Pudgy Penguins recently acquired the on-chain creator economy platform Frame in order to better achieve technological development.

By Weilin, PANews

The well-known NFT project "Pudgy Penguins" has been making frequent moves recently, and has even appeared in the promotional video for VanEck's ETH ETF. In May, Pudgy Penguins announced a partnership with game studio Mythical Games to develop an immersive mobile game set to be released in 2025. In June, Pudgy Penguins announced the establishment of a parent company named Igloo in collaboration with their NFT authorization platform OverpassIP.

Following this, even more significant news arrived. On July 23, Pudgy Penguins announced the creation of an Ethereum Layer 2 blockchain called "Abstract." This Layer 2, which is consumer-centric, secured a $11 million investment led by Peter Thiel's Founders Fund. Prior to this, Pudgy Penguins had acquired the Web3 creator platform Frame, claiming to leverage its blockchain construction technology and utilize its own community and user resources.

Building a consumer-centric L2, or possibly airdropping

The new L2, Abstract, is a Layer 2 built using Matter Labs' ZK Stack and EigenLayer's data availability layer, EigenDA, making the development process of decentralized applications easier, cheaper, and more secure. In addition to constructing this chain, Pudgy Penguins also plans to establish a developer incubator aimed at helping applications go from 0 to 1.

The strategic financing round for Abstract was led by Peter Thiel's Founders Fund, with other investment institutions including Fenbushi Capital, 1kx, Everest Ventures Group, and Selini Capital. Pudgy Penguins will use these funds to establish a new company, Cube Labs, to oversee the development of Abstract and provide contributions and support. Michael Lee, former Senior Vice President of Development at Matter Labs, will serve as the CEO of Cube Labs.

Abstract is currently running on the testnet, and the mainnet is planned to be launched around the end of this year, but the token issuance time is not yet clear. The Abstract team currently has about 30 members globally, and Cube Labs has an office in Miami.

Pudgy Penguins CEO Luca Netz hopes to "shake things up" with Abstract. Luca Netz has ambitious goals, stating that he hopes to bring 100 million users onto the blockchain. According to a recent interview on the YouTube show "Milk Road," Luca Netz stated, "The consumer crypto revolution will happen on one chain, and that chain is Abstract." The three pillars to achieve these goals are "community, culture, and distribution." Based on their current achievements, Pudgy Penguins can do very well. He even emphasized, "Abstract will be the representative noun for Layer 2, not just one of the Layer 2s, or one of thousands of Layer 2s."

Pudgy Penguins' entry into L2 is not surprising, as there are already a number of NFT projects building their own L2, such as Bored Ape Yacht Club's Apechain and Azuki's AnimeChain.

In fact, in terms of technical implementation difficulty, the difficulty and cost of building Layer 2 have already been reduced. Lugui Tillier, Chief Business Officer of Web3 infrastructure company Lumx Studios, recently wrote that launching and maintaining an L2 is actually very quick and relatively inexpensive. Rollup as a Service (RaaS) companies can launch and maintain a rollup in up to six minutes, with monthly costs of less than $1,000. However, he also pointed out that the current development of L2 faces many challenges. The first is the fragmentation of market liquidity, requiring users to constantly switch wallets and bridge assets. Second, the instability and unpredictability of L2 transaction costs, which is very detrimental to the development of various applications. In addition, these new chains will further fragment the market. Of course, part of this problem is being addressed by the same L2s that provide CDK. Polygon, Optimism, and ZkSync are building liquidity aggregation layers to make thousands of application chains and industry chains look like a whole. "Thousands of application chains and industry chains are coming, and they will be crucial for financially sustainable on-chain development."

In order to better achieve technological development, Pudgy Penguins recently acquired the on-chain creator economy platform Frame. In December of last year, Frame announced the completion of a new round of financing on the X platform, with the specific amount undisclosed. Then in January of this year, Frame released an airdrop query link, but then fell into months of stagnation. The previous Frame chain had a solution for mandatory royalties and native ERC-6551 support, which can create smart contract accounts for each ERC721 type of NFT, giving the bound account full Ethereum account functionality, thereby enabling composability of the bound NFTs.

According to the latest official tweet, Frame stated that if users were previous airdrop claimants of Frame, the related rewards will be confirmed in Abstract's incentive system.

Controversy arises from involvement in L2 battle, CEO anticipates NFT comeback

Pudgy Penguins' current advantage lies in understanding the community and users, and being able to achieve good commercialization. For example, Pudgy Penguins' NFT-based plush toys have achieved significant success in offline markets such as Walmart. As of early July, the retail sales of these physical toys amounted to $13-14 million, with 1.2 million units sold. This has become one of the foundations for their company's good economic operation.

However, against the backdrop of many NFT projects performing poorly in the market, Pudgy Penguins' L2 plan has sparked ridicule in the community. Goose Wayne (GOFX) @usgoose commented, "But why though? Is the promotional material really just 'We fork an L2, hype the release, and then airdrop tokens en masse'? There are already over 50 L2s, why can't Arb/OP/Base solve any of the problems Pudgy Penguins is currently facing?"

However, there are also users who express support, such as Steve@SteveKBark, who stated that Luca Netz has shown "main character energy," and he believes that his team and the Pudgy Penguins community are his competitive advantage, so he doesn't want to bring that magic to another L2. That's why he continued to acquire his own company.

In fact, in response to the recent market performance of NFTs, CEO Luca Netz also has his own reflections and outlook. "I actually think that if you look at the NFT space today, the execution speed of top projects is unprecedented in NFT history. This mechanism still works… The crypto market is a financially driven market, and anything that offers huge returns from a financial perspective will experience fluctuations. Despite the ups and downs, it won't disappear completely. So, I believe NFTs will make a comeback."

He stated that if you understand the advantages of digital collectibles and compare them to physical collectibles, another reason for optimism will emerge. The current market value of the collectibles market is about $450 billion, while the market value of NFTs, i.e., digital collectibles, only accounts for 1% of that. This means that the ratio of physical collectibles to digital collectibles is 99 to 1, and digital collectibles have many advantages over physical collectibles. "Clearly, the current 99 to 1 market value ratio does not reflect the true advantages of digital collectibles. I believe this ratio should be close to 50/50, indicating that there is still a lot of room for growth for digital collectibles."

He further pointed out that digital collectibles are particularly popular in Asia and China, and from the perspective of consumer products, there is a very strong growth potential. "It's obvious that NFTs will continue to exist. The world is moving towards a digital future, and digital ownership is obvious to anyone who understands the direction of the internet and our society's development. NFTs are at the core and pillar of this transformation. People want to collect, crave valuable items, and pursue status symbols. I think the worst period is over."

It seems that although Pudgy Penguins' action to build Layer 2 has received some ridicule, the new developments have also brought some stimulation to the NFT and the broader market. We will closely monitor the subsequent trends.

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