the next Labubu.