Original author: Mika, youtube
Original translation: zhouzhou, 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 just took the credit. I talked to the team a few days ago before we announced PENGU and other projects. I said at the time that I was surrounded by the most powerful people, and this was not my credit.
I'm good at communication, being a good community leader, and that kind of stuff. But all the work that you see behind the scenes is the work of Peter, Lorenzo, Vadon, Jennifer, and the rest of the team. There's a team of 60 people at Pudgy, and it's all their work, and I just take some credit.
Host: Luca, I've known you since before we had 60 people. How do you stay on top of everything? This industry is so stressful and hard. Can you give me some advice on how you stay focused? After all, there's a reason you're the "Kobe" and "LeBron" that this industry is pushing for acceptance.
LucaNetz: We are very competitive, just like the "Kobe" and "LeBron" analogy you mentioned. This is our biggest advantage, and some people think it is a weakness, and I can understand this view. We have a strong competitive spirit and want to be the biggest and the best. We feel that we deserve such achievements, and our community deserves it too. We have worked hard to prove ourselves over the past few years, and now it's time to stand out.
We entered this industry many years ago with a mindset to prove ourselves. We invested millions of dollars, our reputations, and our blood, sweat, and tears. We have been betrayed by friends, and we have been through all the traps and deceptions. We have weathered the storms and endured every possible test.
We want to succeed so badly, not only for ourselves and the company, but for the community. I really want to bring something better to the community, that's what I want most.
You know, if you are not familiar with the story of penguins, they were actually ridiculed and suppressed at the beginning. Many stories about penguins are actually a bit similar to my experience. We have been underestimated, ignored, even laughed at, and become a laughing stock since we were young - at least that's how I feel. Maybe the truth is not that exaggerated, because my life was okay since I was a child, but I always felt that we were not favored, and there was a feeling of pressure on my shoulders.
I think the same is true of Pudgy’s story, but it’s amplified through these penguin NFTs. So I hope these penguins can feel the same way I feel when I succeed: I made the right decision, I am the smartest, and I have faith. Even if everyone is questioning and taking sides, the penguins chose the right team. This recognition means more to me than anything else, and I know that this value will be returned.
This mentality comes largely from our competitive nature. When we were young, we all loved sports and competition. I hate losing and love winning, and our executive team has the same spirit.
Our time is now. We have all the ingredients for success. Now is the time to go all out and prove it 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 is ours.
What are Pudgy Penguins
Host: This is the Luca I know! You do mention the team effort, but that’s why we call you the “LeBron” or “Kobe” of the crypto Web3 industry. I hope people will send this to their grandma, their friends, their cousins. Everyone is asking about meme coins, they see them on TikTok, Instagram, and social media. So, if you were to explain Pudgy Penguins and the entire ecosystem to your grandma, what would you say?
LucaNetz: First of all, you have to understand the mission of Pudgy Penguins. Our mission is twofold: 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 achieve these two goals is to build a positive brand that benefits others, produce products that people love, and create memories and emotional connections around characters that can impact people's lives. This is a brand that makes people feel positive energy. Through such brand values, we will become synonymous with penguins around the world and a representative of 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, it is in urgent need of something fresh and creative, and Pudgy Penguins exists. At the same time, more importantly, the cryptocurrency field needs such a breakthrough. Cryptocurrency still has a taboo color and makes people feel inaccessible, while Penguins is the only IP that everyone can accept and identify with, whether you are 5 or 60 years old, regardless of race, gender, profession or background, penguins can be loved by everyone. It is universal enough, without weird or picky characteristics - it is the cutest penguin, and everyone likes penguins.
The story of the penguin is also the epitome of the most classic "comeback story" in cryptocurrency. All these factors combined make it a real cultural phenomenon. People may ask, is this token an ecosystem token? Or...
Host: Wait, let's not talk about tokens yet! The penguin itself is special enough. Let's start with the basics, like NFTs. How do you connect NFTs to IP? Not only do you have NFTs in your ecosystem, but you also have games and upcoming tokens. Let's go step by step, what are these layers?
LucaNetz: Okay, let's look at this from a funnel perspective, which is how I started thinking about it from the beginning. The top of the funnel is demand, right? So what creates that demand? Is it the millions of followers on Instagram? Is it the millions of followers on TikTok? Is it the billions of views per month on Giffy? Is it the toys and the reach of millions of homes? In short, the creation of demand and emotional connection starts at the top of the funnel.
And then as you move down, initially, the middle of our funnel was “Pudgy World” — from a toy buyer or an Instagram follower to a toy buyer, you transition into this blockchain-based experience, which is kind of like blockchain technology support on the back end, coupled with some form of gamification on the front end.
Host: You mentioned this blockchain-like experience, can you explain it in more detail?
LucaNetz: You will see the final version soon. Basically, every toy we sell will come with a QR code. After you scan the QR code, you will get three to five digital wearable NFTs. You enter your email and password, enter "Pudgy World", and the system will give you a custodial wallet. Then, you can redeem these NFTs by paying a certain fee. In the end, for example, you only need to buy a toy for $5 at Walmart, follow the instructions, and about 3 to 4 minutes later, you can start collecting these digital assets on the blockchain.
How Pudgy's CTO Changed the Game
Moderator: Why is this important? Why is it interesting to have these assets on the blockchain? Why put it on the blockchain, especially with what is called a "catch mechanism" in the traditional toy industry?
LucaNetz: Because you can access global liquidity, which is only possible on the blockchain. So the importance of this is that if Pudgy World is really successful, I am really looking forward to the progress in the next few months. Because we can finally see whether this mechanism can really work, although it has been delayed for a year. And I think now is the best time because I think the popularity of penguins has never been so high.
But the key is that I can buy a toy for $5 and unlock three to five digital features worth $2. I can then sell those digital features and keep my physical toy. In other words, I buy the toy for $5 and unlock digital features worth $10. I sell them, make my $5 back, and keep the physical toy. This model in principle could disrupt the entire consumer goods industry, especially fast-moving consumer packaged goods (CPG) and loyalty reward systems.
If we can create a successful case here, it will change the entire industry landscape and change everyone's business model. This is the biggest catalyst that I think will drive big 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 to support this theory), I can undoubtedly become the most cost-effective product on their shelves.
Because I can basically explain to Wal-Mart that every customer who buys this product has a good chance of recovering their costs or making a profit. So they will hardly lose money by buying this toy. If this idea can really be recognized by consumers, the product will definitely sell out quickly, maybe within an hour.
Of course, there are a lot of variables here, like the economy, whether there's the right amount of demand. Those things have a higher probability of success in a bull market, and we're in a bull market right now. So I think it's more likely to succeed, which is cool. Obviously, in a bear market there's a different set of variables, and I don't want to get too caught up in those situations.
Moderator: Let's go back to those features. You mentioned these NFTs as features. Can you give us a more intuitive understanding? Like Fortnite skins, or other similar trading and profit models?
LucaNetz： I think it's more like digital collectibles, just like you buy Michael Jordan basketball cards. 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 is obviously brand recognition and emotional connection and so on. But in essence, digital collectibles have more advantages than physical collectibles. Why? Because digital collectibles have no insurance issues, no counterfeiting issues, no friction in transactions, and no transportation and storage issues, because the characteristics of NFT itself determine that it has these advantages.
For example, Pudgy Penguins NFTs and Michael Jordan basketball cards are essentially the same thing, they are both collectibles. One is digital, the other is physical. But digital collectibles have many features that physical collectibles don’t have, such as being digitized.
For example, I collect art, but now I have no place to hang more paintings, so the art I can buy is limited. But I can buy an unlimited amount of NFTs because my wallet can hold an unlimited amount of art. And my gallery can also be unlimited because it is digital.
This is the difference between physical collectibles and digital collectibles. NFTs inherently have the attributes of physical collectibles, but they are digital. So when we first entered this industry, people were actually quite confused and asked us what we were doing. My answer at the time was: I just did what physical collectibles did. I just wanted to do it the same as them because there is actually not much difference. Everyone is trying to redefine what digital collectibles should be.
Now what we need to do is make these digital collectibles match the physical collectibles in terms of brand awareness, brand affinity, emotional connection, etc. This is actually what we have been doing for the past three years: How do we make our popularity explode? How do we become an online idol? How do we create love and resonance around this brand? And then work backwards.
Host: I remember seeing Pudgy Penguins NFT collections, and they were only $60 at the time. Now these NFTs are worth $100,000, which is amazing! But I don't think we're there yet, and there's still a long way to go. I have a bigger vision. But looking back on these achievements is still exciting. This is not only the work of your team, but also you and your vision. After all, it takes a lot of entrepreneurial spirit and business vision to achieve these achievements. It would be very helpful if you could give everyone a brief overview of how you saved Pudgy Penguins and raised it from a $60 asset to $100,000 today.
LucaNetz: To put it simply, we acquired this project for $2.5 million about three years ago, with an initial investment of $500,000. The day we acquired it happened to be the beginning of the bear market, so we faced a continuous decline from the beginning. We experienced many difficult moments in the process, and even almost went bankrupt many times.
We have never taken a penny from the community, except for programmable royalties, which were cut by 90% a month after we acquired it. We just try our best to do the right thing and create a project that everyone can like. What we try to do is to create value for our holders and the community. Although the process is difficult, we keep persisting.
Even in the last three months, there are still a lot of people who think "Penguin is dead and has passed its prime." They think I don't know what I'm doing. In fact, there are many stories in between, and I can share them with you. We are now in 10,000 retailers, the most famous ones are Walmart and Target. We also have big joint collaborations, such as the collaboration with Vandy and recently with Pokémon, which are all very cool.
We have had over 50 billion views on social platforms, 40 billion on Giffy alone. That's huge, so obviously through MEME, I don't think any crypto-native IP, other than Doge, has spread as widely to the general world as we have. We have a lot of the necessary conditions, like a large number of users and the opportunity for change.
I don't know if you've seen Pudgy Kindness or Kind Pango on TikTok, where we changed the usernames of these people, and even though it was simple content, we were really changing lives on that channel. Like 500 million views on just 10 videos, it's really a beautiful story. I want to do my best to represent this industry, do the best things I can, elevate people's lives, and set an example to follow. Of course, we're not perfect and we make mistakes, but we're going to do our best to lead this industry.
Misconceptions about cryptocurrency
Host: So what do you think are the most common mistakes people make when talking about cryptocurrencies and the Web3 ecosystem?
LucaNetz: They just feel like it's their own show, and it feels arrogant and high up. To be honest, I can only speak to this issue based on our success. You may agree or disagree, but I think you should put the community first, take care of your community, and the community will return the value to you. Look, we are still here, we are still doing our thing. We know that if we take care of them, they will return the value. I'm not sure what the return will be, maybe now I know something, but we just want to do our best to take care of them and make them successful. And some people just take things too arrogantly and think "this is my business, I call the shots."
Host: But if we step back and look at what people from the outside think about the cryptocurrency industry, where are they wrong?
LucaNetz：I think they actually have PTSD because every bull run and adoption cycle of cryptocurrencies is just about price increases. But the problem is that retail investors are always the last to take the bait. So in every adoption cycle, let's say there are a million new users coming in, maybe only 50,000 people can make money, see the opportunity and stay, and the other 95% will feel the pain of cryptocurrencies until they forget about it, until the trauma dissipates. But the reality is that 95% of people, from a general public and retail perspective, will eventually be burned by cryptocurrencies. So that's the problem. You know what I mean? They feel that cryptocurrencies are not real enough, or they are too illusory.
So a lot of Pudgy's work is about how to connect with consumers and retail, and it's not centered on price. Maybe they will find PENGU or Pudgy's NFT by chance, but we prefer to establish a first impression by exposing them to actual goods, like the toys they hold when they sleep, or the charms on their backpacks, or the social media posts their significant other sends them, because these things are interesting, exciting, or make them happy. We hope that these will be their first point of contact. Then, over time, if they are willing to join and believe in the vision and movement of Pudgy Penguin, they can do other things, but the first thing to do is to connect and align.
Moderator: So what do you think of the outsiders’ views on cryptocurrency, especially those who have not yet entered the Web3 ecosystem? What misunderstandings do they have about the entire industry?
LucaNetz: I think they actually have PTSD. The problem is that the bull market and the adoption cycle of cryptocurrencies is always about the price going up, but the retail investors are always the last to buy in. So every adoption cycle, for every million new users that come in, maybe only 50,000 people make money, see the opportunity and stay, and the other 950,000 people complain about cryptocurrencies until they forget about it, until the trauma is over. Like, 95% of people, especially the general public and retail investors, have been hurt in the crypto market. So this is the crux of the problem. Do you know what I mean? They don't believe that cryptocurrencies are real, they don't think it's real enough, or its value is not tangible enough.
So one of Pudgy's jobs is to cater to consumers and the retail market, not price-centric. Maybe they'll find PENGU or Pudgy's NFT, yes, but we want to attract them through some actual products, like the toys they hold when they sleep at night, the charms on their backpacks, or the social media posts their significant other sends them, because these things make them happy, excited, or interesting. We hope that these will be their first contact point with Pudgy. Then over time, if they are willing to join and believe in the vision and movement of Pudgy Penguin, they will make more choices. But the key is to align first.
Pudgy's entrepreneurial history through hell
Moderator: You mentioned that you have a team of 60 people. For entrepreneurs like me who want to enter this industry, can you share how to make this project successful? What is your first step? What happened after you bought the project?
LucaNetz: We had a very difficult first 12 months after we bought Pudgy Penguins. Initially, we had no way of making money from royalties. I knew we had to build a sustainable business model very quickly, but I didn't expect that we would go bankrupt so quickly. The first month after we bought the project, we made $500,000 in royalties, and the second month it was only $20,000. I thought that was crazy! It wasn't because the market volume dropped by a lot, maybe 20% or 30% of the transaction volume dropped, but the royalties went straight to zero, and we suffered from it. You can't imagine how difficult it was. We had a few people who should still be here who were part of our initial team, but ended up killing us, which was really a stab in the back.
Host: What do you do when someone betrays you like this?
LucaNetz: Oh, I really cried. It was such a horrible time, the betrayal was the worst. I had to deal with some big holders calling me stupid behind my back. We had a few guys like that early on, leaking their NDA contracts, spreading FUD. Don’t you understand? I was working my ass off to make this work, we had no money, the whole team was only paid $1,000 a month. Jennifer, our CLO, was a lawyer at Stanford, she could have made $40,000 a month, but she chose to stay and believed in our vision, believed that we could do it, and believed that we would find a way to get through this.
Then I had to attend a conference call with 300 VCs to discuss fundraising, and the answer I got was "no". I felt very strange. I had built a company worth hundreds of millions of dollars before, so why did you say no? You invested money in projects that I didn't understand, and I felt insulted.
Host: What do you think is the reason? Why don’t they think highly of you? Is it because they think this is a “children’s industry”? They don’t understand?
LucaNetz: I think they don't see the big picture. They focus too much on the micro and think it's just an e-commerce or consumer goods company. They don't realize that we are a real team, we are a team with a dream, and I am also a founder with a dream. Most venture capitals don't do well. I can tell you an investor's perspective: when you make an investment, you don't look at the project itself, but at the team. Investing is investing in people, and the core importance of the team is more critical than creativity and products. All the investments I have made well are because the team is strong. The projects I invested in can succeed because the team is super good. That's it. This is the only place worth betting.
So we were really struggling. We were down to about $200,000 at the end, and these VCs were still saying, “No.” At the same time, I was seeing them writing huge checks to other companies, like Moonbirds was getting 50 million dollars in funding initially. You know how I felt? I was like, “Are you crazy?” I was really mad that I didn’t trust us. That’s when I decided to put these people’s names on my list and let them know that they missed an opportunity. I had a list of names, and I knew where they put their money, and it was really hard because I was going to give him 50, but he wouldn’t even give me an offer for Mia.
Host: I always hear people say, "I wish we had a Luca on the team." Right? I've said that I wish I could be like Luca in certain companies, especially in the children's IP space, which is hard.
LucaNetz: Even so, there are a lot of problems. That's not the hardest part, the hardest part is you look at these other NFT projects, there have been projects that were two Ethereum at one point, and then there are people who are at 20, 50, 100. When I go to present it, they're like, "No, it's okay, it's well done, it's cute." That's the hardest part, even the attitude of people.
That was the hardest part, because I was doing the Spaces tour and I was working harder than anybody. You couldn't have worked harder than us, every physical effort, every meeting, every flight, every conference, and they put me in the back row of every conference, and up until three to six months ago, they put me in the very back row. That was the hard part, and now I won't accept anything less than that.
That was really the hardest part, not just the investors, but almost everyone was downplaying it, except for the community, and I'm really grateful to them. Really, I have the utmost respect for them. One guy stepped up, we have Spencer here.
Spencer's NFT fund is probably 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're all buying art stuff and they're not pushing the industry at all. Right? Now, if Pudgy can do what we want to do in the next few weeks, we're bringing back the NFT market, not the artists.
I respect that, I love that, I'm not disparaging that. But the thing is, man, how can you spend $10 million on that and not own a penguin?
I tell you this to inspire the people who are going to take my place. I'm at the top right now, and I'm going to keep it for a long time, but I want you to know that the people who take my place, you know what? They're going to put you in oblivion, just like we did. You have to dig deep and stay strong and never let it get to you. Because man I had some days where I was like, I was going to break down, and it was hard.
I'm telling you this story and this background on this podcast to inspire you, to encourage you. I know what you're watching is fun and exciting, but I'm telling you, every bad thing that an entrepreneur can go through in their company and business, we've been through it, more than once. So, as a source of motivation for all the entrepreneurs and builders out there, I hope you guys can make it through this, man. This is not a victory lap, we still have a lot to prove. So, I'm not saying I'm the GOAT, you know? But at least we're somewhere.
Why PENGU will fill the last gap in the Solana ecosystem?
Moderator: There's a lot of stuff going on under this industry. We talked about NFTs, now games, and then tokens. So can we talk about games? Talk about tokens. How does it tie into all of this? Give us some key intelligence, just give it to us. It's not a meme coin, it's not just a cryptocurrency, just give it to us.
LucaNetz: I want people to define what they think it is, is it a community coin? A culture coin? A meme coin? A consumer brand token? It's all of those things, and to me, it's the face of crypto, and you identify with what I think is the most beautiful story in the crypto industry in the last four or five years. It's the "dark horse" story. I feel like if it succeeds, it will change the entire industry for the better.
I think it's hard to argue with that, and of course, I'm biased. So you can make your own assessment. But you can't say that Pudgy's success isn't a huge win and a huge force in moving the industry forward. To me, Pudgy's success is a huge force in moving the space forward. I think it's pretty easy to understand, and a lot of people probably think of it as meme coin plus, right?
From a technical and structural perspective, it's very much a meme coin. 4 billion views on Giffy, all the content is memetic. So you know, it's very fungible and memetic. I think from that perspective, a lot of people will identify with this narrative. And, you know, the prophecy and the legend of Penku Man, it existed before me.
From that perspective, I think a lot of people would agree that it's a meme coin. But you know, I'm going to put that blue penguin in Walmart and Target, in the No. 1 position in the App Store, in the hands of millions of people, all over social media. I'm going to bring it to the big screen, and I'm going to do all of that one day.
So meme coins don't usually have much action, right? But I firmly believe that, and I think this is the first example of the evolution of meme coins. I think if Doge had a team like ours behind it, the value of Doge would increase exponentially because Doge could be used in a lot of movies and TV shows, and you can't tell me that the popularity of an IP doesn't create demand, and demand makes things more valuable. It's a very simple concept, and it's true for anything that has a fixed supply.
It's all about supply and demand. So you're telling me that millions of fans and hundreds of millions of views a day don't affect and support this ecosystem and this theory? I don't think that makes sense.
Host: So what can PENGU tokens do?
LucaNetz: I can't say specifically, whatever makes sense to you, that's what makes sense to you. Buying stuff, doing whatever you think you can do. Everything, it's. You know, it's all based on your understanding. We're a smart team, right? But at the end of the day, it depends on everyone's participation.
But don't expect it to be any bigger than your local Doge or Pepe. It's the same vehicle, and any other idea is a surprise and a delight.
Moderator: Why choose Solana instead of Abstract or other chains?
LucaNetz: Because the original intention was to do it on Abstract, but it wasn't ready yet. Crypto is really about timing, right? There was a point in time where I knew intuitively that this was the time to do it. You can't rush into something so important just to pursue a point in time that has nothing to do with it, right?
It just makes the community bigger, creates more hype and momentum, and it just makes things more grounded, so a lot of people who build on Abstract are really looking at two things: they believe that Abstract can bring Web2 distribution capabilities, and they also believe that Pudgy is the best community to get in touch with cryptocurrencies. The first reason still holds, and the second reason now makes more sense because I will soon have thousands of holders, and soon hundreds of thousands, and maybe soon millions of holders. Now the "Penguin Army" is no longer 10,000 people, but 500,000, and it may even reach 1 million people. It will go multi-chain, it will be a multi-chain project, right?
I believe in a multi-chain future, and I feel like Solana is where we want to be the most. I feel like what we can bring to Solana is really important to that ecosystem, and I feel like we can do something from a unifying perspective, and I feel like we can bring everything together. You know, Solana has its PvP, and we stand on top of its L1, but from our perspective, Pudgy is not the face of Ethereum, it's the face of crypto, right? For us, I believe in the Solana ecosystem, I believe in its community, trust its culture.
If we weren’t present in this space on Solana, I feel like we would be making a huge mistake in helping pioneer this new space and leading the way. It would be a big loss for us, our ecosystem, and even for Solana, which I feel is the right fit for us.
I think what we bring to the table, in my opinion, is the beginning of a cultural phenomenon. I think that's the last piece of the puzzle that's missing for Solana. You put a cultural phenomenon on Solana, like Bored Apes and Punks did, and I think it makes the whole ecosystem better. Based on my interactions with the Solana community, I want to be able to do something for them, and this is a great opportunity for me. And of course, ultimately it will be an SPL token. Ultimately, you know it's going to be a token standard based on Solana, and such a token is the SPL token.
Host: SPL token, explain to the audience what it is.
LucaNetz: SPL is one of Solana’s native token standards. There are different types of token standards on Solana, and SPL is the most common. So it’s actually not too complicated, you can learn about it.
Host: When will this token be launched?
LucaNetz: Very soon. Very soon. We don’t plan to wait until the end of the year, nor do we plan to launch it immediately. So, according to the plan, it may have been launched when it is released.
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