Written by: Weilin, PANews
The well-known NFT project "Fat Penguin" Pudgy Penguins has been frequently moving recently, and even appeared in the ETH ETF promotional video of asset management agency VanEck. In May, Pudgy Penguins announced that it would cooperate with game studio Mythical Games to develop an immersive mobile game, which will be launched in 2025; in June, Pudgy Penguins announced that it had jointly established a parent company called Igloo with its NFT licensing platform OverpassIP.
Then, more important news came. On July 23, Pudgy Penguins announced that it would create an Ethereum Layer 2 blockchain called "Abstract". This Layer2 is consumer-centric and received 11 million in financing led by Founders Fund of well-known investor Peter Thiel. Prior to this, Pudgy Penguins had acquired the Web3 creator platform Frame, claiming that it would take advantage of its blockchain construction technology advantages and utilize its own community and user resources.
Building a consumer-centric L2, or airdrop
The new L2 Abstract is a Layer 2 built using Matter Labs' ZK Stack and EigenLayer's data availability layer EigenDA, making the development process of decentralized applications easier, cheaper, and safer. In addition to building this chain, Pudgy Penguins also plans to establish a developer incubator designed to help applications go from 0 to 1.
Abstract's strategic financing round was led by Peter Thiel's Founders Fund, with other investors including Fenbushi Capital, 1kx, Everest Ventures Group and Selini Capital. Pudgy Penguins will use these funds to establish a new company, Cube Labs, to oversee the development of the Abstract chain and provide contributions and support for it. Michael Lee, former senior vice president of Matter Labs, the developer of Ethereum Layer 2 ZKsync, will serve as CEO of Cube Labs.
Abstract is currently running in the testnet, and the mainnet is scheduled to be launched around the end of this year, but the timing of the token issuance is still unclear. The Abstract team currently has about 30 members worldwide, and Cube Labs has an office in Miami.
Pudgy Penguins CEO Luca Netz hopes to "disrupt" the situation with Abstract, a Layer2. Luca Netz is very ambitious and said he hopes to bring 100 million users to the chain. According to a recent interview on the YouTube show Milk Road, Luca Netz said that the "consumer crypto revolution" will happen on a chain, which is Abstract. The three pillars to achieve these goals are "community, culture, and distribution." Based on the existing achievements, Pudgy Penguins can do very well. He even emphasized that "Abstract will become the representative noun of Layer 2, and it will be the largest Layer 2, not one of the Layer 2s, or one of thousands of Layer 2s."
It is not surprising that Pudgy Penguins has entered the L2 market. There are also a number of NFT projects in the market that have built their own L2, such as Bored Ape Yacht Club's Apechain and Azuki's AnimeChain.
In fact, from the perspective of technical implementation difficulty, the current construction difficulty and cost of Layer2 have been reduced. Lugui Tillier, chief business officer of Web3 infrastructure company Lumx Studios, recently wrote that it is actually very fast and relatively cheap to start and maintain an L2 now. Rollup as a Service (RaaS) companies can start and maintain a rollup in up to six minutes, with a monthly fee of less than $1,000. But he also pointed out that the current development of L2 faces many challenges. The first is that market liquidity is fragmented, and users need to constantly switch wallets and do asset bridging. Second, the instability and unpredictability of L2 transaction costs are very unfavorable for the development of various applications. In addition, these new chains will lead to further fragmentation of the market. Of course, this problem is partially solved by the same L2 that provides CDK. Polygon, Optimism, and ZkSync are building a liquidity aggregation layer that makes thousands of application chains and industry chains look like a whole. "Thousands of application chains and industry chains are coming, and they will be critical to financially sustainable on-chain development."
In order to better realize technical development, Pudgy Penguins has recently acquired the on-chain creator economy platform Frame. In December last year, Frame announced on the X platform that it had completed a new round of financing, and the specific amount was not disclosed. In January of this year, Frame released an airdrop query link, but then fell into a stagnation for several months. The previous Frame chain had a solution for mandatory royalties and native ERC-6551 support, which could create a smart contract account for each ERC721 type NFT. The account has all the functions of an Ethereum account, making the NFT bound to the account composable.
According to the latest official tweet, Frame stated that if the user was previously a Frame airdrop claimant, the relevant rewards will be confirmed in Abstract's incentive system.
Involved in the L2 battle caused controversy, CEO looks forward to the return of NFT
Pudgy Penguins’ current advantage is that it understands the community and users, and is able to achieve good commercial monetization. For example, Pudgy Penguins’ NFT-based physical plush toys have achieved significant success in offline markets such as Walmart. The physical toys had retail sales of $13 million to $14 million as of early July, with 1.2 million units sold. This became one of the foundations for their company to function well economically.
However, against the backdrop of sluggish market performance for many NFT projects, Pudgy Penguins’ L2 plan has sparked ridicule in the community. Goose Wayne (GOFX) @usgoose commented, “But why? Is the promotional material really just ‘we fork an L2, hype it up, and then distribute tokens via a massive airdrop’? There are already over 50 L2s, why can’t Arb/OP/Base solve any of the problems Pudgy Penguins is currently experiencing?”
However, there are also users who expressed support, such as Steve@SteveKBark, who said that Luca Netz showed "main character energy" and that he believed his team and the Pudgy Penguins community were his competitive advantage, so he didn't want to bring that magic to another L2. So he went ahead and acquired his own company.
In fact, CEO Luca Netz also has his own reflections and prospects for the recent market performance of NFT. "I actually think that if you look at the NFT field today, the execution speed of top projects is unprecedented in the history of NFT. This mechanism is still effective... The crypto market is a financially driven market, and anything that provides huge returns from a financial perspective will experience ups and downs. Despite the volatility, it will not disappear completely. Therefore, I think NFT will return."
He said that if you understand the advantages of digital collectibles and compare them to physical collectibles, another bullish reason will emerge. The current market value of collectibles is about $450 billion, and the market value of the NFT market, that is, digital collectibles, accounts for only 1% of it. This means that the ratio of physical collectibles to digital collectibles is 99 to 1, and digital collectibles have many advantages over physical collectibles. "Obviously, the current market value ratio of 99 to 1 does not reflect the true advantages of digital collectibles. I think it should be closer to a 50/50 ratio, which shows that digital collectibles still have a lot of room for growth."
He further pointed out that digital collections are in their most popular state, especially in Asia and China, and the growth potential is very strong from a consumer product perspective. "It is clear that NFTs are here to stay. The world is moving towards a digital future, and digital ownership is obvious to anyone who understands the internet and the direction our society is heading. NFTs are the core and backbone of this transformation. People want to collect, crave valuable items, and pursue status symbols. I think the worst is over."
It now seems that although Pudgy Penguins's move to build Layer2 has received some ridicule, the new trend has also brought certain stimulation to NFT and the broader market. We will pay close attention to the subsequent trends.
