PFPs are similar to social networks in that users may signify their membership with a certain NFT group or demonstrate their status via ownership, in addition to serving as a medium of self-expression. The success of a given PFP collection is determined by variables other than its visual appeal. This article delves into three main PFP ecosystems and how they are preparing themselves for success.

PFPs account for 70% of the overall NFT market value on Ethereum, with generative art coming in second at 13.5% and virtual land coming in third at 8%.

PFP NFT

So what is fueling PFP popularity? PFPs are simple to grasp. There is also the possibility of price appreciation, which makes them an appealing starting point for NFT speculation. Exciting news and announcements might drive floor prices to surge. This piques the interest of merchants and collectors.

The success of Bored Ape Yacht Club in April 2021 triggered a flood of new PFP collection debuts as other initiatives sought to mimic its popularity.

Since last year, top PFP collections on Ethereum have been impacted by the NFT and crypto market decline. BAYC/MAYC declined by 20%, while Clone X and Moonbirds declined by 55% and 65%, respectively. Despite this, the original minters of these collections remain profitable.

BAYC's market valuation is more than four times that of its nearest rivals combined, indicating its dominance in the PFP ecosystem. Its success may be ascribed to a variety of things, including the organization's ability to attract public attention from superstars like Neymar, Stephen Curry, Steve Aoki, and Justin Bieber.

And yet, prices must eventually be justified by fundamental drivers other than speculation. BAYC understands this and has taken deliberate steps to differentiate itself from its competitors. The company behind BAYC, Yuga Labs, has consistently attempted to extend its products beyond the original 10k PFP collection, investigating new niches and utilities like as the debut of APE coin and the announcement of Otherside in Q1 2022.

Several major PFP initiatives are experimenting with alternative strategies. Doodles 2 is the company's first foray into the Flow blockchain. By incorporating blockchain technology with retail clothes and streetwear culture, Azuki and Clone X are carving out their own niches. Both Azuki's Physical Backed Token and Clone X's World Merging Chip provide new solutions that bridge the gap between the physical and virtual worlds, enabling tangible assets to be attached on-chain for verified ownership.

To separate themselves from the competition, these PFP initiatives are developing distinct ecosystems. Moreover, the top PFP teams have received significant investment and support from renowned VCs (excluding Azuki, although rumors of prospective fundraising are circulating), providing them with the runway to complete their roadmaps.

Bored Ape Yacht Club has emerged as a market leader in the NFT area, with the biggest community in terms of size. BAYC has over a million followers on Twitter, while Azuki, Clone X, and Doodles each have over 300,000 followers. Clone X has more than 245k Discord users, with BAYC coming in second with 171k. Doodles and Moonbirds are in third position, followed by Azuki.

Moonbirds have a high proportion of committed holders. Approximately 68% of the NFTs in the collection are in the hands of "diamond hands," or holders who have never sold any NFTs from the Moonbirds collection.

Moonbirds' success may be attributed in part to its "nesting" feature, which enables NFT holders to stake their Moonbirds without having to move them to a different wallet. This enables individuals to receive cumulative rewards dependent on the length of time that each NFT is "nested" or staked. Nevertheless, this feature may just be a temporary solution to deter holders from selling as long as the incentives are appealing enough to keep holders' Moonbirds staked.

After that, we'll examine Azuki, Clone X, and Doodles and their approaches to success.

NFT Ecosystem Azuki

Azuki - Team History

Chiru Labs, the company behind Azuki, is situated in Los Angeles. The team has expertise in crypto, gaming, and technology and is led by a pseudonymous core team that includes Zagabond (doxxed at NFT.NYC), Hoshiboy, 2pm.flow, and Location TBD. Steamboy (aka Arnold Tsang), a former character art director for Overwatch, and nJoo, who has worked on the Street Fighter manga, have both contributed to the team's efforts.

Azuki's Foray Into NFTs

Chiru Labs entered the NFT market in January 2022 with Azuki, a 10,000-supply PFP collection featuring anime-inspired side profile avatars. This collection provided NFT holders with a unique identity inside the metaverse as well as access to The Garden, a mythical location where art, community, and culture collide. The Garden functions as a link between the actual and virtual worlds.

Azuki Holders Will Get Airdrops

Azuki NFT holders get access to a slew of special benefits, including Azuki streetwear, live events (the Azuki Garden Party and NFT.NYC), and airdrops. Beanz, a companion for each Azuki avatar, was one of the most noteworthy airdrops.

The Twin Tigers Jacket NFTs were then airdropped, enabling holders to claim physical versions of the garment. The jacket, designed by Azuki's in-house tailor Takeda, is reversible and contains two patterns inspired by American and Japanese street culture.

azuki merch

The community at the core of it all

Understanding the benefits of a cohesive and active community, the team has taken initiative to provide value to their holders along the road. This includes The Alley, an exclusive Azuki-only party hosted in New York City to bring the community together.

Hilumia, a community center that gives a new opportunity for members of the community to connect with one another, was revealed on Azuki's anniversary in January. Ember Square (apparel design), Slowpoke's Toy Haven (toys/plushies), 9 Lives Arcade (gaming), 56 Fitness (a gym), and other monuments make up the hub, each providing a distinct experience.

We believe Hilumia will be a virtual center with gaming features. It will also display, in a very visual way, what the team is doing in collaboration with its community.

Chiru Labs has proved its dedication to developing an NFT ecosystem with a thriving community at the center of it all with the introduction of Hilumia and other community-focused projects. And the community is active, as seen by the volume of user-generated material incorporating Azuki art variants.

Azuki - Technological Innovation

On the technical front, the team invented ERC-721A, a tweak to the ERC-721 standard that substantially decreases the amount of gas required to mint many NFTs in a single transaction. It enables participation in the NFT arena simpler and more economical for artists, collectors, and merchants.

Chiru Labs announced the Physical Backed Token (PBT) in October 2022, an open-source standard that connects actual things with digital tokens on the Ethereum blockchain, opening up new opportunities for storytelling and community development.

Important Ownership Stats for Azuki

From March 2022, the number of Azuki's unique holders has continuously fallen, decreasing from a high of 5,597 in March 2022 to 4,976 in February 2023 (an 11% reduction). This measure gives information on the size and strength of a community. One factor for the decrease in holder numbers might be NFTs migrating from short-term to long-term holders. A greater number of unique holders indicates a more diversified spectrum of persons in the project, making it less vulnerable to market swings.

Despite the overall crypto market slump, Azuki has managed to keep NFT prices up, with the average NFT selling price more than doubling from its low in August 2022 to its present level. This shows that demand for Azuki's NFTs is increasing.

The amount of "diamond hands" gives insight into long-term holders' relative certainty. Since its debut, the proportion of diamond hands in Azuki has fallen somewhat, peaking at 85% and down to 44% in February 2022, most likely owing to wallets that minted the collection profiting. The bulk of diamond hand bearers have been holding their NFTs for more than six months (4,490 NFTs).

Azuki - The Road Ahead

We'll be observing how the Azuki team handles the following:

IP growth via collaboration and community co-creation
Storytelling
Partnerships for IP Expansion

In 2022, the team concentrated on its PBT streetwear collection and the creation of new experiences. Notwithstanding these achievements, Azuki's services continue to have a restricted reach among a larger audience. The following are the current holder counts for their respective NFT collections:

Azuki holders – 4.9k
Beanz holders – 7.3k
Bobu, the Bean Farmer – 11.4k
Twin Tigers Jackets – 5.1k

Assuming that each holder is unique (there will be some overlap between collections due to the airdrop of Beanz and Twin Tigers Jackets), the total number of NFT holders in the Azuki ecosystem is a modest 28.7k. Azuki, on the other hand, is working on strategic collaborations to broaden its fan reach beyond NFT holders.

Azuki teamed with Bilibili International and CryptoNatty on January 18th to reach out to users. This is noteworthy because Bilibili, China's counterpart of YouTube, has over 330 million average monthly active users, many of them are young people who like anime. This is consistent with Azuki's brand and has the potential to increase brand recognition among Chinese young people. After all, Azuki's goal is to build a decentralized brand, thus targeting huge Asian audiences makes sense.

Holders of Azuki and Beanz will be able to validate their NFT profile pictures on the Bilibili International app and will earn a new "Bilibili Cheers!" badge on their Azuki collector's accounts. Cheers UP and Beanz have also collaborated to provide an emoji sticker collection for NFT users. These stickers are compatible with Discord and the Bilibili app.

Azuki might possibly enter the streetwear industry by developing collaborations with prominent fashion firms. Given the enormous addressable scale of the garment sector, it is logical to believe that they are working on this behind the scenes. According to Statista, the global clothing industry is expected to generate $1.5 trillion in sales in 2021 and $2 trillion by 2026.

Azuki may establish additional income sources other thanfrom royalties by selling streetwear and PBT items. To be successful, the team must ensure new relationships connect with the values and goals of their community while retaining value for current holders.

Community Co-Creation & Storytelling

Lore and storytelling are vital components of every Web3 brand. Hilumia will provide new opportunities for its community to co-create different material via meta-games, interactive experiences, and community incentives. Chiru Labs' team must effortlessly weave these pieces together to produce an engaging story. We might see Azuki NFTs animated, and even an anime series in the works – the team hinted at this with an animation created for the Year of the Rabbit.

Some Azukis, such as the Azuki mascot Shao, Lei the Lightning Azuki, Bobu the Bean Farmer, and Beanz mascots Jay and Jelly, have already been fleshed out and gained their own distinct personalities. It will be intriguing to watch how Chiru Labs engages its audience in the future via immersive visual storytelling approaches, animations, in-person events, and other interactive experiences.

Clone X NFT Ecosystem

Source: Medium

Background of the Clone X Team

RTFKT is a creator-led group founded by three friends at the onset of the epidemic in 2020. It employs cutting-edge gaming engines, augmented reality, and manufacturing capabilities to produce one-of-a-kind digital and physical footwear and artifacts. Benoit Pagotto (brand & partnerships), Steven Vasilev (product digital/physical Nike), and Chris Le comprise the founding team (design).

RTFKT introduced the Clone X collection, which included 20,000 3D PFP NFTs, in November 2021. This release marks an advancement in RTFKT's digital streetwear lineage. The business teamed with renowned artist Takashi Murakami to create a distinct style for the line.

Nike purchased RTFKT for an unknown price in December 2021. Since then, the Clone X collection has grown to be an important one that many people are keeping an eye on.

Bringing Additional Dimensions to Airdrops

RTFKT has continually engaged its community by providing various airdrops to Clone X holders, each with its own purpose. The Space Pod, which acts as a virtual living area, was one of the first airdrops, and it was quickly followed by the Loot Pod, an improvement that included Nike branding. The project recently announced the Exodus event, which included the burning of Space and Loot Pod NFTs in exchange for a new Starship NFT.

RTFKT encouraged holders to engage in virtual expeditions and work together as a community to solve mysteries with the MNLTH airdrop. This exemplifies RTFKT's distinct approach to community participation since the firm wanted to build an engaged experience for its holders from the start. Finally, MNLTH holders were given the option of exchanging their MNLTH NFTs for three other NFTs: Skin Vial, Crypto Kicks, and MNLTH 2.

The team introduced Project Animus, a new plotline in the Clone X world, in December 2022. It added new species with distinct abilities to help Clones on their journeys. Clone X owners were allowed to claim Animus Eggs. The final total supply is still unknown, however, it may exceed the original 20,000 due to a public auction later this year.

Important Ownership Metrics for Clone X

Clone X's unique holder count has plateaued since June 2022, after peaking at 9,782 in January 2023. These holders are most likely hoarding their NFTs in anticipation of future airdrops.

Since April 2022, the price trend for Clone X's NFTs has been lower. On February 13th, the average NFT price for Clone X is 4.68 ETH, reflecting a decline of over 80% from the average price of 22 ETH seen a year earlier.

We have several theories as to why this may be the case. A handful of Clone X owners were outraged by the team's choice to prioritize subsequent drops like Pods and MNLTH above the core collection. Potential purchasers are not required to purchase a Clone; they may purchase a Space Pod, MNLTH, or Animus for less money and earn virtually the same incentives as a Clone X holder who has held it from the mint.

For example, a holder who purchased an MNLTH NFT would still obtain MNLTH 2, Skin Vial, and CryptoKicks, as well as the ongoing value provided by MNLTH at a significantly cheaper entry price. Customers who purchased Space Pods also received a Loot Pod, and owners of both may burn them and participate in Exodus without the requirement for a Clone X NFT.

Although Clone X owners profited from the initial airdrop, it seems to be becoming less significant as the plan progresses. Instead of concentrating on the genesis collection, the team looks to be focused on increasing future drops such as MNLTH and the pods. Also, Clone X features were not present in some of the airdrops received (aside from Murakami Flower WL for Drips traits). We assume that several Clone X owners felt betrayed and sold out.

The ratio of diamond hands peaked in December 2021 at 63%, gradually declining to 53% in February 2022. The downward trend has persisted, with 48% of diamonds in the hands as of February 2023.

The Future of Clone X

Clone X's mission is to combine the physical and virtual worlds by fusing fashion and augmented reality technology to create next-generation retail gear such as phygital shoes. Clone X also announced the growth of its metaverse with teaser trailers laying out a three-phase rollout strategy: The Warning (RTFKT x Rimowa), The Signal (Eggperience), and The Exodus (MNLTH Quest 2). The emphasis is on interactive storytelling in the run-up to the release of Project Animus and a huge in-person event at the end of the year.

We're keeping a careful eye on how successfully RTFKT performs on the following:

Expansion of IP
Taking use of Nike's brand and goodwill
Extension of IP

RTFKT published Clone X 3D files in July 2022 and provided commercial rights to NFT holders. The community reacted positively to this change. It created new options for collaboration, resulting in an increase in user-generated material on social media. The team has consistently used augmented reality to integrate the physical and virtual worlds, enabling Clone X to have a physical presence in the real world while also being readily shared on social media.

With Nike's support, we anticipate further activities to broaden RTFKT's IP in the near future. Project Animus looks to be RTFKT's major focus this year, and more information should be available shortly.

Taking Advantage of Nike's Brand and Goodwill

Nike's market dominance in sport's shoes and gear gives RTFKT a competitive edge. RTFKT can now utilize Nike's brand and goodwill to boost its audience and income since it is now closely tied to Nike.

Unlike many PFP projects, RTFKT has earned substantial actual money in addition to royalties. Clone X's Forging SZN 1 debut in 2022 generated over $11 million in sales in less than a week, roughly equaling the lifetime NFT income of rival fashion labels like Adidas and Gucci. For additional information, see our earlier NFT x Fashion report here.

Moreover, the addition of.SWOOSH IDs for Clone X owners seem to deepen the brand's link to Nike, as Nike continues to experiment with new platforms and immersive experiences for its growing customer base. The project has declared that it will be released. SWOOSH will be Nike-licensed smart wearables that will be compatible with Clone X.

It's worth emphasizing that.SWOOSH is a brand-new product from the Nike team, not RTFKT. Others feel that the ideas of RTFKT and Nike Virtual Studio (the team responsible for.SWOOSH) are diverging. Clone X holders were not given priority during.SWOOSH onboarding and tangible things like the AR Hoodie were expensive.

Despite this, Clone X is still the only PFP collection having a direct collaboration with a major mainstream consumer brand like Nike. If both corporations can discover the correct synergies going forward, there is significant development potential – with RTFKT contributing its experience in Web3 and technical understanding and Nike using its brand, marketing, and worldwide distribution networks.

Doodles NFT Ecosystem

Team Background Doodles

Doodles was formed in October 2021 by a group of former CryptoKitties and Dapper Labs executives, including Jordan Castro, Scott Martin, and Evan Keast.

Scott Martin, nicknamed BurntToast, has worked as a designer, animator, and muralist for companies such as Google, Dropbox, and Adobe. Doodles raised $54 million at a value of $704 million in September of last year, driven by Alexis Ohanian's firm Seven Seven Six.

Recruitment of Key Appointment Holders

The company hired former Billboard President Julian Holguin as a partner and CEO in May 2022 to concentrate on music, gaming, premium content, and consumer goods. They also hired Pharrell Williams, a well-known rapper, and musician, as Doodles' Chief Brand Officer to develop music projects, animated films, and television series, and supervise product launches.

To support their development over the last six months, they have continued to fill key leadership positions such as Head of Brand Marketing, Head of Business Development, Head of Product Management, and Frontend Engineering Lead.

Creating a Full-Service Media and Entertainment Brand

Doodles recently purchased Golden Wolf, an award-winning animation studio known for creating high-quality cartoons for large companies such as Adult Swim (for Rick and Morty), Supercell, KFC, Adidas, Disney, and others. Golden Wolf extends their experience in animation, visual storytelling, and content development to a worldwide scale with this purchase. It will allow Doodles to extend its original content portfolio and develop Doodles' characters and tales across many platforms.

Expansion into the Flow Blockchain in Doodles 2

doodles golden wolf

Source: Doodles

Doodles began the year with the release of Doodles 2 wearables on the Flow blockchain and the Dooplicator marketplace. Doodles are now officially multichain as a result of this change. The Flow blockchain was selected because of its gas-free transactions and potential for modularity. Doodles 2 NFTs are readily adaptable to a variety of Web2 use cases, including social platforms, gaming worlds, live events, streaming content, retail activations, and more.

Holders may also "duplicate" their Doodles to acquire a Beta Key pass, which can be exchanged on Flow's Gaia marketplace. Doodle NFT holders who do not have Dooplicators may sell the rights to duplicate their Doodles and Beta Key passes to other users.

Important Ownership Stats for Doodles

The project witnessed a substantial decline in the number of unique holders in March 2022, a statistical aberration that may be related to the debut of Space Doodles. Users may transform their Doodles into Space Doodles by wrapping them in a new dynamic spaceship design. Their NFT can only exist in one state at any one moment – as a Doodle or Space Doodle.

The collection peaked at 6,106 unique holders in February 2022 and fell by 9% the following year to 5,560 individual holders. Similar to Azuki, the decrease in unique holders might be attributed to individuals amassing Doodles. For example, notable NFT collector Pranksy has been consistently purchasing Doodles NFTs in recent months, including a large purchase of 296.69 ETH (at the time, $1.1M) on Doodle #6914 last year. He presently carries 46 Doodles in his wallet.

Doodles' average price has been dropping since July 2022, representing a drop of more than 56% from the previous year's average price of 16 ETH. The team's relative silence throughout that time period is likely to have contributed to the team's bad price action in 2022, with many community members expressing their worries about the team's lack of communication.

Diamond hands have been decreasing, with a high of 62% in October 2021, a significant reduction in March 2022 owing to the Space Doodles launch and a steady rise since then. Today, 3,611 NFTs have been kept for more than six months.

The Future of Doodles

The Doodles team has made it obvious that it aims to build a media and entertainment empire. The selection of ex-Billboard President Julian Holguin as the project's CEO, together with Pharrell's participation with Doodles Records, indicates the project's aim to make a significant push into the entertainment business.

Final Thoughts

A PFP project's success is dependent on more than simply cash incentives and airdrops. Projects must generate emotional connection and engagement with the brand via narrative and unique value propositions, whether through metaverse integrations, celebrity & brand partnerships, community co-creation, or other ways, in order to cultivate a dedicated community of collectors.

Apart from retention, one of the most difficult issues for PFP projects will be acquiring new audiences and developing sustainable income sources. We've laid out the strategies that these top-tier teams are using, but the unpleasant fact is that the path ahead is riddled with danger.

Projects that can create attention and demand while also developing long-term connections with their communities will have a better chance of success. Azuki, Clone X, and Doodles have built strong communities inside Web3 and are gaining traction toward exciting future roadmaps. It will be interesting to observe which PFP teams are able to break out of their Web3 molds and into the mainstream. This year will be critical for them.

Disclaimer:
This article is intended for and only to be used for reference purposes only. No such information provided constitutes advice or a recommendation that any investment or trading strategy is suitable for any specific name.

A deep dive into Profile Picture (PFP) NFT Ecosystems