NFT Avatars: Bragging rights or just a bubble? 🎭
What are NFT Avatars and why people are going crazy over them. + more!
Hi, Ravdeep here. 👋
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Have you noticed a bunch of people on twitter changing their profile pictures to those of well-dressed apes, uber-cool cats and pixelated people? Yes, those are people showing off their NFT avatars to the world and yes, they do have a good reason to show them off too.
What are NFT Avatars? 👺
NFT avatars are images of characters that are used as digital profile pictures by buyers. These NFT avatars are algorithmically generated from a wide variety of characteristics ranging from clothing, accessories, hairstyles etc. They also have rarities associated to them making them more or less valuable depending on this characteristic. Most of these avatar projects have associated functions to them like access to special virtual clubhouses, implementation in games, future animated series etc.
Why are people crazy about these NFT Avatars? 🤔
On the first glance, a digital profile picture would not seem as revolutionary as the crypto community is making it to be. But there is a reason behind this:
Strong communities are forming around these projects.
Functionality in shared online virtual worlds.
Acquiring elite-tier status in the crypto world.
HUGE secondary-market sales.
We’ll touch on all these points with examples later in this issue.
When and how did this all start? 📜
→ 2017
In 2017, software developer Larva Labs created 10,000 cyberpunk-themed characters called CryptoPunks, each one of them unique, algorithmically generated, and located on the ethereum blockchain. These 10,000 characters were distributed for free to anyone who was willing to pay the gas fee to receive one. (Gas fees are payments made by users to compensate for the computing energy required to process and validate transactions on the Ethereum blockchain.) But these CryptoPunks were dismissed as a novelty and did not receive much attention outside the very small cryptocurrency community of 2017.
The actual story starts with the blockchain-based digital cat breeding and trading game CryptoKitties by Dapper Labs. Sales of CryptoKitties involved a multiple six-figure transactions at the height of 2017 crypto bubble. The game proved so popular that it caused Ethereum usage to spike, leading to long transaction delays for network users. During the bear market years that followed, CryptoPunks continued to change hands and other NFT projects were launched.
→ 2020
By the end of 2020, this all changed. The DeFi Summer, that’s what industry folks called it, realised huge profits for those involved in the cryptocurrency space. At around the same time, CryptoPunks started selling for increasingly higher prices.
Rising CryptoPunk prices coincided with other NFT developments that brought greater mainstream attention to the sector. In October 2020, Dapper Labs, the company behind CryptoKitties, released NBA Top Shot to the public.
→ 2021
In 2021, several notable CryptoPunk sales took place toward the end of July and into August. On July 30, entrepreneur and NFT enthusiast Gary Vaynerchuk spent $3.76 million on Punk #2140. That evening, a pseudonymous investor, known only as 0x650d on Twitter, bought 88 CryptoPunks for around $7 million. Some speculated that the mystery buyer was cryptocurrency hedge fund Three Arrows Capital. However, it was later revealed that the fund had, in fact, bought 10 Punks, including zombie #6649, for $2 million.
How it’s going now? 🧐
With NFTs as profile pictures an established concept, many projects tried to recreate what CryptoPunks did, wanting to capture a similar enthusiasm for their projects. Some collections launched straight to OpenSea, like CyberKongz and Bastard Gan Punks, and enjoyed relative success. Two projects stand out from the rest which I believe will reach similar success as CryptoPunks:
BAYC and the Cool Cats
The Bored Ape Yacht Club launched in May 2021 with a flat 0.08 ETH (around $270 at time of launch) mint price per ape. Moreover, the BAYC team fostered a dedicated community around the project with an extremely active Discord and special benefits for holders. Each BAYC NFT grants entry to a special “Bathroom” section on the official BAYC website where users can write digital graffiti on a communal wall.
Cool Cats is a collection of 9,999 randomly generated and stylistically curated NFTs that exist on the Ethereum Blockchain. Cool Cat holders can participate in exclusive events such as NFT claims, raffles, community giveaways, and more. Cool Cats plan to include a future breeding mechanism — similar to CryptoKitties, the first NFT project to really explode into the mainstream public consciousness in 2017 — determined in-part by community members.
More on the NFT Avatar hype! 🔥
Strong communities are forming around these projects.
Cryptocurrency communities bon over a shared desire to promote the project. However, members of avatar communities have an even stronger bond between them, just like wearing your team’s colors or dressing in a certain style. With BAYC, for example, members receive various exclusive perks, such as the ability to draw on the clubhouse bathroom sketchpad. Also, only proven BAYC holders can join the Discord server.
Functionality in shared online virtual worlds.
Many NFT avatar projects have a much grander vision. Meebits, for example, are three-dimensional characters with a complete body. With some animation magic, a Meebit can easily serve as an avatar with which its holder can explore virtual worlds like Decentraland or The Sandbox. Even BAYC has experimented in using their avatar head in Decentraland (See below)
Acquiring elite-tier status in the crypto world.
The owner of Punk #4156 explained the concept of NFTs as social capital in an interview:
"With #4156 linked to my Twitter account, everything I do has the credibility and sincerity of my $1.2+ million bond (the value of the ape) behind it. For example, I can make large private art deals and people know I won’t bail on them because I have staked so much capital on my reputation.
Owning a Punk and using it as an avatar is a life hack with an ROI much greater than the [then] $40K (entry-level) price tag. As more people realize this, the price of Punks will increase, and their utility as social proof-of-stake will increase too. This is a virtuous cycle that will cause Punks to become incredibly valuable and will open the door for other avatar projects to become very valuable as well."
HUGE secondary-market sales.
CryptoPunks are being traded upwards of $200,000 even for the most common ones as it can be seen from their website: Larva Labs
These are only some of the projects in the NFT Avatar space that I have covered and we’ve only scratched the surface of what can be done in terms of community. People in the crypto space are working on things that we cannot even fathom and I am thoroughly excited about the future. I will be doing a follow-up issue some time in the future and we’ll see if these NFT avatars are still relevant or were just a bubble. Let me know your thoughts on this!
Recommended reading this week:
Visa buys an NFT-based 'CryptoPunk' avatar for $150,000 | Abrar Al-Heeti, CNET
CryptoPunk Owners Can Now 'Rent Out' Their Avatars | Dylan Kelly, HypeBeast
Thank you and have a brilliant week ahead. Would be great if you could share the newsletter with your friends and family as that helps a lot and hit that little heart button!