← The Wolf Of All Streets
The Wolf Of All Streets
NFTs Set To Explode Amid The Crypto Bull Market | Luca Schnetzler, Pudgy Penguins CEO
00:54:14
NFTs Set To Explode Amid The Crypto Bull Market | Luca Schnetzler, Pudgy Penguins CEO
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- [00:00]
A
Are you the world's tallest penguin?
- [00:02]
B
I might be. We wanted to be the face of penguins around the world, and we wanted to be Crypto's mascot. In the face of crypto, that you're going to have a community that's going to die for you. You know, the beauty with me is, like, I'm doing this to beat everyone. That might not be the best fuel, right?
- [00:15]
A
Yeah, it is.
- [00:15]
B
Crypto is really the future. Kids need to start getting involved.
- [00:19]
A
While many bitcoiners choose to believe that the reason we had the last bull market in 2020 and 2021 was largely because of bitcoin, the reality is that it was Doge and NFTs. And we reached peak hype when NFTs were on Saturday Night Live, when celebrities were buying and flexing with their bored apes. As you know, most of those projects have gone down 99.99%, never to be revived in the next cycle. But one project has emerged as the true winner as a beacon of hope for all NFT projects. That, of course, is Pudgy Penguins. I had an incredible conversation today with Luca Schnetzler, AKA Luca Netz, who bought the Pudgy Penguins project years ago and has turned it into an absolute behemoth. He gave me hope that NFTs could come back. Baby, you don't want to miss this conversation. That's dope. You know, usually I have very, like, impactful, deep conversations with the Michael Saylors and serious bitcoiners of the world, but today I just want to talk about penguins, if that's cool.
- [01:36]
B
That's fine.
- [01:37]
A
Are you the world's tallest penguin?
- [01:39]
B
I might be.
- [01:40]
A
Technically.
- [01:41]
B
Six, seven.
- [01:42]
A
I mean, it's unbelievable. I think I said this to you when we met. I think it was in Dubai, maybe. You were on a panel with Mario. I was like, somehow everybody I talked to on Zoom, like, I'm relatively tall. I'm almost six. One is taller than me. And I never assume it, but everyone in crypto who's building anything of significance seems to be huge.
- [02:00]
B
I. I've actually been. Been kind of surprised myself. So it's nice to meet another. Well, there's a couple tall guys like us, so it's nice. Nice to be with you.
- [02:09]
A
You tower over me. So listen, let's talk about Pudgy Penguins. And I think I want to generally talk about the state of NFTs, what you see kind of coming. Since we have this 2025 beginning opportunity to sort of take a reset. You guys have seen insane success. Some would Argue that maybe Pudgy Penguins has been the most successful of the PfP. 10,000 print collections of the last cycle, which all were going nuts three years ago. So you kind of took it over. Maybe give the very quick backstory for those in my audience who may not know about Pudgy Penguins.
- [02:43]
B
Yeah. And so just to cement your statement, it very much is the highest performing NFT of the last couple of years by a Texas mile, actually. It's not even close. And so definitely super proud to say that. Super proud of the team, super proud of the community to get there. The story, at least my story is pretty simple. Humble beginnings. High school dropout when I was 16, started throwing underground rap shows in Los Angeles. Got my first job at a tech startup called Ring. Became a self made millionaire when I was 18 via E Commerce. Started my most recent company. Prior to Pudgy Penguins was a company called Gel Blaster. It was North America's fastest growing toy company. We basically went from zero to $100 million in sales in about 18 months. And then I bought Pudgy Penguins about two and a half almost three years ago. April 4th will be three years since we bought the project. The thesis there was really simple. I was an NFT connoisseur. Pudgy Penguins was the first ever PFP that I bought in in size. And I made a ton of money trading and collecting them. I was a huge fan of the community and the culture. If you understand Pudgy Penguins and the lore. It was one of the great innovators of memetic culture that you see today. Most people would roll their eyes at that statement, but if you were around in 2021, you know exactly what I'm talking about. It was one of the great NFT projects that kicked off the 2021 Bull Run. The NFT bull run at least. And so it was really apes, penguins and punks when I came into the space to trade NFTs for the first time. And unfortunately the company was started by a bunch of 18 year olds, so they didn't have much experience building any business. And so while apes and punks continue to do their thing, penguins kind of flayed and faltered. And unfortunately that created some chaos. And through that chaos created more camaraderie amongst the community, deeper ties and deeper connection amongst the flood storms that plagued the penguins for many months. It ultimately led the community to starting what we call a riot. And so they basically rioted the founders out of the project and demanded for new leadership. This is where certain members of the community including myself, you know, suggested that we, you know, take over the project. I ended up winning the bid for about two and a half million bucks. And our thesis, ever since we acquired it, was simple. We wanted to be the face of penguins around the world and we wanted to be crypto's mascot in the face of crypto. And so we've marched in that direction over the last couple of years. I've been a firm believer in supply and demand, and I think a lot of what we're doing from a team perspective is creating more love, more affinity, more demand for the penguin and the penguin ip, the community is playing their role by proliferating the penguin and creating a community of chads that people want to be a part of. And subsequently, this relationship that we've had together has ultimately led us to where we are today. And so where we are today is, I think we're on the precipice of being both the face of penguins around the world and crypto's de facto mascot. I think we have many more barriers and many more boundaries that we need to break that are ultimately going to help change the space for the better. And today we have a new issuance in our ecosystem, which is Pengu. Pengu is very much a memetic style coin, a culture coin, a community coin is really an everything coin if you understand the brand that is pudgy penguins. But most importantly, I think it is going to reinvent the category that is this like memetic style category around this like stagnant and passive approach. And I think we're going to reinvent it in terms of making these things active with active developments and active initiatives that I think ultimately help push the IP and the character forward. And so that's probably like the really short version. Happy to take a deep dive any which way that you'd like to go. But that's, that's probably the 122nd version I can give for you.
- [06:35]
A
When you say you bought it for two and a half million dollars, what is the actual entity? What are you buying? Is it ip? Was it a corporation? I mean, what are you actually purchasing when you buy a project, you know, an NFT project like this that was launched?
- [06:50]
B
Yes. We didn't buy a business, I'll tell you that. We bought very much assets, so we bought logins to social networks, we bought, you know, teams treasury of penguins, we bought, you know, trademarks and, and anything along the lines. So I think it was like 60 different assets that we purchased. It was very much not a business that we purchased, we purchased assets and we turned it into a business.
- [07:12]
A
Did that include a certain amount of penguins that gave you theoretical control of the supply? Just, it's so outside my wheelhouse. Obviously I've seen this happen with tokens, but with an NFT project, it's really different.
- [07:24]
B
Yeah, it was probably a couple hundred little pudgies which I ended up giving away to the community over the years. So that' probably, you know, $15 million in little pudgies that I gave away at least at today's prices. And, and then like you know, 20 big pudgies that we ended up selling via Sotheby's and, and gave the money to charity. So not much there. But the team, the, the, the team, the company has a treasury and we've been buying penguins and, and we buy penguins internally. We've had a lot of penguins for a while, so we've got a pretty, a pretty big base of penguins at the igloo. But the ones that we acquired, we either gave them away or, or sold them and gave the money to charity.
- [08:01]
A
So obviously what got on my radar, I think when we first spoke on a Spaces was when you launched the toys and ended up in Walmart and Target, things like that. Clearly when you understand your background, even if you only hear the 32nd version of it, you understand that side of the business, the actual physical side, retail, that's what you were doing before and how you sort of made your millions as you described. What was the thinking behind taking the penguins, turning them into a physical toy and how did you then get them into Walmart and Target? I think everybody watches Shark Tank and thinks that's almost impossible, but seemingly you kind of bootstrapped it and got your way in there.
- [08:40]
B
I think the beautiful part about the pudgy penguin story is actually that first year. And so to give you some context, we'd purchased the project for two and a half million bucks. We had seeded it with $500,000 of our own money to ultimately like start the business and run the business. And what had really transpired about a couple of weeks after the purchase was really a down only bear market. And Black Swan after Black Swan with the implosions of FTX and others and so, and furthermore royalties disappeared, was really the business model for a majority of NFT projects. And so with really our back against the wall, we had no other choice but to lean into what we knew how to do best, which was consumer product. Now I knew we were going to do this anyway. This was not unorthodox to the roadmap or the plan. How quickly and how urgently we had to rush to that roadmap into that plan, I think was predicated on the macro environment and ultimately the cards that we were dealt. And it seemed really obvious to me how NFTs and tokens work. And so to give you my thesis here, I think it's just very simple. These things are supply and demand and it really starts and stops there. And the beauty about when you do toys or products or content or kind of these initiatives in which the team drives, they're really accomplishing two things. The first thing that it's accomplishing is it's creating demand because every time a toy sells in Walmart, that's more people that are falling in love with the brand. That's more people that are participating within the Pudgy Penguin ecosystem. It's more people that are developing also love and affinity, right? Because there's some sort of conviction that's being built around this real tangible asset that you sleep with or that your child sleeps with, or that your girlfriend sleeps with or you know, no matter what, it's omnipresent in your life and it's building some sort of subconscious conviction. And so, and then, and then I think in principle too, the products also make money, which allows us to not make decisions that hurt the Web3 community. And so, you know, for us it seemed like, it seemed evidently clear that this was the direction that we needed to go. It seemed like these toys and these products had obvious PMF if you just closed your eyes and envisioned it. And they ultimately solved, I think the three most important things that any NFT or token should solve that ultimately helps benefit the holders, which is, you know, does it generate revenue, which ultimately that, that's not taking from your community. Does it create more demand for your token, whether it's an NFT or a liquid token? And does it create more conviction and belief or love and affinity, you know, for that token, whether it's an NFT or a liquid token. And so the, the, the toys really accomplish that in a super meaningful way. And obviously per my relationships and success in consumer product, we were able to open the doors to Walmart and Target and 10,000 other stores across the country in the world that ultimately has led to the success that is the Pudgy Penguins consumer product business.
- [11:24]
A
So the consumer product business obviously is a business, right? I'm assuming there's a corporation, you're paying your taxes, there's a structure there. How does that relate to what you bought into the Community itself. Is there a way that the value from sales accrues to the token or accrues to the penguins themselves, or is it sort of a separate business that's beneficial to the community for all the reasons that you mentioned?
- [11:47]
B
Yeah, I think it, you know, if it were to start and stop at all the reasons that I mentioned, I think that would be good enough. But obviously I think there's a lot of symbolism here in terms of how you can reinvent the IP business, which I think is a business that is probably one of the most archaic and least innovative, you know, businesses today that you see in the world. And the relationship that we've actually pioneered, you know, not only in crypto, but it's kind of permeated outside of crypto. Now, was this idea that somebody can own a digital asset and license it and kind of have it alchemized or turned into a physical product, and then they actually get a royalty in perpetuity for that. And so we're actually about to pay out our royalties this month for 2024. I think we're going to cross the million dollar royalties paid mark, which I think is pretty incredible figuring. You know, we've really only been selling physical products for about 18 months. But the idea is simple, right? You hold one of our first editions, you hold one of our NFTs. When we make products or do things, 95% of them are going to be licensed from the community. And the beauty of this is every time one of those sells, it kind of accrues into a piggy bank in which that piggy bank is paid out at the end of every fiscal year. In this case for us, our fiscal year starts and stops in January. And so it's a pretty beautiful reinvention where I think right now traditional IP businesses have a relationship of brand and consumer. And I think this reinvention creates a middle layer which is brand, participant and consumer. And the participant is indexed around our first edition collectors, which is our NFT holders. And so every toy that you see in Walmart is actually an NFT that exists in a holder's wallet that they own. They license to the company that every time it sells, they get a royalty in perpetuity. And so I think it's a really beautiful story. And so I think it's one of many reasons why Pudgy Penguins has seen the success that it's seen up until this point. But it's really this idea that we are for the people, by the people, for the community, by the community, this idea that like we are doing things that is not just in our self interest, but in everyone's self interests. And I think it's a pretty beautiful story, to say the least.
- [13:54]
A
It's interesting what you describe as sort of the early promise of all of these projects that just failed to deliver. I mean, I remember when I was initially excited about NFTs. It was before PfP, before that cycle, when it was the boring things, you know, like music royalties or transferring your mortgage or your deed to other people without a third party in between. The royalty side was always the most interesting to me, coming from, you know, a DJ background and getting screwed repeatedly in the music industry and never getting paid for my work and all those things which I'm sure you somewhat, you know, experienced in both music and retail. Why do you think that this failed with so many other projects? Was it just ignorance by founders who thought they could do something and didn't have the competence to do it? Was it the bear market and a lack of prep because things just went down and they didn't have enough money? Was it predatory? I mean, very few of these seem to have emerged. I mean, even apes were so hyped in the last cycle. But I don't really hear about them doing much these days. I'm sure they are. It just might not be on my radar.
- [15:03]
B
Yeah, I think there's the biggest Achilles heel that I've identified with projects who have failed or have once succeeded and are now failing is this inability to grasp the business that I think we're in. And what I mean by that is Web three to me is less of a technology and more of a cadence. And so this might not technically be true by definition, but from a builder's perspective or an entrepreneur perspective, I think it very much is the case. And so what I mean by that is you can sell digital products on blockchain rails and still be a Web2 business. Right? And a Web2 business is really predicated on one person's decision making or a small group of people's decision making. And this idea that you are going to build the business the way that you want to build the business and everyone else is going to fall in line because they are nothing but customers. And they can either choose to buy or they can choose to sell, and that is their prerogative. And unfortunately, I think that's a recipe for disaster. And you have to have empathy and respect for the people that are buying your collectibles or your tokens, and you have to understand that they are making a financial commitment and bet on you, your team, your community and your product and your brand. And so I think very much the ethos in which we build is really the backbone for our success. Which ultimately in my mind, I am nothing but the muscle to the hive mind that is this community. Right. And it's my job to be the custodian of good ideas and to filter the good ideas and to execute on the good ideas and also create my own good ideas. But this is very much a company that is ran by the people. If the people tomorrow came to me and said, hey Luca, we want you out of this business and it was a majority that wanted me out of pudgy Penguins, I would leave. Right. Regardless of how many hundreds of millions of dollars I would give up to do it. Because that's the only way that the business is going to succeed. Right. The business succeeds by the buy in of the people that want this to succeed and our success. Up until this point though, I do take some responsibility and I think the team should take some responsibility. It's majority because the community has supported these initiatives and driven these initiatives forward. And if I didn't get their buy in, then we wouldn't be here today. So to sum it up shortly, to sum it up, I think a lot of these builders who are failing are treating this business like a web2business. And I really encourage everyone. If you want to find success in crypto, you have to take care of the people and you have to be a servant of the people. And any other mindset I think ultimately leads to failure at some point. Now it might not lead to failure immediately, but at some point you will crash and burn if you take any other approach. And that I think is the difference between building and Web two and Web three. It's not necessarily the technology in which we're building on top of, it's the cadence in which we're building.
- [17:51]
A
Or the founder will get really rich and then the project will crash and burn and everybody else will suffer. Right. Which I think was probably more the story of those things that quote, unquote failed. I guess failure depends on who it failed for. Right. And that's, that's not unique to NFTs. That's I think unique to effectively everything in crypto. Right. Just kind of misaligned incentives.
- [18:09]
B
Yeah. And you also have to be doing this for more than money. You know, the beauty with me is like I'm doing this to beat everyone. That might not be the best fuel. Right. I probably happen to a pure fuel eventually, but I'm Very much here striving for greatness, as corny as that might sound. I just want to be the biggest and the best. When this is all said and done, I want people to put me on the Mount Rushmore of crypto. And I want to be able to say that anybody who didn't believe, anybody who counted us out, anyone who wished for our downfall, ultimately rued the day that they made those wishes or that they thought those thoughts. So I'm very much here to win and I think money is less of a motivating factor for our team than it is for most.
- [18:50]
A
I'm literally looking right now at just NFTS and sort of the top list. You guys are at a floor of 27, which I find interesting because I remember when you lost launched Penguin, all I saw was people talking about how the price crashed. Right. People bought the. They bought a Penguin so they could get the airdrop and they sell it off tails all this time. But it seems like you're actually trading higher than you were now or back to where you were before that, which is what, not even a month ago.
- [19:14]
B
Yep.
- [19:14]
A
And as I scroll here, you know your volume 24 hour volume 833.64. I can't even find anyone else that's above 100. Right. Except for. Yeah, I mean little pudgies are like in second. So I mean, when you say buy a Texas mile, you're also the only thing that people seem to be interested in trading. Yeah. So why, I mean, we keep saying it, but like, you know, it's amazing that you guys are this unicorn. But wouldn't you say that we also need others to sort of rise from the ashes like a Phoenix year for this to eventually be a real thing again? Or is it just that there's going to be a few that are viewed as this beautiful collectible digital art, the X copies and peoples of the world.
- [19:58]
B
Right.
- [19:59]
A
And then you're going to have this one collection that rised above the rest and we're going to have to reinvent completely going into another cycle.
- [20:05]
B
I think we're in a moment where leaders lead and power law is very much in effect. But you're very much right in the sense that we need other people to come and step up to the plate. And I think some are. I actually think the responsibility for NFTs coming back the way that people want them to come back actually falls on the shoulders of the marketplaces. The problem and the excitement around NFTs was really those initial mints and those things were so Much more fun than maybe scanning the trenches for a low cap ticker that had a 99.9% chance of failure. Minting was really the backbone of the excitement around NFTs. And the problem with minting today is royalties are non existent. And because royalties are non existent, minting an NFT is really a long term liability unless you have the cojones to incur that long term liability from a.
- [20:52]
A
Regulatory standpoint or just from a sheer loss of money.
- [20:55]
B
A long term liability in the sense that you can go launch a pump fund shitter and be done with it in 24 hours and make your money and you can go make the same money on an NFT mint and then you have to be caught holding the bag for five years. If not, you're a rug puller and a scammer. Right? And so there's a different emotional connection and thing that kind of invades the brain versus like a shitter and an nft. And it's really fascinating to say the least. And so you either are going to be inspired by what we're doing at Pudgy Penguins and you believe you have the cojones to incur that long term liability and create something, you know, that, that, that can stand the test of time and deal with the, the tides of not having something in terms of some sort of passive stream to cover your burn or, or you're just not going to do it and launch a pump fund shitter. And most are going into the pump fund trenches and launching a shitter instead. And so I think that's what you're kind of seeing in the delineation now. Now mind you, I thought the 5 to 10% royalties were egregious. I actually think the number is 1%. I think anyone who's serious about this can survive off a 1% royalty if they know how to build the business. And I think that is the number that ultimately brings NFTs back. Yet for some reason OpenSea and Blur and none of the other, you know, NFT marketplaces are really stepping up to the plate and understanding that NFTs are a creator business and they are the backbones of this new generation of a creator economy. And for some reason they are, you know, prioritizing maybe their fees over that of, of the creators, not understanding the business that they're actually in. But like I've been for the last couple of years, I think the exchange that makes this leap of faith is ultimately going to be responsible for bringing the entire sector back. And I think it's going to open up the floodgates to NFTs in a way that I think trumps what we saw in 2021. But right now you're just seeing power law, distribution, right? Pudgy penguins are the most exciting thing in NFTs. I would argue they're one of the most exciting things going on in tokens today. And we are just getting started. The best is yet to be seen and I think people know that. So power laws in effect. But I very much hope that NFTs do come back as an entire sector because I believe there's very few things that are as fun as NFTs in the space. And it really brings something out into the crypto culture that I think very few things can. But it's going to require a unified effort. And if I'm being frank, I know we're doing our part to try to bring them back and I think we're uplifting the entire market with us. But it's going to take in a marketplace with some vision and some cojones to go heads up and say, hey, these are creator economies, this is a creator business model and we're going to find some sort of fair minimum royalty that's going to excite people to start minting and creating projects again that ultimately doesn't sign them up for a long term liability that is nothing short of painful.
- [23:42]
A
Hey, like the atlas of the, you know, NFT of the PFP sector, you're carrying the entire thing on your back, right? People better hope that you don't shrug. There's so much to unpack from what you just said, because in most facets of crypto, I think outside of NFTs, we've seen it over and over again. Anyone who's been here for multiple cycles, right, you know that you kind of get the first iteration of something, people get really excited about it. It doesn't go as parabolic as you would expect. And then three or four years later in the next cycle, you start to see it really start to bubble and develop and mature. Right? But it sounds like through this entire bear market in the NFT space, the projects largely and the exchanges chose not to innovate or make the changes that would be necessary for it to really bubble and catch a flame again in the next cycle. Right? I mean, and that to me is a bit sad. The way that you just described it. You would have thought that if it's as obvious as you just stated it, that one of these exchanges or a new exchange would have been built during that two or Three year dark period when builders love to work, when everybody isn't concerned about price and FOMO and, you know, getting rich. It sounds like that didn't really happen.
- [24:56]
B
Yeah, I think it's. I think it's a really, a lack of vision. It's a game of follow the leader. I found that very few people in crypto, specifically founders, have vision. A lot of people seem to follow the leader and play that game. And when the leaders in the marketplace went to zero, they thought that that was the competitive edge. And to be frank, like, it's not just as easy as making creator royalties 1%. It's messaging, it's positioning, it's marketing that narrative right to the rest of the world and the rest of the space that only a couple of these guys can. I would think that Magic Eden OpenSea are probably the only two that have the pockets to actually go and tell that story. But it's the story that's going to bring back the entire sector and the person. Just like pudgy penguins, when you bring back entire sectors or when you lead the charge, it pays many, many dividends. So I really encourage and hope that the people at OpenC and Magic Eden are listening to me today. I've been preaching this message for the last couple of years. Hopefully our success continues to add more weight to my word, as I hope people are starting to believe that I actually know what I'm talking about and understand that this is the sacrifice that's needed to bring the entire sector back and whoever does it is going to win in a really big way.
- [26:07]
A
You mentioned pump fund shitters, which is a rare topic on certainly my longer form podcast certainly comes around sometimes on the daily shows, but when you talk about it, it confirms one of my suspicions, which is that because 99% of the founders were just looking to make money, they're not going to do what you said and launch an NFT project and give it a long term vision and take the reputational risk of being seen as dumpers when they can literally just openly dump something. They launch 24 hours and for some reason that's totally fine if it's a meme coin. So I guess the question is, have meme coins replaced NFTs or are they the NFTs of this cycle in that you get a community really excited and it's over and they move on to the next thing?
- [26:51]
B
I think meme coins have a PMF and a ability to garner a tranche of liquidity that NFTs will never be able to capture. However, I think NFTs are a better form of distribution and a better form of tribalism and a better form of flexing than I think any meme coin can be. I actually believe the pairing of the two is the deadliest combo. That is why Pengu and Pudgy Penguins now exist in tandem, because on one side of the spectrum, Pudgy Penguins was too illiquid for somebody to put $20 million on our floor and is too priced out of retail. The average retail buyer can't buy $100,000. Pudgy Penguin and Pengu now opens up the floodgates to these two users that I think are really important to becoming the face and the mascot of crypto. And so I actually think the combination of the two right now that Pengu exists now fulfilling and speaking to this audience we couldn't speak to, while you also have 10,000 people on the Twitterverse, all giga chads in their own industry, in their own field, championing the Pudgy Penguin to the world now creates this form in this flywheel that I think any other memetic style coin or culture coin or community coin that does not have that pairing simply won't beat. Right? And so I'm a firm believer that actually NFTs are really the best way to kind of start building a community and a culture. And I think they're the best place to kind of incubate a crypto, a protocol or brand as the starting point. And as you grow the company, you kind of evolve into what you think your envision is going to be. Meaning, if I was a defi founder today, or an L1 or an L2 founder today, my strategy, based on what I'm seeing over at Pudgy Penguins, would be start an NFT project first, Build that culture, sell that vision, align people for the first six to 12 months, make product progress on that vision, and then launch the token and then launch the product. And do this thoughtfully and do this with the community in mind, and don't do this poorly in terms of, you know, skimping or getting greedy at the finish line. Take care of them every step of the way. And my mantra here has been simple. If you take care of the community, they will take care of you. And my number one objective is to get them rich because I'm a businessman and I'm here to make money, but I'm not going to get rich if they don't get rich. And so I'll make them rich first, then they'll reciprocate that, and then I encourage all the builders that are thinking of this through a short term mindset. I was very much an Internet hustler for many, many years. Somebody who was an opportunist who looked at things through a short, through a short sighted lens. And I encourage you to look at it through a different lens. At the end of the day, you know, pudgy penguins throughout this journey could have made $20 million or $50 million or even $100 million doing things that ultimately would have put us in a position that would have prevented us from being here today, but we didn't. And so today our ecosystem is worth $5 billion. And I think over the course of the coming months, I think it will be worth 20 or 30 or 40 billion dollars. And that's the difference between playing the long game. 100 grand is not going to change your life. A million dollars is not going to change your life. But being at the helm of a, you know, 11, 12 figure ecosystem definitely can. So I just encourage people to dream bigger, want more, and think about the real potential in crypto. Because this is the one industry where I've seen so many people who didn't deserve, you know, to make it, have made it, because they just put the time and the energy and the effort and thought with a long term mindset. So, you know, this is, this is truly the best industry on earth. I believe that. And if you're building in here, I really encourage people to take the long, the long term mindset.
- [30:39]
A
So you effectively launched the token for people who are priced out, that wanted to passionately be a part of the community. Yep. And so in this, well, I guess the regulatory environment is changing, but in the environment that you did it. Let me try to think how to frame this. If it was full Gensler at the helm, I know you had the plans for a long time, would you have launched the token still? Or did you wait until you saw that the regulatory environment might be changing before launching a token? Because obviously doing that as a US citizen carries some risk.
- [31:07]
B
Yeah, I think we are not the issuers of the token. There's definitely some partners and some semantics involved which we won't get into. But the administration definitely has made me feel comfortable that the current government is not going to attack people who are not stealing or hurting people. Right. And so that's really like my gauge is, you know, at the end of the day, we're here to make a positive impact on the industry. We're here to push crypto forward. We're here to break barriers and push boundaries. And if we continue to do that and not get into any funny business, which we have no interest in doing, you know, that. That, I think, makes me feel comfortable to go and launch these things. I think prior to this new administration, I felt like they weren't going after people who were, you know, just stealing and causing harm. They were going after people who were trying to make a difference. And so I don't think my story would be as compelling to the old administration as it is the new one. If for some reason there was an inquiry or something negative that happened, I ultimately think we get on the other side of it because the facts remain the same. You know, we're helping people, we're giving to the space. We're pushing the barriers of crypto in America. We are representing crypto in America better than, I think, almost anyone else. And I think what the new administration wants is innovation and progress. And it wants to lead and it wants to win, and the igloo is winning, and it's winning on behalf of the Western world. So I think we'll continue to do that. And the new administration definitely made us feel comfortable in the sense that as long as we're not committing a major crime or hurting people, that this is something that we now are able to participate in. And this is why I think we put everything together or helped be a part of this new initiative.
- [33:04]
A
I want to talk more about the idea that the founder of an L1 would launch an NFT project first. I think that there's a disconnect there, at least with the current state of NFTs and the current state of L1s1 sort of is lighthearted, right? I mean, anyone who launches NFT project, you're talking about fun and memes and memetic value and obviously flexing and all those things. Most of the people launching layer ones, from what I've seen, are at least attempting to pretend, whether they are or not, to be very serious people we're launching so that we can get securitized to do treasuries from blackrock on our chain, or we're looking for some level of institutional adoption. So how can those two things sort of square, you know, how can you launch an NFT project to build community, but then launch seemingly an L1 that you know is going to be adopted by institutions? I don't see very many people trying to build an L1 that's for community, I guess, is the best way to sort of say that, yeah, you can.
- [34:04]
B
If you're one of those founders that Maybe thinks through that framing that you just presented. I would argue that you can either win or you can be a serious person, but I don't think they're necessarily. I don't think you can be both at the same time. So, you know, to be frank, like, crypto and crypto culture is not necessarily, you know, maybe there's a sub. Subsection that is very serious. And I think being serious is important. But I think in a world of L1s and L2s and L3s, you have to be also serious and understanding that that tech is all being commoditized and very few people will have any moat in the near future. And in reality, your moat is your user base, your moat is your brand, your moat is your community, and your moat is your culture. Right? And you're even seeing this in AI. Maybe there's an AI that comes out and is so much better than the next. But we saw that with ChatGPT and it took about six months for everything to catch up. And so what does CHAT GBT have that's different than Claude? It has the interface, it has the users, it has the brand recognition, and that is its moat. And if it loses that, then it's nothing but another LLM. And I think chains are in the same in. In the same spot. Like, what makes your perpetual protocol better than the next or your paralyzed EVM better than, you know, this svm. You know, ultimately these things do matter. And I don't want to brush these things under the rug because I definitely respect a lot of these guys and gals that are building these products, because I am definitely the person that has no clue and how to build.
- [35:37]
A
Me both, buddy, you and me both.
- [35:39]
B
So, so tons of respect for them. But you have to look at your reality and understand that blockchains are very much breaking into the same. The same way that web2tech kind of broke into, which is like you had all these, like, new novel things in 2000, 2001, and once you got to 2010, it really became a game of who has the most users and who has the moat. A really interesting analogy that I bring up whenever somebody asks this question is around a letter that Mark Zuckerberg wrote to c CFO when he was buying Instagram. The message was simple. He said, you know, we can easily build Instagram. It'll take us a couple of months. But I think by the time that we actually build our Instagram competitor, Instagram will have owned that user behavior. It will have a community that can't be beat. And it will have a moat that we just won't be able to penetrate. And that moat wasn't a technological moat. It was a user and user behavior and branding moat. And this is ultimately where these things, you know, start and compete. You could go build an Instagram fork pretty easily today with a couple mil, you know, 10, 20, $30 million and, and a good team of engineers. But it's the Instagram brand and the familiarity and the rapport and the reputation and the community that ultimately has created that moat. Blockchains are now in the same game. Your technical innovation that was maybe more prevalent five years ago is less prevalent today. And that competitive edge will, Will. Will steadily trend to zero over the course of the next couple of years. So I would actually say the contrary. PFPs and NFTs are the best form of digital tribalism that we have ever seen. It's the best mechanism to build community and to get people to identify and to, and to proliferate and to champion whatever you're representing. And it's the best starting point for any founder, because if you can't pull off an NFT PfP, the chances of you being able to win long term with a chain or a protocol that has a lot of other variables that make it extremely difficult, I don't think you will win. Now, can you win short term and can you catch a tailwind in a cycle? Sure. But you have to ask yourself, what are you here for? Are you here to make a couple million bucks or 10 or 20 million bucks? Or are you here to make a difference? Are you here to find a purpose? Are you here to win? And are you here to make hundreds of millions of dollars? And I think this is the difference between founder mindset and where they want to accomplish and what they want to accomplish. And I think the difference is ultimately going to be who has the best community, who has the best culture, and who has that mode of users.
- [38:10]
A
So then if you're the only ones who kind of survived, okay, we can say that five or six projects survived. I'm literally like, I haven't really taken a look at it, and I happen to be looking at it as you talk, just how completely wrecked these NFT projects are. Everything's down 99.999% right out of a few. So what's next? Because I don't think anybody's going to be able to copy your roadmap. Right? I mean, you guys did it. It doesn't seem like anybody's particularly interested in doing it. I haven't really heard about many mintings and launches and I think we would both argue that if we believe in cycles that this would be the time we would need to see those starting to pop off in the next six months, I would say, right by summer. Do you hear that bubbling? Do you think that that's going to happen or is there some new thing with NFTs that we're going to see kind of catch a bid in the coming months?
- [39:02]
B
I think NFT is a new ecosystem, so obviously we have abstract. I think the abstract NFT ecosystem might be the thing that brings back NFTs because every good NFT project that's released in the last year was going to release is releasing on abstract. So I'm really excited about that. I kind of knew that that would happen. Figuring We've been leading NFTs for so long that I would only assume that, you know, people launching or minting NFTs would do it on our chain. So that's pretty exciting and I'm, and I'm excited to see ultimately what that does for, for the space in terms of what we have in store at Pudgy. I think we're just going to keep putting full throttle on this thing and I believe you're going to see the best of us these next six months. I think you're going to see more from Pudgy penguins in the next six months than you've had, than you have in the last three years. And I think, you know, if you thought Walmart was special, I think these next few things that you will see will be even more special and even more groundbreaking for the entire industry. So, you know, I think that's kind of our focus where I think the majority of the NFT projects are today. I know there's a couple projects still doing well. Have to give credit to Azukis and Doodles. They've been really putting on and, and trying to steer the ship in the right way over the last, you know, six to 12 months. And I think they've made right all of their wrongs that they maybe have, you know, maybe happened in the past. If you're not familiar familiar, it's all water under the bridge because I think they're doing an amazing job and hopefully they have successful launches and they do some amazing things. And I think it's up for the, the, I call it the Pumped P U M P D which is like the thing of NFTs. It's up for the Pumped to, to keep leading the charge and ultimately for one of these marketplaces to fall in line and understand the business that they're in. I think they're in a different business than, than what I think they're in and, and, and hopefully that one of them has that revelation sooner rather than later and they come up to the plate and they do what's good for the entire sector and ultimately their bottom line, which is bringing NFTs back. So we will see. But I do think you will see this emergence of NFT projects, almost like you kind of seeing it with Mad Lads, right? Mad Lads is actually a perfect example of this pudgy kind of formed into this. It wasn't the initial thesis, but I think Mad Lads was kind of created for this reason. I think you're going to see more Mad Lads style NFT projects, which I think is great. I think this is the way to do it where you kind of start off with an NFT first and then you start building these suite of products kind of around it, but you have this nucleus of users that kind of go and test out and find PMF for these products as you build it. So I'm excited to see a resurgence and an emergence of what I think this new kind of model is going to be around NFTs. And I also think that there's going to be a lot of memetic coins that are going to come to the realization that like, hey, maybe these things being passive memes and copy pastas that we do on the timeline, maybe that's doing this category a disservice. Maybe we should follow the lead of penguin and pudgy penguins and do what these guys are doing and actually try to build a cultural phenomenon rather than just trying to stay a CT echo chamber stagnant meme. And hopefully that will create these meme teams to kind of go in and try to build these other verticals through these NFT projects, which I think would be nothing but a net positive.
- [42:13]
A
So some of the few memes that make it past 24 hours and actually gain community and exist for a little while could then make NFTs their next step. So sort of as you described, launch an NFT project, gain a community, then launch on. You could have people that launch complete shitters that catch some sort of like interest in a community that's big enough to then launch an NFT project to support it. That'd be interesting to see. I'm surprised actually that we haven't seen that yet. I want to quickly talk about abstract. You mentioned it in passing. Probably most people don't know that's the Ethereum layer two that you guys have launched. We talked about it sort of being a commodity. I totally agree. In previous cycles, it was like the panic was that there wasn't enough block space. How are we going to do all the things we need to do now? We have endless chains, block space and nobody to use them. Right. So now we need the actual applications and adoption for it to happen. So why launch your own layer two knowing that there's all this block space and you could jump over to Solana, which is fast and cheap, or what's the advantage of doing it yourself?
- [43:15]
B
Yeah, if we didn't have Abstract, I'd probably full port the whole thing over on Solana, because I think that ecosystem is just nothing short of phenomenal. From the founders, the foundation, to the community, to the funds that actually support that ecosystem. I mean, really, it is the North Star for every single chain. Just want to give them their flowers before we move forward because, I mean, it inspires me as someone who's now contributing to a blockchain to really see how it's done right versus, you know, how I think it's been done wrong for so many years. I think the fundamental problem with blockchains today has actually been the mindset and how these people are looking at these things. I think for us, again, I think we have the best community in crypto and so I think we have the ultimate edge in terms of, you know, building any protocol, whether it's a licensing protocol or a blockchain. I think we just bring the meat to the bone and we have a lot of products that are being powered by L2S today that I really wanted to consolidate was actually initially how we kind of came to this thought. Now where I think this thought has gone after really taking a deep dive into why I think ecosystems aren't succeeding is I think there's a fundamental approach versus general purpose and purpose built, which is everyone's trying to chase after Ethereum and Solana with these general purpose blockchains with really no core focus outside of powering the next age of Internet economies. You know, if you actually digest what it is to power the next age of Internet economies, the actual operational excellence and resources needed to do that at a high level and to actually execute that vision is really unparalleled. You need some of the best entrepreneurs and builders to actually pull that off. You either have to be a first mover or it has to be that. And so I think a lot of the successful general purpose chains that we've Seen today really were first movers and now everyone kind of clamor that is clamoring for this block space is really just following the wrong leader. And so I think the future of chains is actually going to be around this purpose built mindset which is like, hey, go and do one thing really well. And as you do that thing really well, you can expand and upsell into new and different categories. And so our, our thought process around abstract is we really wanted to build the consumer chain. And what does that mean to me, at least in the first couple of years? I think consumer and crypto today is going to grow around discretionary spending and fun. And so when I am and am thinking about the future of abstract, I'm thinking about what does it look like to build the most fun and seamless abstracted experience for users to ultimately come in and participate, you know, on chain in a way that is seamless and easy for them to understand. And I really want to capture the moat around discretionary spending and fun. And those are the two things that I want to do over the next couple of years better than anyone else. And I want you to come and participate in abstract, not to participate in the next great defi innovation, but because you want to go have fun on the Internet. And I think this type of really focused approach around fun is something that I know I can sell both to web two users and Web three users that I ultimately think is going to find PMF fairly quickly. And so honing in on fun as we garner an ecosystem of 5, 10, 15 million users who are now having fun within our ecosystem, I then will upsell them on a savings account or maybe, you know, some sort of yield earning defi application and then I will expand a general purpose. But I think that's kind of what we're going to bring to the space is we're going to bring a really thoughtful, curated and laser focused approach to how we're building a chain. We're going to lean into our strengths, which is fun and virality. The pudgy ecosystem is already fun. We've already proven our ability to make things go viral. And then ultimately as we accomplish those two things, we're going to scale up and, and become general purpose and, and kind of power it that way. But it just made sense for us to own our own ecosystem. It didn't make sense for us to go bring our value to, to another ecosystem figuring. I thought we brought all of the value and figuring chains are going to be commoditized here sooner rather than later. We really wanted to innovate on the user experience and the cadence and how we're building these things in the future.
- [47:28]
A
I mean, you talk about discretionary spending. I had a conversation very recently with the ex CEO of FanDuel who's building a gambling platform and I was shocked at how big call it discretionary spending gambling was in the crypto space and how nobody views that as the killer app for crypto yet. But he broke down the numbers of stake and it was like billions and billions and billions of dollars a year in gross gaming revenue. I had no idea it was so big. I'm not saying that what you're doing is gambling, but it seems like honing in on that discretionary income is definitely the key to capturing the zeitgeist in crypto. It just seems that speculation and fun are the things that everybody is looking for here, or at least new entrants. So if you can capture that, I can see why that would be a reason to launch an L2 and to pursue those other kind of ventures. But at the end of the day, isn't it just about having the best UX UI then? Because everybody's going to try to capture that. So you just have to have the one that's so obvious to the person who wants to gamble or speculate or have fun or do these things versus any other.
- [48:36]
B
You need the best experience, which I think is predicated around abstracting, abstracting everything to the best of your ability. Because it's very much the back. Blockchain is very much the back end, not the front end. It's going to be the experiences that are built on top of it. So the applications and the builders, right? So you have user experience, you have the builders, which is the applications, which is the fun, right? Like I'm not creating every app on Abstract. We'll have a couple that we're making, but that's about it. And then the third one would, I think, really be predicated around this idea that you have to have a community that is ready to die and ride for you no matter what. And so, you know, UX UI and interface, which I think a majority of the technological innovation left for blockchains, is really going to come there and then this idea that you're going to have a community that's going to die for you and create some sort of loyalty, I think is going to be important.
- [49:33]
A
Do you own Bitcoin?
- [49:34]
B
Yeah, of course.
- [49:36]
A
I'm just curious. Always. It's interesting because when I came into this space in 2016, 17, it was all about bitcoin and then you had to trade your bitcoin for all coins. There was no USDT market. There were no really USD markets. But now I talk to so many people that seem to have missed the bitcoin step entirely.
- [49:52]
B
Yeah, not me.
- [49:54]
A
When did you get into Bitcoin?
- [49:57]
B
2017.
- [49:59]
A
Roughly the same time as me. 2016. So was that your first introduction to this space then?
- [50:05]
B
Yeah, I was a litecoin lit in there. I called it my version of a litecoin millionaire. Thank God I sold that position I've been holding.
- [50:12]
A
Did you sell it when Charlie Lee did?
- [50:15]
B
Right, when Charlie Lee did actually the chicken, I was a chickun bull. And then when he sold it, I was like, wow, I don't think we ever hit all time highs again. Right? It was like 420. He did.
- [50:23]
A
No, he sold literally the deadest top the market publicly on his own project. Absolutely insane. So do you ever get shit from bitcoiners for being, you know, like a shitcoiner for NFTs or for any of these things? Do you like suffer any of the tribalism that often comes with this space?
- [50:39]
B
You know, the fascinating part about Pudgy Penguins is I think everyone from every chain and every coin understands what we're doing here. Like think about what Pudgy Pudgy Penguins is reinventing the taboo and the intimidating nature of this industry. It is the only thing you can sit down at the dinner table with your family and talk about and have everyone in the family really engage in understanding, you know, what's going on here in a way that is relatable and digestible. And so I think the Pudgy Penguin story supersedes this maximalism. You're kind of seeing this with Solana and Ethereum. Not that many people were upset that we were moving from eth to soul and soul welcomed us with open arms. And you would think like maybe the NFTs would be affected by it. But like both the Token and the NFT are doing incredibly well. And it's really, I think, one of the great unifiers that crypto has ever seen. And kind of this one thing that I think everyone from every chain or ecosystem kind of has this positive social consensus around the penguin and Pengu, which ultimately makes me so confident in terms of where we're going in the future, because you've just never really seen something like this. And, and I think people understand the role that it needs to play. Like if crypto is really the future, kids need to start getting involved. Right? Like there's no better way to get a kid involved with crypto as a first entry point than pudgy penguins. Right. And I think the woman needs to get involved. And I would probably say the same, like, is there really that many things out there that speak to women more than a cute pudgy penguin and everything that we've got going for us? And so it's just one of those universal things that I just think has a ton of appeal. And I think everyone's kind of rooting for it in some shape, way or form. It's not really taking market share away from any singular, you know, entity or project. It's kind of in its own lane, its own open ocean, doing its own thing, but it's doing it for the betterment of the entire industry. And I think most people realize that. So I actually haven't gotten the pushback that you might think I would have gotten. Maybe there's an anomaly here or there, but everybody, I think, really understands and is rooting for the success of this thing because they understand that if this is not going to succeed, there's going to be a whole subsegment of things that are not going to succeed that ultimately is going to alienate a huge part of the world that we don't want alienated.
- [52:47]
A
Do you think that we can Pudgy Pill Sailor?
- [52:50]
B
I'm, I'm. I'm doing it as frequently as I can. He's. He's a. He's a. He's not too far away from me, you know, over here in Miami. So I'm going to continue to do my best pudgy pill and Mr. Sailor, and hopefully we can get some of that, uh, you know, microstrategy balance sheet with some penguins.
- [53:07]
A
If not, we just need to buy a publicly traded company and start to make pudgy penguins their treasury asset. Why not?
- [53:13]
B
I heard Ray from 9gag is doing it, so I hope Pengu will be his biggest position alongside me.
- [53:19]
A
Unbelievable, man. Well, Luca, it's really an inspiration. It's incredible to see something sort of emerge from these ashes and do so incredibly well. And I think that you'll continue to lead. My hope is just that others will actually find a way to follow. Right. It really would be a shame if you were the only winner.
- [53:37]
B
Well, we saw it with apes. They. They'll follow and they're so. Hopefully they just don't mess it up along the way. But, Scott, I've been a huge fan of the podcast. Thank you for having me on. And I hope you have a great rest of your week.
- [53:51]
A
You, too, man. And thank you. I'm glad we got to finally do this. We've talked about it for a while. So great to have you on, man. We'll speak soon.
- [53:57]
B
Thanks, boss.
- [53:59]
A
Let's do.