In the world of collectibles, there are non-fungible tokens (NFTs) known as profile picture avatar projects that have gathered a high level of popularity and have even gone as far as building their own communities.
These projects are also known as PFP projects. PFP is an acronym in texting and social media for a profile pic.
PFP NFT Avatar projects have gone up in value tremendously, especially on secondary markets, so let’s dive a little deeper and see what all of the hype is about, and analyze if they can withstand the test of time and remain valuable as the market gets flooded with other PFP projects and new trends in the NFT space.
What Are Profile Picture Avatar Projects?
Non-Fungible Token (NFT) Avatar projects are images of a character, which will typically be portrayed from their upper body and shoulders, upwards towards their head and face, and are frequently used as a digital profile picture across its community.
A majority of these NFT avatars will be individually unique, or in other words, to put it more precisely, an algorithm generates them from an array of differentiating variables and traits that are predefined before generating the final variation in the set.
These variables can include the clothes they are wearing, the accessories, their hairstyle, glasses, and so on.
Each of these variables or traits will typically have its own level of rarity associated with them, and the rarer traits an avatar has, the more valuable they are.
Keep in mind that there are certain NFT projects that have other functions associated with them. A notable example of this would be NFT avatars that give the users that own them special access to virtual clubhouses.
Furthermore, the market for NFT avatars has grown tremendously, and it is one of the main reasons why they have become so valuable across many marketplaces.
Why Are Profile Picture Avatar Projects So Popular?
With all of that in mind, it is clear that NFT clubs are all of the “rage” across cryptocurrency enthusiasts. Throughout social media platforms such as Twitter, we have seen alliances throughout specific NFT clubs. This conflict drives a lot more engagement, and this can be seen in the example of The Bored Ape Yacht Club.
You see, this is a project that launched on April 30th, 2021 The premise was simple: launch ten thousand unique iterations of cartoon apes for sale as NFTs. But here’s the kicker, a Bored Ape NFT doubles as your membership to a swamp club for apes. A day after it launched, all ten thousand Bored Ape Yacht Club images sold out.
While most of them started at a price of $200 in Ethereum, users bought them at $1700 a few days later on marketplaces such as OpenSea. In fact, Bored Ape Yacht Club’s initial NFT launch brought in more than two million dollars, and the collection saw a hundred million dollars in trading. The cheapest apes will typically go for $18,000 at least. Collectors adore them, and with the added functionality of being in a “cool club” of sorts, they are bound to spike up in popularity even further.
How Do Avatar Projects Build a community?
Some NFT avatar projects build their own communities by putting their owners into a club of sorts. With that being said, each avatar club has a strange combination of an online community, a stock-shareholder group as well as its own little society that just adores the art.
When one ape is bought for a high price, the perceived value for the rest of the apes rises as well.
This is the case with CryptoPunks as well, when a buyer makes his Twitter avatar from an image of an NFT, it is a sign of allegiance.
Furthermore, it serves as a message to his/her followers, that the owner is in a cool club, a new club, an exclusive club, where only the biggest collectors are welcome.
Since they have pre-built their own little club, typically they will seek each other out and follow each other on Twitter, which means that, in a way, just by buying an NFT and changing a profile image, you can get hundreds of followers and become part of a club.
By making the NFT a rarity, by limiting the supply, by and getting its value as high as possible on secondary markets such as OpenSea, the community builds itself, assuming the project in question is appealing enough.
CryptoPunks started all of this, as is considered to be the “OG ” of NFT avatar projects. It set the precedent that every other project would follow in its footsteps, and it was released all the way back in June of 2017 by Larva Labs, which essentially made it one of the first projects to explore NFTs on the Ethereum blockchain.
All 10,000 of the CryptoPunks were uniquely generated, 24×24 pixelated avatars that were free to claim by anyone that had Ethereum wallets.
Since then, it has achieved the status of legend and has made its way to the mainstream audience and headline attention due to the major auctions that have occurred at Christie’s and Sotheby’s.
Let’s compare them to watches. What’s the first luxury brand of watches that comes to mind?
Chances are high that this would be the most heavily advertised one, such as Omega, or Rolex, well, you can think of CryptoPunks as that, but in the world of NFTs, even the lowest-priced Punk is worth thousands of dollars. There are rare CryptoPunks that fall into the categories of apes, aliens, or zombies, and all are priced into the range of millions.
A Shift in Pricing
Prices of the Apes and Cryptopunks have been going up and are resold on OpenSea and Christie’s auction sale of Crypto Punks.
In fact, let’s look at the numbers.
There are 10,000 Bored Ape Yacht Club NFTs.
There are 5,200 tokens, with a floor price of 15 ETH and a traded volume of 72,000 ETH.
Then there are 10,000 CryptoPunks NFTs.
There are 2,800 tokens, with a total traded volume of 313,800 ETH.
So over time, the more popular these NFTs became, the higher their price raised. Due to their scarcity and limitation to only 10,000, there can never be any new ones created, and as such, the price just keeps on increasing.
Specifically, Prices of the Apes and CryptoPunks have been going up and have been resold on OpenSea and Christie’s auction sales.
How People Make Money
The main way through which people make money on these NFTs is by selling them on markets such as OpenSea. You have probably noticed this by now, however, much of the trading of these tokens occurs on secondary markets, not from buying the NFTs from the creators themselves, as that supply was limited to 10,000 and sold out within hours.
Bored Ape Yacht Club
The Bored Ape Yacht Club (BAYC) launched in May of 2021 with a flat 0.08 ETH mint price per ape, which, at the time of the launch, was in the $270 range.
The BAYC team managed to get a dedicated community around the projects due to their active Discord server and specific, specialized benefits for all of the holders. You see, unlike CryptoPunks, the BAYC had a twist to it that a lot of people found amusing.
Each BAYC NFT gave people access to a special Bathroom section on the BAYC website, where users could write digital graffiti on a wall. It was set in stone, if you had a BYAC NFT, you were in the club, you were one of the “cool people ”, and everyone just had to have them.
Ape Kennel Club
That being the case, Bored Ape Yacht Club launched a new roadmap. For example, we saw the launch of the four-legged companions to the apes, the Bored Ape Kennel Club.
This is an NFT collection that allows its users to adopt dogs, and a dog NFT was offered to every single member of the BAYC for free, and all they had to do was pay for the gas.
Furthermore, the BACK has 2 .5 royalty fees for all secondary sales, however, 100% of the proceeds will be donated to animal shelters such as The Giving Block. This fee is planned to be removed six weeks after the launch. This, in a way, promoted the quick re-sell of the dog NFTs, however, it was for charitable causes.
However, what you need to keep in mind is that 99.9% of these projects will, at some point in the future, be worth nothing as they do not really have the sustaining power to remain as relevant and valuable as they currently are.
What the BAYC project did here was set a new standard for subsequent NFT avatar launches, and as such, inspired similar animal-based avatar projects which grant their holders special, specific perks.
Rug-Pull
Here is what is actually happening, so you get a full level of understanding when it comes to the underlying plan of each of these projects.
People launch a project, which eventually gets hyped up to the point where it’s a “must-have”. Then, they just disappear after they have made a decent chunk of money. Now the project becomes worthless as a result of this.
Minting is the process of turning digital art into a part of the Ethereum blockchain as a public ledger, and this art will in turn be tamper-proof and immune to modifications. They are intentionally minted to a cap, the most common cap being 10,000 NFT tokens due to the fact that this was set up by the first mainstream success CryptoPunks, NFTs whose prices have sky-rocketed.
Another issue that has plagued NFT avatar-based projects such as these is the fact that, due to the increase in popularity, we have seen a much higher usage of the Ethereum blockchain. This drives the gas prices up, where we can see a huge spike, and we can also find bad smart contracts. As a result of this, projects need to be delayed due to technical difficulties that occur during their initial inception.
These types of projects are, in a way, a current trend, something people get into due to the fact that they are popular, and for the aspect of exclusivity which the tokens offer, a lot of other users are prepared to pay huge sums for these NFTs, which is one of the main reasons why investment-oriented buyers buy them in the first place.
As long as there are buyers prepared to pay astronomical amounts of ETH for these NFTs, they will be in circulation and get listed on OpenSea as well as other NFT marketplaces. But underneath that exclusivity, they do not really offer that much functionality, and over time, they will just be a statistic and a distant memory of the time where NFTs were “cool”.
However, this is in regards to the 99.9% of these types of projects that have historically been this way, specifically developed and groomed so that they can be sold, and once they are, they are completely abandoned by their developers and lose most of their value.
The Bottom Line
Avatar NFT projects are more than just projects, they represent a status symbol, a way through which a user and owner of the NFT can showcase that they are part of a community, part of a digital club that only a select few people can enter, and this gives them access to a plethora of social media followers that engage in the same community and adore the same project.
Furthermore, these projects rely on their large communities to maintain the value of their NFTs, which tremendously grow the moment they are minted to their cap and are no longer available to mint.
The scarcity they share drives their value up, and as such, a lot of people are prepared to pay more for them, which builds the community even further. Most of them end up getting abandoned and become worthless though, so make sure to be careful about what NFT you will be choosing and investing in.