PFPs: Profile pictures – the avatars that people use instead of their own image on social media.

NFTs are totally blowing up right now and this summer feels like an NFT gold rush. As I’ve said on previous posts, my first adventure into the world of NFTs was via Sorare. My second was via PFPs.

Barely a day goes by now without at least two or three new randomly generated PFP collections dropping on Opensea. The patter is always very similar – a limited number (usually around 10,000) of avatars (human/alien/animal), dropping for a small cost (between 0.02 and 0.08 ETH) with a near infinite number of trait combinations, a Discord channel and some sort of roadmap to demonstrate the ‘worth’ of the project. If the project sells out then that’s hundreds of ETH transferred to a random wallet address and thousands of us left speculatively holding a jpg. I can fully understand why people struggle to get their heads’ around this.

But whether you understand it or not, this is a big part of the current gold rush sentiment on NFTS and, for a handful of people, it’s earned them life-changing sums of money. For the vast majority though, it’s a gamble that is unlikely to pay off (and a nice cash-grab for the developers).

But still, the ‘lottery’ attraction is there. What if you manage to pull one of the top 10 rarest from a 10,000 mint? You could turn 0.02 ETH into 2 ETH overnight! It’s a double bet of course – the bet that you’ll pull the winning lottery ticket, coupled with a bet on the project itself being a success. You also need to know when to hold, when to sell on a rise and when to cut your losses and fold. Understanding that you won’t win every time is important.

I’m holding some PFPs that are absolutely flying plus a couple that are doing ok as slow burners and one that has completely bombed. I’m still really new to this and I’m trying to learn as much as I can. I’m putting my thoughts down here as part of that learning process and to help those of you completely outside of this to understand a bit more about what’s going on.

WHAT’S THE VALUE IN NFT PFPS?

My earlier remark about holding jpgs was a flippant one. The perceived value in an NFT PFP is much more than that and there are clear reasons why this space is taking off:

Status symbol – having an NFT as your PFP is a clear status symbol. It signals that you know about NFTs and gives you a certain amount of credibility (depending on which one you have of course!). Consider it the equivalent of a fancy watch or handbag in cyberspace.

Access to a community – as well as being a status symbol, your PFP gives you access to a community of likeminded people. Everyone is looking for a community, it fulfils a basic human need, and now that we live so much of our lives online it’s only natural that people are looking for a community in the metaverse too. This isn’t just about sharing anecdotes and finding support – just like in real life, these community connections can help us promote our own projects, expand our horizons and maybe even find work too.

Utility/earning – some (but not all) PFPs offer some sort of utility or potential to earn from the PFP as well. A strong project will continue to receive income via secondary sales on Opensea so this, plus the income from the initial launch, gives the developers a war chest to create something really special for the holders. This might take the form of play to earn games, airdrops or royalties. It might even take the form of real world wearables or experiences – such as the things that Gary Vee has piloted with VeeFriends.

Artwork – we shouldn’t forget that some people genuinely love the artwork and are prepared to pay for it…

Potential for flipping – and we also shouldn’t forget that some people are just jumping on the bandwagon and hoping to flip PFPs for a quick profit, just as we see with any other tradable commodity.

SUCCESS OR FAILURE – WHAT MAKES THE DIFFERENCE?

I don’t think anyone can know with any certainty which PFPs are going to make it at this point but there are some pointers that show projects which are likely to move in the right direction and those which aren’t. The trouble is, it’s not always to work this out before they first drop and I suspect the whole market is pretty much saturated right now so the chance of any new PFPs cutting through is getting slimmer. We’re also in a massive bubble at the moment so holding any PFPs is pretty risky – I imagine very few will hold their value in the long term.

These are three of the projects I’m on board with, plus a bit of a review of what’s working (or not!):

Gutter Cat Gang

Huge success – I bought in for the mint price of 0.08 ETH and my cat is currently sitting at a value of around 1.95 ETH.

What worked: This is one of the earlier projects, launching before things really started to heat up. Had a very rough start but turned it round quickly, refunding people that lost money due to failed transactions and fleshing out what was quite a weak roadmap early on. They limited the number you could mint which helped the project to get a really high number of unique holders (nearly 50%). Very limited supply (only 3,000). The artwork is good and has attracted some high profile influencers as holders which has helped to put eyes on them, and the community has really helped to make the ‘Gutter’ narrative feel real. The team are delivering on their plans – launching a liquidity pool to help protect the floor and recently airdropping ‘Gutter Rats’ to all holders, giving some extra value.

Cool Cats

Huge success – I missed the initial mint at 0.02 ETH but saw momentum building and bought a couple on the secondary market for around 0.15 ETH. I sold one for 1.3 ETH and I’m holding the other, valued at around 1.25 ETH.

What worked: The artwork for this project is really solid and likeable, and comes out of a long period of development by the artist. The roadmap was really well fleshed out and included airdrops and a breeding element to add future value, and the community engagement was strong even before the PFPs dropped. Like the Gutter Cats, there were some teething problems with some early buyers minting for 0.06 ETH before the price was dropped to 0.02 ETH but the team quickly compensated them. They’ve been proactive in collaborating with other projects and have had some celebrities add Cool Cats as their PFPs, which has really helped to drive sales. They’ve added a liquidity pool and are continuously innovating the roadmap.

Rabbit College Club

Big flop – I minted six for 0.02 ETH (plus as much again in gas) but the floor price is stuck around 0.01 ETH at the moment.

What went wrong: This is a good case study in how not to launch a PFP. After a lot of hype, and with good numbers in the Discord channel, the 10,000 rabbits sold out within minutes. Very few unique owners due to the maximum mint being set at 20, giving a sense that many holders were purely buying for the flip. The website was buggy, the roadmap they published was vague and sparse, and the Discord channel lacks basic tools to support the community (like a floor bot). The reveal of the PFPs was a bit disappointing – the cute artwork is ok but nothing exciting – but the most worrying aspect was that the developers said they were tired and signed off for the night. After a long period of silence, with the floor dropping, the developers reappeared with some poorly received comments. The project is at least listed on Rarity Tools now which might increase exposure but it feels a long way back from this point…

THE KEYS TO SUCCESS?

Involvement in those three projects has taught me that for a project to be a success:

• You absolutely have to like the artwork. If you don’t like it, don’t expect anyone else to either.
• Getting plenty of momentum before the drop is important but isn’t necessarily an indicator of success as there will be a lot of people just looking for a quick flip so the numbers in the Discord channel don’t tell the whole story.
• Having an element of scarcity is important and can definitely add value but it needs to be authentic scarcity – avoid projects that allow people to mint a ton of PFPs at once, thereby selling out quickly but restricting the number of unique holders.
• The developers need to be really active and responsive to the community. Projects will only succeed if the community is onboard too and goodwill can be quickly lost when money is on the line. A day feels like a week in the world of NFTs and silence in definitely not golden. Developers need to keep talking and innovating after the drop.
• A lot of projects promise utility but a roadmap needs to make sense and demonstrably add value – otherwise what’s the point? A PFP isn’t just about the art, there needs to be something solid behind it if it’s going to stand out from the crowd and encourage people to keep buying into it. Vague promises just don’t cut it.
• If it feels like a low-effort cash grab, well it probably is.

This is my first take on things and I’m sure this list will evolve over time. I’d be interested to see what you think too and what you are holding or plan to hold next.