Compiled by BlockBeats

Editor’s Note: This conversation mainly tells how LucaNetz and his team experienced difficult challenges in the early days of Pudgy Penguins, including financial difficulties, investor rejection, and community distrust, and discusses Pudgy Penguins’ ecosystem, tokens, and its future development. It also touches on why Pudgy Penguins chose Solana instead of other chains, and said it would change the Solana ecosystem by promoting cultural phenomena.

The following is the original content (for easier reading and understanding, the original content has been reorganized):
 
Host: LucaNetz is like the Kobe of Web3 crypto. Everyone is asking, how can you be like LucaNetz? How can you become the best in the world? How can you become a legend?

LucaNetz: To be honest, I was just taking the credit. A few days ago, before we announced PENGU and other projects, I talked with the team. I said at that time, I have a group of the most amazing people around me, and this is not my credit.

What I'm good at is communication, being a good community leader, and so on. But all the behind-the-scenes work you see is the result of Peter, Lorenzo, Vadon, Jennifer, and other team members. There are a total of 60 people on the Pudgy team, and these achievements are all theirs; I just took a bit of honor.

Host: Luca, I knew you before the team had 60 people. How did you manage everything? This industry can feel overwhelming and is really tough. Can you give some advice on how you stay focused? After all, you became the 'Kobe' and 'LeBron' of this industry for a reason.

LucaNetz: We are very motivated, just like your metaphor of 'Kobe' and 'LeBron'. This is our biggest strength, and some people see it as a weakness, which I can understand. We have a strong competitive spirit and want to be the biggest and the best. We feel we deserve such achievements, and our community deserves it too. In the past few years, we have worked hard to prove ourselves, and now it’s time to stand out.

Years ago, when we entered this industry, we did so with a mindset to prove ourselves. We invested millions of dollars, bet our reputations, and put in blood, sweat, and even tears. Friends betrayed us, we experienced all kinds of traps and deceptions. We gritted our teeth and weathered those storms, going through every possible trial.

We are so eager for success, not just for ourselves and the company, but for the community. I really hope to bring better things to the community; that’s what I want the most.

You know, if you are not familiar with the story of the penguins, they were actually laughed at and suppressed at first. Many stories about penguins are somewhat similar to my experiences. We have been underestimated, ignored, or even mocked since childhood, becoming the butt of jokes—at least that’s how I feel. The reality may not be that exaggerated since my childhood was fine, but deep down, I always felt that we were somewhat looked down upon, carrying a sense of pressure.

I think the story of Pudgy is similar; it’s just magnified through these penguin NFTs. So I hope these penguins can feel the kind of feeling I had when I succeeded: I made the right decision, I am the smartest, I have faith. Even when everyone is questioning and taking sides, the penguins chose the right team. This recognition is more important to me than anything else, and I know this value will be rewarded.

This mindset largely comes from our competitive nature. We all loved sports and competition when we were young. I hate failure and love victory, and our executive team has the same spirit.

Our time is now; we already have all the elements of success. It’s time to take a leap and prove everything to the world. This is the cultural phenomenon of this cycle. We respect and thank those who paved the way, but now is not their time; it's ours.

What are Pudgy Penguins

Host: This is the Luca I know! You do mention the efforts of the team, but that’s why we call you the 'LeBron' or 'Kobe' of the crypto Web3 industry. I hope people can share this with their grandmothers, friends, cousins, and siblings. Everyone is asking about meme coins; they see these on TikTok, Instagram, and social media. So if you were to explain Pudgy Penguins and the whole ecosystem to your grandmother, how would you do it?

LucaNetz: First, you need to understand the mission of Pudgy Penguins. We have two missions: First, to become synonymous with penguins worldwide. When people think of penguins, I hope they immediately think of Pudgy Penguins; second, to become the mascot and representative of cryptocurrency.

The way we plan to achieve these two goals is by building a positive, uplifting brand that produces products people love and creates memories and emotional connections around the characters that can impact people's lives. This is a brand that can make people feel positive energy. Through this brand value, we aim to become the global representative of penguins and the cryptocurrency field.

If we achieve these two points, it will undoubtedly be a great thing for the entire industry. Especially for the IP (intellectual property) industry, which desperately needs something fresh and creative, and Pudgy Penguins is just that. More importantly, the cryptocurrency field needs such breakthroughs even more. Cryptocurrency still carries a taboo, making it feel unapproachable, while penguins are the only IP that everyone can accept and relate to, regardless of whether you are 5 years old or 60, regardless of race, gender, occupation, or background, everyone loves penguins. It is universally appealing, with no weird or picky characteristics—it is simply the cutest penguin; everyone loves penguins.

The story of penguins is also a reflection of the classic 'comeback story' of cryptocurrency. All these factors combined make it a real cultural phenomenon. People might ask, is this token an ecosystem token? Or...

Host: Don’t rush; let’s not talk about tokens yet! The penguins themselves are already special enough. Let’s start with the basics, like NFTs. How do you link NFTs with IP? Your ecosystem has not only NFTs but also games and upcoming tokens. Let’s take it step by step; what are these layers?

LucaNetz: Okay, let’s look at it from the funnel perspective; I have been considering this idea from the start. The top of the funnel is demand, right? So what creates this demand? Is it millions of followers on Instagram? Is it millions of followers on TikTok? Is it billions of views on Giffy each month? Is it toys and the reach to millions of families? In short, creating demand and emotional connection starts at the top of the funnel.

Then, as you move down, initially, the middle part of our funnel is 'Pudgy World'—from toy buyers or Instagram followers to toy buyers, you transition to this blockchain-based experience, which is somewhat like backend blockchain technology support, along with some form of gamified frontend.

Host: You mentioned this blockchain-based experience; could you elaborate on that?

LucaNetz: Soon you will see the final version. Basically, for every toy sold, there will be a QR code attached. When you scan the QR code, you will receive three to five digital wearable NFTs. You enter your email and password to access 'Pudgy World', and the system will give you a custodial wallet. Then, you can redeem these NFTs by paying a certain fee. For example, you only need to spend $5 at Walmart to buy a toy, follow the instructions, and about 3 to 4 minutes later, you can start collecting these digital assets on the blockchain.

How Pudgy's CTO is changing the game

Host: Why is this important? Why would owning these assets on the blockchain be interesting? Why put it on the blockchain, especially in terms of the 'grab mechanism' mentioned in the traditional toy industry?

LucaNetz: Because you can access global liquidity through this, and that can only be achieved on the blockchain. So the importance of this is that if Pudgy World can truly succeed, I am really looking forward to the progress in the coming months. Because we can finally see if this mechanism can really work, despite a year of delays. And I think now is the best time, because I believe the popularity of penguins has never been higher.

But the key is, I can spend $5 to buy a toy and unlock three to five digital features worth $2 each. Then I can sell those digital features while retaining my physical toy. In other words, I spend $5 to buy a toy and unlock digital features worth $10. I sell them, earn back $5, and still keep the physical toy. This model could fundamentally change the entire consumer goods industry, especially fast-moving consumer goods (CPG) and loyalty reward systems.

If we can create a successful case here, it will change the landscape of the entire industry and alter everyone's business model. This is the biggest catalyst I see for bringing major brands in. Retailers, especially Walmart, focus on 'value for money'. For example, Walmart's goal is to provide value to customers. If I can go to Walmart with data (millions of dollars of data supporting this theory), I can undoubtedly become the most value-for-money product on their shelves.

Because I can basically explain to Walmart that every customer who buys this product has a reasonable chance of recouping their costs or making a profit. So they buy this toy and almost won't lose money. If this thinking can truly resonate with consumers, the product will surely sell out quickly, possibly within an hour.

Of course, there are many variables here, like economic conditions and whether the demand is appropriate. These factors have a higher probability of success in a bull market, and we are indeed in a bull market right now. So I think the likelihood of success is higher, which is pretty cool. Obviously, in a bear market, there are also a series of different variables that I don't want to consider too much.

Host: Let’s return to those features; you mentioned these NFTs as features. Can you help everyone understand this more intuitively? Are they like Fortnite skins, or do they resemble other similar trading and profit models?

LucaNetz: I think it’s more like digital collectibles, just like buying a Michael Jordan basketball card. I think it’s more appropriate to compare it to baseball cards or basketball cards. This is a better analogy because, you know, the difference between basketball cards and Pudgy Penguins NFTs lies in brand recognition, emotional connection, and so on. But essentially, digital collectibles have advantages over physical collectibles. Why? Because digital collectibles have no insurance issues, no forgery issues, no friction in transactions, and no transportation or storage issues, as the characteristics of NFTs themselves determine that they have these advantages.

For example, Pudgy Penguins NFTs and Michael Jordan basketball cards are essentially the same; they are both collectibles. One is digital, and the other is physical. But digital collectibles have many characteristics that physical collectibles do not have, such as being digital.

For instance, I collect artworks, but now I have no more space to hang more paintings, so the art pieces I can buy are limited. But I can buy an unlimited number of NFTs because my wallet can hold an unlimited amount of art. And my gallery can also be infinite because it is digital.

This is the difference between physical collectibles and digital collectibles; NFTs inherently possess the attributes of physical collectibles, but they are digital. So when we first entered this industry, people were quite confused, asking what we were doing. My response at the time was: I was just doing what physical collectibles were meant to do. I just wanted to make it like them because there really isn't much difference. Everyone was trying to redefine what digital collectibles should be.

Now what we need to do is to align these digital collectibles with physical collectibles in terms of brand recognition, brand affinity, emotional connection, and so on. This is actually what we have been doing for the past three years: how to make our popularity skyrocket? How to become an internet icon? How to create love and resonance around this brand? And then work backward.

Host: I remember I once saw Pudgy Penguins NFTs when they were only $60. Now these NFTs are worth $100,000, which is amazing! But I feel like we are not at that point yet; there is definitely still a long way to go. I have a bigger vision. But looking back at these achievements is still exciting. This is not just the effort of your team, but also yours and your vision. After all, achieving these accomplishments requires a lot of entrepreneurial spirit and business acumen. If you could give everyone a brief overview of how you saved Pudgy Penguins, elevating it from a $60 asset to today’s $100,000, it would be very helpful.

LucaNetz: Simply put, we spent around $2.5 million to acquire this project about three years ago, initially investing $500,000. The day we acquired it happened to be the start of a bear market, so we faced continuous decline from the beginning. We went through many tough moments during this process, even coming very close to bankruptcy multiple times.

We did not take a single cent from the community, except for programmable royalties, which were reduced by 90% just a month after our acquisition. We simply tried our best to do the right things, creating a project that everyone could love. What we aimed to do was to create value for our holders and the community. Although it was tough, we persevered.

Even in the last three months, many people still thought, 'the penguins are dead, their golden age is over'; they thought I didn’t know what I was doing. In fact, there are many stories in between that I can share with you. We are now present in 10,000 retailers, the most notable being Walmart and Target. We have also done significant collaborations, such as with Vandy, and recently with Pokémon, which are all very cool.

The views on our videos on social media have exceeded 50 billion, with 40 billion views just on Giffy. This is enormous, so clearly, through MEME propagation, I believe no other crypto-native IP has spread to the mainstream world as widely as we have. We have many necessary conditions, like a large user base and transformative opportunities.

I don't know if you have seen the performance of Pudgy Kindness or Kind Pango on TikTok; we changed these users' usernames. Although the content is simple, we are genuinely changing lives on that channel. Just like 10 videos brought in 500 million views; this is truly a beautiful story. I want to do my utmost to represent this industry well, do good things, improve people's lives, and set a worthy example to follow. Of course, we are not perfect; we've made mistakes, but we will do our best to lead this industry.

Misunderstandings about cryptocurrency

Host: So what do you think is the most common mistake people make when talking about cryptocurrency and the Web3 ecosystem?

LucaNetz: They feel like it’s their own show, feeling very arrogant and looking down from a height. To be honest, I can only talk about this based on our success. You may agree or disagree, but I believe you should put the community first; take care of your community, and the community will reward you. You see, we are still here; we are still doing our thing. We know that as long as we take care of them, they will reciprocate that value. I am not sure what that reward will look like; maybe I know some of it now, but we just want to do our best to take care of them and help them succeed. Meanwhile, some people look at things too arrogantly, thinking, 'This is my business; I’m in charge.'

Host: But if we step back and look from the perspective of outsiders, where do they go wrong in the cryptocurrency industry?

LucaNetz: I think they actually have PTSD (Post-Traumatic Stress Disorder) because every time there’s a cryptocurrency bull market and adoption cycle, it revolves solely around price increases. But the problem is, retail investors are always the last ones to get in. So in every adoption cycle, assuming a million new users enter, maybe only 50,000 people can make money, see the opportunity, and stay, while the other 95% will feel the pain of cryptocurrency until they forget it, until the trauma dissipates. But the reality is, 95% of people, from the general public and retail perspective, will ultimately get burned by cryptocurrency. So that’s where the problem lies. You know what I mean? They feel cryptocurrency is not real enough or too illusory.

So much of Pudgy's work is about how to connect with consumers and retail without focusing on price. Perhaps they might stumble upon PENGU or Pudgy’s NFTs by chance, but we would prefer to establish a first impression by introducing them to tangible products, like toys they hug while sleeping, or charms on their backpacks, or social media posts sent to them by their partners, because these things are interesting, uplifting, or make them happy. We want these to be their first touchpoints. Then, over time, if they are willing to join and believe in the vision and movement of Pudgy Penguin, they can do more, but the first step is to establish that connection.

The Entrepreneurial Journey of Pudgy Through Hell

Host: You mentioned you have a team of 60 people. Can you share how you made this project successful for entrepreneurs like me who want to enter this industry? What was your first step? What happened after you bought this project?

LucaNetz: After we bought Pudgy Penguins, we went through a very tough first 12 months. Initially, we couldn’t rely on royalties to make money. I knew we had to quickly establish a sustainable business model, but I didn’t expect to almost go bankrupt so soon. In the first month after we acquired the project, the royalty income was $500,000, but in the second month, it dropped to $20,000. I thought this was crazy! It wasn't because market volume dropped significantly; it may have decreased by 20% or 30% in trading volume, but the royalty income went straight to zero, and we were hit hard. You can't imagine how tough that time was. We had a few people who should still be here now, who were part of our early team, but in the end, they really stabbed us in the back.

Host: What do you do when someone betrays you like that?

LucaNetz: Oh, I really cried. It was terrible; that kind of betrayal was the most painful. I also had to face some big holders talking behind my back, calling me foolish. We had a few guys early on who leaked their signed NDA contracts and spread FUD. Don't you understand? I was working my ass off, trying to make this thing work, and we had no money; the entire team was only taking $1,000 a month in salary. Jennifer, our CLO, she’s a Stanford lawyer who could have made $40,000 a month, but she chose to stay, trusting our vision, believing we could make it, trusting we would find a way to get through tough times.

Then I had to join a conference call with 300 venture capitalists to discuss fundraising, and the answer I got was 'no'. I found it strange; I had built a company worth over a hundred million before, why are you saying no? You invested in projects I can’t even understand; I felt utterly insulted.

Host: What do you think the reason is? Do they think this is a 'children's industry'? They don’t understand?

LucaNetz: I think they didn’t see the big picture; they were too focused on the micro, thinking it’s just an e-commerce or consumer goods company. They didn’t realize we are a real team, a team with dreams, and I am a founder with dreams. Most venture capitalists don’t do well; I can tell you from an investor's perspective: when you invest, you don’t look at the project itself; you look at the team. Investing is about people; the core importance of the team is more critical than the idea or product. All my good investments were successful because the team was strong. The projects I invested in succeeded because the teams were exceptional; that’s it, that’s the only place worth betting.

So at that time, we were really struggling. In the end, we had about $200,000 left, and still, these venture capitalists all said 'no'. Meanwhile, I saw them writing huge checks to other companies, like Moonbirds getting funded for $50 million at the start. Do you know how I felt at that time? I thought, 'Are you crazy?' I was so furious, feeling disrespected. That’s when I decided to remember these people's names; I wanted them to know they missed an opportunity. I have a list, I know where they invested; it was really hard because I originally planned to give them 50, but they wouldn’t even give a single Mia offer.

Host: I always hear people say, 'I wish we had a Luca on our team.' Right? I’ve said that I wish I could be like Luca in some companies, especially in the children's IP field, which is tough.

LucaNetz: Even so, there are many issues. That wasn’t the hardest part; the hardest part is watching other NFT projects, projects that were once two Ethereum, then someone comes along and it’s 20, 50, 100. When I went to showcase, they would say, 'No, it’s fine, doing well, quite cute.' That was the hardest part, even the attitude of people.

That was really the hardest part because I was working harder than anyone else on the Spaces tour. You can't find anyone who worked harder than us; every physical effort, every meeting, every flight, every conference, they put me in the back row of every meeting until three to six months ago; they still put me in the last row. That was the tough part; now I won’t accept anything less than this.

That was really the hardest part, not just with investors, but almost everyone downplayed it, except for the community; I truly appreciate them. Really, my respect for them is immense. One guy stood out; we have Spencer here.

Spencer's NFT fund might be the best-performing in history, right? His biggest investment is Pudgy Penguins. I love this because you know how many big NFT funds there are? They are all buying art pieces that don’t drive this industry forward. Right? Now, if Pudgy can accomplish what we want to achieve in the coming weeks, we will bring back the NFT market, not those artists.

I respect that; I like it; I’m not belittling it. But the question is, brother, how can you spend $10 million on that and not even own a single penguin?

I’m telling you this to inspire those who will eventually replace me. I am at the top now, moving forward.
I will hold this position tightly for a long time, but I want to let you know that the people who will take my place, you know? They will push you into oblivion, just like we were at that time. You must dig deep inside and stay strong; never let these affect you. Because, brother, I had days when I was really about to break down; that was really tough.

I share this story and background on this podcast to inspire you, to encourage you. I know what you see now is fun and exciting, but I tell you, every bad thing an entrepreneur can experience in a company and business, we have gone through, and more than once. So, for all entrepreneurs and builders as a source of motivation, I hope you all can get through it, brother. This is not a victorious boast; we still have a lot to prove. So, I’m not saying I’m a 'GOAT' level person, you know? But at least we are somewhere.

Why PENGU will fill the last gap in the Solana ecosystem?

Host: There is a lot of content in this industry. We talked about NFTs, now games, and then tokens. So can we talk about games? Let’s discuss tokens. How does it all connect? Give us some key insights, just lay it out for us. It’s not just a meme coin, nor just a cryptocurrency, just say it straight.

LucaNetz: I want everyone to define what they think it is: is it a community coin? A cultural coin? A meme coin? Or a consumer brand token? It is all of these things; to me, it is the face of cryptocurrency, and I think it is the most beautiful story in the crypto industry in the past four or five years. It is a 'dark horse' story. I believe if it succeeds, it will change the entire industry and lead to a better direction.

I find it hard to refute that, of course, I have my biases. So everyone can assess for themselves. But you cannot say that Pudgy's success is not a huge victory, nor a massive force pushing the entire industry forward. To me, Pudgy's success is a tremendous force propelling this field forward. I think this is easy to understand; many might think it’s a meme coin with an upgrade, right?

From a technical and structural perspective, it resembles a meme coin. 4 billion views on Giffy, all content is memetic. So you know, it has high fungibility and memeability. I think from this perspective, many will resonate with this narrative. And you know, the prophecy and legend of Penku Man existed before me.

From this perspective, I think many will agree it’s a meme coin. But you know, I want to place that blue penguin in Walmart and Target, position it at number one in the App Store, put it in the hands of millions, and spread it across social media. I will also bring it to the big screen; one day I will achieve all of this.

So, meme coins usually have no action, right? But I firmly believe that I think this will be the first case of meme coin evolution. I believe that if Doge had a team like ours behind it, the value of Doge would multiply because Doge could be utilized in many movies and TV shows. You can’t tell me that the popularity of an IP won't create demand, and demand will make things more valuable. This is a very simple concept; anything with a fixed supply is like this.

This is essentially the supply-demand model. So you’re telling me that millions of fans and billions of views daily won't impact or support this ecosystem and this theory? I think that perspective is fundamentally untenable.

Host: So what can the PENGU token do?

LucaNetz: I can't say specifically; anything that means something to you is what it means to you. Buy things, do anything you think you can do. Everything, that’s it. You know, it’s all based on your understanding. We’re a smart team, right? But in the end, it still depends on everyone's participation.

But don’t have expectations greater than your local Doge or Pepe. It’s just the same vehicle; any other ideas are unexpected surprises and joys.

Host: Why choose Solana instead of Abstract or other chains?

LucaNetz: Because the initial plan was to do it on Abstract, but it wasn’t ready. Cryptocurrency really emphasizes timing, right? There was a timing point, and I just knew it was time to do it. You can’t rush to do something so important for the sake of pursuing a time point unrelated to it, right?

It will only make the community larger, create more hype and momentum, and solidify things. So many building on Abstract are mainly focused on two things: they believe Abstract can bring Web2 distribution capabilities, and they also believe Pudgy is the best community to touch cryptocurrency. The first reason still holds; the second reason has become more meaningful now because soon I will have thousands of token holders, and soon there will be hundreds of thousands, possibly millions of token holders. Now the 'penguin army' is no longer 10,000 but 500,000, and it may even reach 1 million; it will go multi-chain; it will be a multi-chain project, right?

I believe in a multi-chain future, and I think Solana is where we want to go the most. I believe what we can bring to Solana is very important for that ecosystem; I think we can do some things from a unified perspective; I think we can bring everything together. You know, Solana has its PvP, and we stand on its L1, but from our perspective, Pudgy is not the face of Ethereum; it is the face of cryptocurrency, right? For us, I believe in Solana's ecosystem; I trust its community and culture.

If we don’t appear in this field on Solana, I think it would be a huge mistake for us to help open up this new field and lead the way; it would be a big loss for us, for our ecosystem, and even for Solana, and I think it fits us well.

I believe what we bring, in my view, is the beginning of a cultural phenomenon. I think this is exactly the last piece of the puzzle that Solana has been missing. You put a cultural phenomenon on Solana, just like Bored Apes and Punks did, I think it will make the entire ecosystem better. Based on my interactions with the Solana community, I hope to do something for them; this is a great opportunity for me. Ultimately, it will become an SPL token. Eventually, you know it will be a token standard based on Solana, and such a token is an SPL token.

Host: SPL token, explain to the audience what it is.

LucaNetz: SPL is one of the native token standards of Solana; there are different types of token standards on Solana, and SPL is the most common. So it’s really not that complicated; everyone can understand it.

Host: So when is this token plan going to launch?

LucaNetz: Soon, very soon. We do not plan to wait until the end of the year, nor do we plan to launch immediately. So, as scheduled, this release might already be live.