Author: YBB Capital Researcher Zeke

1. The Collapse of NFTs

The final cry of the NFT era ended with the token launch of Pudgy Penguins, while Doodles’ recent release on Solana made barely a ripple. Yuga Labs continues its downsizing, this time cutting into the very soul of its identity — Cryptopunks. Even the Bitcoin NFT revival, once the last glimmer of a comeback, has nearly faded to zero. These once-hyped narratives have long fallen into obscurity, now met with indifference.

The original vision behind 10k PFPs was once full of promise: a perfectly sized community helping a bottom-up IP project gain global traction. This was fundamentally different from traditional IP creation, where companies like Disney spent years and massive budgets building franchises like the Marvel Universe, Star Wars, or animated characters that became household names and revenue machines.

NFTs flipped that model. The barrier to entry was incredibly low, and the speed at which an IP could be created and monetized was unprecedented. A creator only needed to pay a small amount of gas to mint their artwork on OpenSea — no gallery, no toy manufacturer, no film studio, no professional team. Just like that, an IP or a new artist was born.

A few years ago, we witnessed grassroots IPs rising to popularity across the entertainment industries of the West, Japan, and Korea. A self-taught artist could break out through NFTs. For someone like me, a Gen Z kid raised on Japanese anime, being able to participate in the investment and incubation of IPs once reserved for the elite felt like a dream.

But then came BAYC’s “endless nesting dolls” and Azuki’s disastrous Elementals series. The vague nature of NFTs started to crystallize. They weren’t really equity or investments; they were more like overpriced luxury goods with some membership perks. And yet, project teams expected us to keep buying new sub-series to fund their roadmap of content-building IP value. The contradiction was planted early: they knew creating content was expensive, but without it, the IP would die. Releasing new sub-collections every few months sucked value from OG holders, slowly bleeding the community. Years of content building might never yield results — or the results might never come at all.

The cracks grew wider. As floor prices fell, the lofty dreams shattered. What remained was bitter infighting.

2. The King of IP MCNs — PoP MART

If NFTs are seen as Gen Z’s luxury collectibles, their rise and fall become easier to understand. In a fast-paced consumer culture, lacking content isn’t necessarily fatal — strong visual appeal alone can attract buyers. Azuki’s art style, for instance, resonated with Asian aesthetics, allowing this grassroots NFT collection to emerge as a blue-chip, following close behind BAYC. In the physical world, popular collectibles like Bearbrick, B.Duck, and Molly also rose to fame without any narrative foundation, riding solely on their unique designs.

However, trends are fleeting. Without content as a core value anchor, IPs risk becoming obsolete. In crypto, where cultural depth is thin and success rates are extremely low, project teams often resort to spinning derivatives around a single IP. But the reality is, the “wind” dies out before the IP even forms its core.

Some PFP projects did have rich content backing them — Japanese NFT projects, for example. I’ve seen at least four or five that held licenses from well-known anime, hoping to dominate the NFT market. But they failed to consider that anime fans and NFT communities barely overlap. Plus, anime merchandise is already so abundant — why would fans pay hundreds of times more for a tiny digital image? More importantly, those images are just that — images. The promised “future utility” is essentially zero. Even if you own a Gundam NFT, you’re only granted entry into the “SIDE-G” metaverse, with no revenue share from model sales, games, or animations. You’re not part of the IP’s growth — you’re an outsider. GameFi faces a similar dilemma.

At this point, PFPs feel like a false narrative — only Pudgy Penguins remains a pragmatic outlier still making real effort. But is there another path for profile-picture-style NFTs? I believe PoP MART offers an alternative blueprint.

This once-small store in Beijing’s EC Mall rose to prominence by distributing Sonny Angel figurines, which contributed nearly 30% of PoP MART’s early revenue. When the IP owner terminated exclusive distribution a year later, it inadvertently sparked the rise of an IP empire.

PoP MART founder Wang Ning pivoted quickly: build proprietary IPs that no one could take away. In 2016, PoP MART collaborated with Hong Kong designer Kenny Wong to create its first original character — Molly, a pouty-faced girl who immediately became a national hit. The blind box mechanism, rooted in surprise and dopamine, sent PoP MART soaring. By 2019, Molly alone generated 456 million RMB in annual revenue, becoming PoP MART’s core cash cow.

This model — combining Japanese gashapon aesthetics with upscale collectible collaborations — mirrored much of what we later saw in the NFT boom. Artists designed base elements, while project teams generated collections and marketed them. Most NFTs also launched through blind boxes, with rare traits teased to drive demand.

While NFTs and PoP MART differed in sales formats, tens of thousands of NFT projects and even the top-tier “blue chips” ultimately failed. Yet PoP MART is enjoying a second spring — why?

Previously, I attributed this to real-world difficulties and high entry barriers. The former is certainly true. As for the latter — perhaps not. NFTs had their free mint era too. Goblintown, MIMIC SHHANS, and others thrived. Creators profited purely through trading royalties. Even Bitcoin-based NFT inscriptions achieved a greater level of decentralization, but none of this prevented the overall NFT decline. It’s easy to create or join an IP community; the hard part is sustaining it.

This is where I think the model was flawed. After PoP MART’s first meteoric rise, even Molly couldn’t “deify” the company — its stock price, like NFTs, fell from 2021 through 2024. But PoP MART came back. How? By building an entire wall of IPs. Today, it owns 12 proprietary IPs including Molly, DIMOO, BOBO&COCO, YUKI, and Hirono. It holds exclusive rights to 25 IPs like THE MONSTERS (Labubu), PUCKY, and SATYR RORY, and has over 50 licensed collaborations with global franchises like Harry Potter, Disney, and League of Legends.

Tastes shift. IPs are mortal. But what if I could choose from hundreds? Labubu is currently exploding in popularity across Europe and Southeast Asia, with some toys appreciating like fine liquor. Yuga Labs’ dream was ultimately realized in Web2, and that, in hindsight, is no coincidence.

We should reconsider what an IP business truly is, what an NFT roadmap should mean, and how PoP MART managed to reach such heights without content at its core.

3. Pudgy Penguins

I attended Pudgy Penguins’ event in Hong Kong last year — their community engagement is always warm and consistent. Pudgy’s success lies in one word: pragmatism. NFTs don’t differ much in tech; no matter how clever the minting process is, they’re all ultimately just JPGs. The real challenge lies in making the IP land in the real world — a task hundreds of times harder than generating 10K profile pictures. Yuga Labs wants to build a metaverse. Azuki dreams of an anime empire. Sounds cool, but these billion-dollar ambitions are funded by their “family members” in the community.

This hyper-compressed world is too impatient — everyone wants results now. Holders want big profits; project teams want instant empires. Few blue chips are willing to slow down, and the more impatient they are, the harder they fall. Pudgy Penguins’ original team was a grassroots group prone to hype and missteps. After their reputation collapsed, they sold the project cheaply.

That’s when Pudgy found its true owner: Luca Netz. With years of experience in physical product marketing, Luca brought Pudgy Penguins back to the level it deserved. He’s really building a brand — running a company for NFT holders. From marketing to plush toys to upcoming games, every step is solid. The company makes money. Holders profit too. None of it is revolutionary — it’s just doing what should be done. And this proves that a bottom-up IP model can work in Web3 — there are just too few teams humble enough to commit.

That’s why I dislike the term “debunked,” as if something was never worth existing. Electric cars were once a joke, and early versions of Siri were laughable. But now, green license plates flood our cities and AI needs no introduction.

Many so-called failed narratives in Web3 will be retried in the future — they just lacked the right team the first time around.

4. The Path Forward

Success is simple. And success is hard. For PFPs to move forward, they must break away from some of crypto’s inherent logic. Becoming the next “Web3 Disney” requires deep time and commitment. I’ve questioned in past essays whether NFT scarcity, once considered a strength, actually became a weakness as the space sought mass adoption. If NFTs are consumer collectibles, then the 10K limitation is too rigid. If they’re a Web3-native fundraising and asset format, then the IP must eventually be translated into real-world products — not just a never-ending series of random offshoots.

Given the unique culture of crypto and the nature of NFTs, clinging to a single IP indefinitely is understandable but limiting. How do we reimagine these PFPs? How do we evolve a single project into an IP factory? This will require embracing new concepts, fresh technologies, and experimental mechanics.

5. Is Token Launch the Final Chapter?

What’s the point of launching a token for an NFT project? I still don’t fully understand. It often feels like exploitation — a convenient liquidity exit masked as community empowerment. From $APE to $DOOD, most project tokens resemble nothing more than glorified air coins. Their “utility” usually boils down to staking for trading rebates, in-game perks, or governance — none of which hold long-term value.

Ideally, there’s a sustainable loop between holders, stakers, and developers. But in reality, it’s a cycle of depreciation: NFT prices fall, staking yields collapse, and token prices crash.

For OG NFT holders, token launches offer windfalls through airdrops — so they don’t complain. But over the long term, these distributions are dilutive. Azuki’s anime token drop was outright daylight robbery. 

Short-term hype is important, but project longevity matters more. Don’t let your token launch be the final stop.

Conclusion

In an era dominated by fast dopamine hits, we’ve seen countless new IPs rise from Web2. NFTs should’ve thrived in such an environment — they have unique, irreplaceable characteristics. Four years ago, I called NFTs the “Maotai of the metaverse.” The truth turned out closer to cyber tulips.

Few want to tend the ruins — but I believe that buried beneath the rubble, the next Labubu is waiting to be found.

About YBB

YBB is a web3 fund dedicating itself to identify Web3-defining projects with a vision to create a better online habitat for all internet residents. Founded by a group of blockchain believers who have been actively participated in this industry since 2013, YBB is always willing to help early-stage projects to evolve from 0 to 1.We value innovation, self-driven passion, and user-oriented products while recognizing the potential of cryptos and blockchain applications.

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