What Happens When Good PFP Projects Go Bad
Will Somebody Save The Penguins?
Can you spare a minute for the penguins? Yes, no, anybody?
Why are you looking at me like that! Don’t walk away from me!
The penguins are going to make a comeback! They are just experiencing some difficulties, ma’am, as we all do.
Please stop hitting me with that newspaper! Ok ok, you win!
The penguins are screwed. They’ll never recover, it's an absolute travesty!
Please will somebody help save the Pudgy Penguins!
What Are The Pudgy Penguins?
What are Pudgy Penguins? Pudgy Penguins is an NFT PFP project that launched in July of 2021 and quickly took the market by storm.
They had a tremendous rise in terms of popularity, daily transaction volume, and growth in the project’s floor prices. Then only a few short months later the project collapsed and the community fractured in front of the entire NFT space.
Before we get into the whole saga, a quick refresher on what PFP projects are in the NFT space.
"PFP" stands for profile pic and they are a popular variety of NFT project due to holders often displaying their NFT on their social account profiles particularly on Twitter where most of the NFT space lives 24/7. Most PFPs are part of generative 10k collections where the same base art or character has a variety of different traits that have higher and lower rarity percentages. Typically, the more rare your NFT is, the more valuable.
- You can learn more about PFPs here: What are PFP NFTs?
Since the BAYC took off in spring 2021 there have been 1000s of copycat PFP projects of all sorts. Lazy Lion, Gutter Cats, Martian Cats to name a few. Some projects take off and form their own legitimate communities like aforementioned projects, but others completely fizzle out after they launch and their prices collapse, or worse they don’t sell out their collections at all.
When Pudgy Penguins launched, they sold out their 8888 size collection in only 20 minutes!
The market immediately loved the penguins and they quickly grew in number of unique holders, as well as Discord members, and they racked up over 25 million in ETH in total trade volume.
The project floor was lava and quickly moved from 1.4 ETH to 2.4 within the first week after launch!
This project had legs and was poised to be legendary in the NFT space.
What was the appeal of the penguins?
A major appeal was the art! The art of Pudgy Penguins is super cute and easy to love.
Who doesn’t love a cuddly penguin or “Pengu” dressed up in beanies, winter scarves, and other funny costumes and accessories. There were even a few rare 1/1 penguins that had hand picked traits that weren’t generated.
A lot of large influential NFT accounts bought into the project and boosted it on Twitter. Even Steph Curry of the Golden State Warriors purchased one and proudly displayed it as his PFP for a time.
The team behind Pudgy Penguins were all active in the NFT space before launching the project and had been a part of other successful communities.
What’s notable is that all four were college students at the time the project launched.
It’s amazing that you can find this level of success in the NFT space no matter your age or background, but having that much success and money thrown at anyone that fast definitely has its own challenges as we will see later in the piece.
Here are all the founders, Cole AKA Colethereum was the most well-known and public of this group. His role in the project comes into play later when things start turning against the PP team.
The community was off to a great start. I remember when I started seeing Penguin PFPs pop up on my timeline and a few of my friends had actually bought into the mint or purchased on OpenSea in the days after their sell out.
The community behind PP was hyped. They grew so rapidly that they started to receive press coverage in mainstream media outlets like CNBC and the New York Times.
Kevin Roose, who covers tech trends for the NYT even bought into the collection and wrote about it in a widely publicized article that was featured on the front page of the paper. At the time it was seen as a major PR win for the entire NFT community.
Pudgy Penguins felt unstoppable and many speculators believed the project could even surpass the BAYC floor price.
The team behind PP kept the community excited with some lofty plans for the brand that included game development, and future airdrops, merch, and more.
There were a few months of bliss as the project continued to grow and the community rallied around their love for the penguins.
One of the best parts about these community focused PFP projects is the way friendships form between holders and new ideas blossom out of those connections.
A Few Cracks In The Igloo
Then in December of last year some cracks started to appear in the mighty Pudgy Penguin Igloo.
An issue arose between the founding team and one of the Discord mods who was being promoted into a more formal community manager role.
The manager in question goes by “Darth” online (@coldpizza_eth on Twitter) and he was upset that he did not have an official agreement on this role before the promotion was to take effect.
The founders and Darth had been in discussions regarding the role but nothing had been formalized in terms of his compensation the contract to outline these additional responsibilities.
Darth had been working hard with the PP community as it skyrocketed into becoming one of the largest in the space at the time and he was apparently near the edge of burnout.
The team floated the idea of offering him a weekly salary in ETH, which would be roughly the equivalent of $400 - $1000.
Darth felt that that was inadequate especially given all the work he had already put into the community for free and the level of success the project had reached during that period.
Without a formal agreement in place, Darth became aggrieved to the point where he left the team and went to air his complaints against the founders in a public Twitter space.
Hundreds tuned into the space on NFT Twitter, and Elon Musk was even listening in at one point.
(Why was Elon there? Who knows! He wasn’t a holder as far as we know. Elon, if you love Pudgy Penguins let us know!)
During Darth’s space he revealed other shady practices that the team had been engaging in including launching a hiring campaign that was nothing more than a marketing stunt because the team never intended to actually go through with any hiring.
According to reports of people who attended the initial space, Darth relayed that another member of the founding team equated him to a low-skilled cashier and he took that as a major sign of disrespect as to how they valued his contributions. (Note: I was in this space for a short period but missed this piece of information.)
Darth also exposed Cole, the head founder of the project, as attempting to bribe him with 1 ETH to stay quiet about the entire situation.
The founders later launched their own Twitter space to do some damage control and try to minimize the fallout from the Darth situation and return to business as usual. They tried their best to paint it as a simple misunderstanding and an amicable parting of ways.
They complimented Darth and hoped he’d return to the community when the hard feelings subsided.
Cole admitted to offering ETH to Darth but branded it as a “farewell gift” versus a bribe.
While this was a dramatic turn of events in the NFT space and provided an evening's entertainment for the unaffiliated listeners, the space moved on quickly and it didn’t linger in the Twitter news cycle. The Pudgy Penguins floor price took a small hit, as some holders followed Darth in renouncing their affiliation and sold off their Penguins, but in time it recovered to its prior levels.
However, it was a sign of things to come for the Pudgy Penguins community.
EggRogs For Xmas
Back in August shortly after the project launched, holders were airdropped a new NFT of an Egg that would hatch on Christmas day. Many speculated what was in the egg, maybe a baby penguin, something related to the promised game? Nobody knew for sure.
Including the founding team at the time!
When the unrevealed egg NFTs were airdropped, they didn’t actually have other art behind the metadata but the team had 5 months to figure out what to do with them.
They were a top project in the space, they had thing one in the bag right?
On Dec 25th, the metadata was updated and the eggs hatched only to reveal a new image of a fishing rod, named the “Rog.”
The community was furious. They revolted on their Discord channels. They couldn’t believe the eggs that they watched over since the summer contained nothing but a fishing rod once a white background.
The art looked low effort and lazy compared to the cute and happy Pudgies.
Part of this fury was the fact that the founding team had been raking in cash daily from the transaction volume and all they could deliver on was shoddily designed JPEG?
There were no other plans released about what to do with the rogs, no real purpose to them communicated to the community, the rogs were seen as a rug by many.
The meme chants of “No one likes the Rogs”, “They put fishing rods in the eggs,” and #Savethepenguins flooded their Discord and Twitter hashtags.
In hopes to rectify the situation the founders quickly released a new collection of smaller Pudgies known as Lil Pudgys that holders could claim for free. But these too were disappointing since an additional 13,334 were available to the public to claim via auction.
The team did profit a tidy 305 ETH from the Lil Penguins launch, but the alienation among their original holders was starting to set in.
The crypto market as a whole was slowing from the mighty 2021 bullrun and daily transaction volumes were down across the board. Pudgy Penguins was hit even harder and lost about 40% of its market value since reaching record highs back in November.
The Wallet Drain
From what we know now, things were bad behind the scenes. The founders no longer wanted to keep running the project and they attempted to sell it off for a whopping 8888 ETH to another NFT influencer, 9x9x9.
9x9x9 is the founder of OpenDAO and the $SOS token. He has been one of the largest holders and supporters of the penguins since the beginning. 9x9x9 had been in talks with the founders for some time hoping that they could turn things around for the project and community.
He had rejected their offer but was still in support of the project.
Then the news broke that the founding team had removed all the Ethereum they had netted so far from sales from the project’s wallet to their personal Coinbase accounts. Nearly 4000 ETH in total, worth millions in USD.
They were dividing up the ETH they had earned and the project’s coffers were now empty.
That was part of the reason why 9x9x9 rejected the offer to purchase the project. He had no interest in running any empty company without a treasury.
The community went apoplectic.
They had had enough of the founders, particularly Cole aka Coletheruem who ran point on the public communications.
A public vote to oust Cole from the community was held in the Discord.
While they were largely in favor of ousting Cole and the other founders, there was no actual mechanism for making that happen. The founders remained in charge of the project until they came to an agreement with the community or another suitor interested in taking over.
The floor price for PP was taking a beating and dropped down below 2 ETH for the first time in 3 months.
This was a new situation for the NFT space, never before had a project this popular turn against its original founders.
New influencers were approached to take over the Pudgies. Other’s came forward and presented their own offers and visions for the future.
There were talks with NFT influencer @beaniemaxi to purchase the project and help deliver on the game, but he quickly retracted his 500 ETH offer.
This was probably fortunate for the community since Beanie was recently exposed and doxxed as being involved in his own shady dealings in the crypto space for a long time. He’s since exited several of the projects he was invested with and they’ve renounced any affiliations with him. (Maybe we will cover that saga in a future blog.)
@ZachSpaded was the next buyer who made an honest pitch to the community publicly in a twitter thread. He believed that the Pengu IP was salvageable and through licensing deals they could reinvent themselves and prosper by selling merchandise outside of the NFT space.
It’s an interesting proposal, but ultimately was also shot down.
The community was at a true crossroads. A few members decided it was time to take the project into their own hands and turn it into a community effort free from the founders.
With more cries of #savethepenguins they launch a new initiative to “wrap” the original NFTs in new ERC-20 tokens that would allow them to trade on a new contract that would not pay out a royalty to Cole or the other founders.
The spin-off project has formed PenguDAO to manage this new community effort. They’ve been promoting on Twitter in hopes to convince more PP holders to join them.
All these events happened over the course of about a month from the initial blowup with Darth to the Rogs, to the founders raiding their own treasury and abandoning the project.
The community has been through a lot, and even though the value of Pudgy Penguins has fallen from its previous highs they are still trading above 1 ETH and have several sales a day.
Will this community ever recover and return to its former glory?
At this moment it feels unlikely, but the NFT space is still the wild west and you never know what’s possible.
The saga of Pudgy Penguins will forever be a cautionary tale in the NFT space. For project founders it shows that even if your project has a successful launch, and a strong community, your GOAT status in the space is not guaranteed.
Having rock solid integrity at all times matters a lot here.
Building a project for the long term takes much more than just running on hype, because hype can turn against you in an instant.
It also shows the pressure founders and communities are all putting on themselves to deliver bigger and bigger roadmaps in shorter timelines.
This isn’t something we expect in the traditional content industry and it’s not healthy to put those expectations on the NFT space while it’s still growing by leaps and bounds.
It’s unfortunate that so much trust and money was placed on a team of founders that wasn’t up for the challenge and it’s left a stigma on what otherwise was a promising community.
Personally, I wish the best to the community projects that have spun off from the OG Pudgy Penguins. I think it will be a tough road ahead but I would never say it’s impossible.
For the rest of us, always invest your money wisely and cautiously and be prepared for your a W to turn into an L in this crazy industry.