3 Weeks on NFTs (feels like 3 years)
It’s hard to communicate to someone unfamiliar with the space about NFTs and the metaverse. It’s harder still when that person doesn’t understand the difference between the ERC721 technology that could enable tokenized, composable mortgages and pfps.
The Disclaimer Part
This is not financial advice blah blah blah.
I own assets and have interest in the success of many of the mentioned projects. If you buy them and they go up astronomically in value, that is good for my P&L and I may dump on you.
I’ll likely continue to update this as I pull more metrics, find spelling & grammar issues, and hear complaints from NFT communities who feel left out.
This is About PFPs
In the future as described by Balaji S. Srinivasan, networks of information sharing and resourcing will be empowered by ability to operate remotely and employment will become task based.
As work becomes more task based individuals will be able to more successfully operate under pseudonyms, creating an online identity that has reputation. I first heard Balaji speak on the Tim Ferriss show and I highly recommend listening to that episode as well as reading his work and exploring his projects.
While we are not quite there, there is a large community on Twitter that does operate in this way. And there are defi protocols with billions of dollars flowing through them created by unknown entities who exist under pseudonym names and through Twitter and Discord avatar photos.
This rise has led to a need to have a recognizable and potentially valuable profile photo (pfp) that represents yourself and your position in the space.
CryptoPunks launched in 2017 as one of the first art use cases utilizing ERC721. I am not sure that Larva Labs was envisioning this type of future but they seem to be leaning into the metaverse concept with the introduction and future utility of Meebits.
Bored Ape Yacht Club
I woke up at 3am on May 1st and checked Twitter. I saw that @pranksyNFT and @j1mmyeth, both well known figures in the NFT art space, were minting a project called Bored Ape Yacht Club at scale. I took a look at the art and thought it was amazing — maybe it was because it was 3am.
I got my computer out and went to the living room to mint a Bored Ape. And then my girlfriend walked out and saw me and asked…
“What are you doing…?”
I didn’t have the heart to try to explain that I was about to spend $300 to buy a JPG of a cartoon Ape. I fumbled with my words and made up an excuse. I decided I would wake up the next day well rested and try to make a decision with a more rested mind.
At 8am, I got up and checked the site. The minting was completed and the Bored Apes were only available on the secondary market for 3x the mint price. I was bummed, I could have made a quick profit!
I decided that it was for the best. I might not have sold anyway and held onto an asset that went up in price quickly and then eventually decreased in price. NBA Top Shot was an expensive foray into the NFT collectible space and I didn’t want to recreate that experience with cartoon Apes.
Over the next few days, the Apes continued to go up in price. I watched my Twitter timeline get flooded with Apes and I watched Apes work together to create a sense of community and work on projects together.
It felt like I couldn’t get away from the Bored Ape Yacht Club, and I became jealous and tried to ignore it.
On June 4th, Lamelo Ball bought a Bored Ape and jumped in the discord to interact with the community. I really, truly couldn’t get away from the Bored Ape Yacht Club. And I still can’t. The Apes are everywhere.
The Wicked Craniums
On June 20th, I saw @DeezeFi mention that he was minting this project called The Wicked Craniums.
bored apes but with skulls
These sounded awesome. I hadn’t been able to mint a project yet and I was still feeling jealous of the community that the Bored Apes had built.
I went ahead and minted.
What is Minting?
If you’re familiar with this — feel free to skip!
The strong NFT pfp projects being launched allow users to “mint” the initial supply. Often times there are a series of potential traits that are used to randomly generate the eventual image and the user has no idea what combination they will receive when they mint items from the project.
Once the items are minted, they are owned by the minter who may then go on to sell the items on the secondary market, hold onto them, or utilize the assets in more sophisticated structures such as providing liquidity, staking, collateralizing, etc.
We’ll go into some of the more sophisticated structures later.
The Wicked Craniums Dashboard Begins
I had started playing with Dune Analytics over the previous month and once I was able to successfully mint a Wicked Cranium, I decided to start looking at the data associated with the project.
Dune Analytics is fantastic. I cannot express strongly enough how much using Dune and Etherscan has allowed me to level up my understanding of what is going on. Dune allows users to use SQL to query on-chain data. Usage of the tool inevitably leads to long rabbit holes down Etherscan where you start to see how funds are moving around the ecosystem.
The Wicked Craniums Community
As I dove into The Wicked Craniums data, I wanted people to share it with and I turned to the community of Wicked Cranium owners. The community was excited to see the data and inspired me to continue to dive deeper.
As I mentioned before, I was jealous of the community of Bored Apes that I did not end up joining (yet). It was exhilarating to join a community of others who were interested in the same art and were creating backstories and characters for their Craniums. Personally, this backstory type concept isn’t all that interesting to me. I like the community, I like the art, and I like the data.
But people LOVE the backstories. The Wicked Cranium team lead by @WickedDoob and @WickedDerb (I have no idea who these people are) launched an application called The Cradle where individuals who own Wicked Craniums can create a backstory for their pfp.
I enjoyed spending time on Discord (there’s a whole separate post to be written about the role that Discord plays in the crypto ecosystem) with these other folks who were so passionate about their Wicked Craniums
As I continued to work on the Wicked Craniums dashboard, I interacted more with the community in the Dune Analytics Discord. These individuals are a bit more my speed and love to dive into the on-chain data and learn how various crypto protocols operate and the level of activity flowing through them.
I found myself forking queries from Bored Ape dashboards and reached out to the creator for some insight. @0xWave has been a great resource and I’ve appreciated the discussions and feedback he has given me. I recommend checking out some of his work.
I now found myself working alongside the Apes, even if I wasn’t one of them.
I am also trying to build my own sub-community inside The Wicked Craniums Discord — join me in #data-dreads!
The Wicked Craniums Dashboard Now
I went haywire on this thing. I spoke extensively with community and team members on the Wicked Cranium and Dune side. I found myself staying up late into the night working, I couldn’t stop.
I had built dashboards for previous projects I had looked into (PieDAO, Volmex Labs) but this was the first dashboard that I feel that I truly completed to a point of pride.
Check it out: https://duneanalytics.com/danner_eth/Wicked-Craniums
The art in The Wicked Cranium collection allowed this to come to life. I was able to embed photos of Wicked Craniums in the dashboard and to pull colors from the Cranium color palette for the data visualizations. The skull emojis added a nice touch and I developed a true appreciation for how the data can become engaging and visually pleasing.
Quick Threads
May 2021 saw the rise of the doggy money sector. I am not kidding.
In mid-May there was a 24hr period where there was $1.5 billion in trade volume of tokens such as Shiba and other dog based tokens. I don’t know the rest of the names as I stayed far away from this stuff.
I’m not certain but I think this video might have kicked it off.
July 2021 looks to be shaping up to be the pfp sector pump. There have been avatar based projects for years, but Bored Ape Yacht Club brought the attention roaring back. Projects have been looking to replicate the success of Bored Ape Yacht Club and they might have found the right model and the right time.
Projects such as Gutter Cats, Bulls on the Block, Forgotten Runes Wizard Cult, and Cool Cats have all launched in the past few weeks. I am certainly forgetting some. We’ll hear from their communities and I’ll update this post to include them.
As these projects launched I dove into the mint stats and shared them with the communities.
At launch, most of the minters care about sales data. There is a large group of actors who are looking to mint and flip and continue to roll funds. A lot of the individuals are looking to roll into more well established projects like Bored Ape Yacht Club or CryptoPunks.
You really do have to look at the sales numbers to understand the scale though. We just watched Mike Tyson spend something like $10k on a jpg of a cartoon cat.
I find distribution and mint metrics far more fascinating than sales data. Are assets well distributed or is someone controlling the entire market? Did the project have a smooth launch or were there a lot of users who failed to mint?
By the way, Wen Rug Pull is the original rug NFT project.
NFT Comparison Dashboard
As I continued to look into projects, I kept finding more and more. It became impossible to keep up. Communities were particularly interested in crossover metrics: how many Bored Ape members also own a Wicked Cranium? How does Bulls on the Block distribution compare to Bored Ape Yacht Club?
You really can’t get away from the Bored Ape Yacht Club.
I decided to rework some of my code to work with any ERC721 contract and I started adding projects like crazy to a dashboard where I could compare their distribution.
I also added a parameter that allows a user to enter any contract address and generate the metrics for that particular project.
This lead me to discover even more NFT pfp projects. I shared my progress on Twitter and got feedback around which projects should be added.
Reach out on Twitter to get your project added or visit the dashboard and use the ERC721 contract address to see the stats for yourself!
Some Loose Thoughts
As I’ve taken time to get into NFT art as a consumer, my view on the space has shifted from these are somewhat ridiculous to these are truly amazing.
Pfps in the Metaverse
We’re likely years away from this, and even further from true adoption, but as we see more use of built out 3D virtual worlds like Decentraland and Sandbox, NFT pfp holders will want to and be able to use their pfps as a 3D avatar in the world. This will give further form and utility to the assets.
Commercial Rights
Bored Ape Yacht Club allows all owners to make money off the asset as commercial rights are transferred with the token. We already see talk of a movie created with DeadHeads, and while I haven’t looked deeply at that project there will likely be a flow of funds to asset holders whose pfps are featured in the film.
The Defi-ication of NFTs
Defi is what really interests me. The composability of protocols that allows funds and assets to flow in and out of various protocol functions to create strategies is truly beautiful.
These functionalities are coming to NFTs.
Liquidity Pools are a common concept in defi when trading ERC20s. Pools offered by NFT20 and NFTX behave a bit differently with ERC721s.
If you don’t know anything about liquidity pools, check out the section on LPs in this post.
When you provide liquidity in an ERC721 pool you deposit an ERC721 for an ERC20 that gives claim to any asset in the pool. This allows people to trade in and out of items within the same project and gives liquidity to users who may not want to hold the asset or wait for a buyer. The transition into ERC20 also opens up the composability piece that makes defi incredible.
NFT Trader allows users to swap ERC721s in a peer to peer fashion.
GenieSwap will enable peer to contract multi-hop swaps so that users can move between various ERC721s and ERC20s.
Bunchy Protocol will allow users to use NFTs as collateral for loans. I suspect this is based off of the floor price as indicated by a liquidity pool.
Fractional will allow users to fractionalize their ERC721 and enable the buying and holding of specific NFTs. The non-fungible asset just became fungible.
Illiquid Assets as Anchors
In crypto, you never stop hearing about liquidity. Being able to buy and sell from and to markets is key to move funds around in an optimal manner. NFT art is nowhere near as liquid as various governance tokens. NFTs are too specific to easily get liquidity, except through liquidity pools which cater to the lowest priced asset in a collection. High value items are hard to move and require finding a buyer who wants to own that specific piece.
We see this in the physical world in the form of art and in homes. These non-fungible assets then anchor the owner in a sense. The owner has a vested interest in success of the artist, neighborhood, micro-economy, etc.
As I have come in and out of crypto over the years, I have always had sufficient exit liquidity. And I have always regretted leaving the space for a period of time. I am still trying to understand this piece of my view, but I see value in the illiquidity of these items as anchor pieces to keep people engaged.
I’m probably just coping.
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