Punks, Apes, Cats, etc.
Original post: https://julian.so/blog/pfp-nfts
Have you seen these pictures lately on your social media feeds?
If you've seen them then you probably already know or heard about NFTs. NFTs are one of the hottest topics that are being discussed these days. People are spending millions of dollars on it and many are still skeptical. The biggest argument is that you can right click and save it instantly. There are many kinds of NFTs, but there is one kind of NFT that caught my attention which is the profile picture / avatar NFTs project. This essay will cover my thoughts about this kind of NFT and why they matter.
What is an NFT?
NFTs are tokens that we can use to represent ownership of unique items. - ethereum.org
NFT (Non Fungible Token) enables us to tokenize art, collectibles, and many more. It's impossible to modify the record of ownership of NFT. This thing is called non fungible because it's not interchangeable because of their unique properties.
NFTs and Ethereum solve some of the problems that exist on the internet today. As everything becomes more digital, there's a need to replicate the properties of physical items like scarcity, uniqueness, and proof of ownership. - ethereum.org
This is a huge thing for collectible art since you can easily prove your ownership of your art and even if someone tries to copy / forge a fake, people will know.
NFT also allows the creator to set the scarcity of the collectibles. This is of course the main thing about collectibles, you want to collect rare stuff.
Beside all the points I've mentioned, NFT powers the creator economy since everyone can mint or create NFTs. You can easily upload your art to Open Sea now by having an ETH wallet and some ETH to pay for gas fee. (more on gas fees here). It’s never been easier to sell your art.
What is profile picture / avatar NFTs?
This kind of NFTs are projects that release an avatar image that can be used as profile picture.
NFT avatars are images of a character, usually from the shoulders up, frequently used as digital profile pictures. - The Defiant
These avatars are uniquely generated and have different traits. Some will have rare traits and some will look more common.
This kind of project not only offers you a jpeg that you can use but also it offers unique benefits for all owners. For example some of them will send you airdrop if you are the owner of the NFT project, some will offer you an access to a private space in the Metaverse, and there are many more.
The first avatar NFT project is called Crypto Punk. It was created by Larva Labs in 2017. These punks can be claimed for free back then as long as you have an Ethereum Wallet. Right now if you see on their official website (https://www.larvalabs.com/cryptopunks) the highest sale of a punk is \$7.57 Million dollars.
Top sales screenshot from larvalabs.com
The CryptoPunks are 10,000 uniquely generated characters. No two are exactly alike, and each one of them can be officially owned by a single person on the Ethereum blockchain. - Larva Labs
The next wave started last April with the launch of Bored Ape Yacht Club. They released 10,000 apes with unique traits into the NFT space. The price was 0,08 ETH (around $200 at that time). It blew up and as I'm writing this (August 4, 2021) their lowest price is at 11.58 ETH (US $28925). And right now during the update (Sept 12th, 2021) of my essay their lowest price is 31 ETH ($106,190). They're 3x in a month.
Stephen Curry is using Bored Ape PFP on his Twitter.
Screenshot from BAYC website
The question you might ask is why do people want to spend that amount of money for a JPEG?
People are buying these NFTs because they want to be a part of the community. By being a part of the community you can gain many things for example a private channel on the discord server, access to merch drops, being able to participate in the next release, and many more.
People love being in a community since we're social creatures. You can make new friends and meet a lot of interesting people inside it. Even by buying a Bored Ape you can gain many followers because people know that you belong in the community.
A project will be nothing without a community behind it. A community can be their "free marketing" since people will share about the project without even asking for free from the team. The community keeps the discord server alive by welcoming new people and also helping them onboard.
Humans love being in a tribe. They want to feel a sense of belonging. Being in a tribe means you have faith in one another, you can somehow “be yourself” and authentic, and also the success of a tribe does not depend on one person but it depends on the whole members.
This is the point that I really love. People are buying NFTs for status signaling. By having a Crypto Punk you can signal that you can afford such a premium price for a JPEG and that you belong in the NFT community and you're up there with the elite.
Status signaling is one of the biggest motivations in the crypto space. From what I've observed during my time here in the NFT space, Avatars / PFP NFT Projects gain the most traction especially for new users. It's easier for them to choose the one they like and if they have the money they can join the big projects instead. Also, these kinds of NFTs are easier to show off since you can put it as your profile picture.
From Eugene Wei's essay:
Status isn't worth much if there's no skill and effort required to mine it.
Of course having a top tier PFP NFT project requires effort, you need to have the capital to buy one. Top tier NFT projects have a high bar to entry, not a lot of people can afford it and this is why buying a PFP NFT project is a great way to signal.
It used to be hard to signal in the digital space. It's of course easier to signal in the physical world since people can touch and see it. In the digital space everything doesn't seem real enough for people to notice. One of the biggest reasons I used to hate NFT is because you can easily right click and save those images and it's yours. It doesn't work that way. By right clicking and saving the image you might own the image but there's no proof that you really own it. NFT enables this proof of ownership.
Signaling, however, grows stronger the larger the out-group is – as long as the out-group knows about the in-group. Limited supply creates FOMO and hype which increases the size of the out-group and results in higher social status for members of the in-group. Banking on Status - Julian Lehr
Next thing that makes NFT grew so fast these couple of months is because the outer group (people outside of NFT) is huge since most people still don't know about NFT and the inner group (people inside the NFT space) is spreading the word every single day. Even celebrities are buying PFP NFTs to put as their social media profile picture. Because NFTs are designed to have limited supply, FOMO increases, thus driving prices.
Of course money is important when it comes to investing. A lot of people come to the NFT space not just to collect them, they are aiming to get a significant gain on the NFTs that they buy. There are many kinds of NFTs and it's hard to choose which one is good and which one is not. Art can be subjective and newer people tend not to look for another project beside PFP.
The entry points for this type of projects are relatively low (around 0,02 - 0,1 ETH) compares to Art Blocks or any other projects. This is the reason why people are getting into PFP projects, low barriers of entry and a high amount of gain. There's no better place right now to gain 10-100x besides NFTs. Sometimes it looks too good to be true but it's just the truth right now.
Pseudonymous identities let you traverse the internet (and soon the Metaverse) and create or find parts of yourself that cannot be discovered with a single identity. - https://shreyashariharan.com/2020/12/19/pseudonymous-identity/
People have been using Anime PFP, cartoon PFP, or any other kind of random pictures as their profile pictures to stay anonymous. Some people want to hide their identity for their own good. Sometimes they are afraid of being fired because of something they posted online. PFP NFT is a great way to hide your real identity and I've seen a lot of people online start appearing after they buy a certain NFT. Being pseudonymous can make it easier to express things into the outside world, since people don't know who you are. It helps us to become the person we want to be.
Pseudonymous identity is the first step. The next step is building reputation with that identity, porting that reputation across different identities, and making a livelihood with that identity. - https://shreyashariharan.com/2020/12/19/pseudonymous-identity/
It's hard not to think about NFT right now since it's becoming mainstream. A lot of people still think this is some kind of scam and it won't be here for long. I believe that NFT is going to stay here in the long run, but just not all of them.
PFP projects are on the rise right now because it fulfills human nature. There will be a point where it will stop and people will move on to the next type of NFT. But since most of the top tier projects are getting too expensive, people will keep on finding the next one so they can be a part of something. The demand will always be there once newer people are coming into the space.
I hope that this short essay can be a good explanation on PFP NFT projects. My twitter DM is open if there's anything you want to discuss.
Thanks to Evan Tan for letting me use his Ape and Punk on this essay.
https://twitter.com/gregisenberg (all things about community)