Decentralizing Possibilities: Exploring Blockchain's Role in IP Expansion | KBW2023

[Applause] thank you for the introduction Luca good to have you here today good to meet you in person likewise um since it's just the two of us feel free to also make it conversational if there's stuff you want to put out there or lines of conversation that you want to start Feel Free as well I'm ready to go all right so to get us kicked off how are you thinking about nfts today I think we've seen several metas over the last year and a half two years where do you think it's moving where do you think we are right now yeah I think it's uh kind of purging all of the nonsense and I think we're uh at a new phase for the space I think that phase is going to be built around uh sustainable models that meet consumers where they are uh not Traders where they are and when you say meet consumers where they are do you mean that as in people who aren't necessarily in the crypto Arena right now I think it's anybody I think it's anybody who is just a a a consumer is a broad term so a consumer can be somebody who knows crypto a consumer can be somebody who doesn't but I think right now the the mechanic and the value proposition was always catered to a Trader and a Trader is not necessarily a consumer I think looking at the token systematically like a token and not like an actual value proposition outside of it being just a low Supply token that can go up in price quickly and so so as time will go on further I think the the space is going to evolve into a more consumer oriented place and that's just meeting them where they love is that content is that product is that story is that Community we don't really know yet I have my own thesis I think it's all of the above and but we've seen this you know hundreds of times before plenty of brands have already built this base and this collector base and this fandom and I I think nfts don't need to reinvent the wheel they just need to leverage the technology that the stuff is built upon uh to build something that I think moves quicker has better value propositions and ultimately it's just a better product and so how do you take a a a collectible Market how do you take a fandom Market how do you take all of these markets that are already existing and already thriving and uh how do you build on top of that so I think you hit on something really interesting there which is sort of moving away from this thought process of nfts as fungible tokens in the same way way we think of the tokens that we trade on the day to-day and moving back to it from appreciation of those few things that you listed but if I look back I feel like crypto punks kind of were that appreciation of this community of this art of this aesthetic and then we moved away from that and what do you think was the cause that there was that move to making these more just purely tradable assets uh I I think it was part of the culture part of uh you know when you look at crypto and you look at nfts and you look at one of their main backbones of adoption I think fomos played a huge part in that and narratives I think have done you know really well in convincing people to spend their capital in certain directions in this situation I think there needs to be a new narrative uh one that isn't built off of profit taking and yielding higher returns though you understand the dynamic of that space and why that is important and that's not not important but these things I think are greater than that I think certain projects tra blazed that narrative uh and a lot of people saw huge migrations of wealth and stories and testimonials that I think everybody dreams of when they're not in the place they want to be financially and I think that leads you know certain behavioral patterns but at the end of the day the nft is a better collectible looking at it uh in any greater or any different capacity than that I think uh is is trying to cater to a value proposition and and to an objective that I don't think is is pure I think ultimately people are optimizing for either the founders are optimizing for their own wealth or communities are optimizing for theirs and again there's something okay about that I think capitalism breeds Innovation but at certain point the value proposition has to be deeper and it has to be better and so this transition will happen at the end of the day if you look at Collectibles it's a I think a $426 billion market trading Collectibles today and buying buying and selling Collectibles today uh has a lot of friction uh spoofing issues inauthenticity issues shipping issues insurance issues there's a space issues storage issues there's a plethora of issues with with physically collecting uh and everybody loves to physically collect and it's a it's a market that's only going to grow bigger as every year goes by and you look at nfts and you look at the value proposition there and if you can build the right story you can build the right content you build the right products these are actually better collect CES and so how do you optimize and create a better collectible for the end consumer nfts have already done that we don't know if nfts and gaming are going to work we don't know if nfts and software are actually going to work we don't know there's a lot of things that and narratives that are around nfts we don't know if those are going to work yet what we do know unequivocally today is for the reasons I just explained they're better Collectibles and because they're better Collectibles that is the value proposition that I'm optimizing for is how do I create you know a pudgy penguin that has these 8,000 888 nfts that Lev on the blockchain they're my first additions and how do I yield value to those first additions through the story and the brand that we build to me it's the only sustainable model that I can see today that I think has a long-term path for Success sorry can I ask you to take off your badge it keeps flashing light into my eyes over and over like bling blinded um that makes a ton of sense and one thing going specifically to the pudgy penguin example and like this new energy and revitalization that you've brought into it what was sort of the impetus for you to say hey I want to double down on nfts this is what I care about is it because you had a trend or an affinity to Collectibles growing up or was it something else yeah I mean just I understand what it is to collect I've been collecting for many years Fine Art watches Collectibles figures uh it's it's just a market that makes sense and so from my perspective I think ultimately I saw the value in nfts but I you know how I got into this I think was really out of frustration I thought everybody was claiming that they were building a brand and that they were executing and that they were doing things well and then you really looked at the landscape and actually understood what they were doing and they weren't doing much and so out of frustration I said well I'm going to buy this project and show you guys how it's done and I think we've done a really amazing job in proving that thesis ultimately how we came down to where I think the value proposition lies in nfts is we bought pudgy Penguins for $2.5 million about 18 months ago and when assessing the situation I have one goal and that goal is to be the number one nft project in the world and I know unequivocally we will be that and when I peel back the layers and I look at what that means and how I'm going to achieve that how am I going to get there and how am I going to do it in a way that's not going to blow up in my face this was the conclusion that I came to this was the assessment that I knew it might take time it might not be the situation that brings me to number one in the next 6 months but I know equivocally it's the place that's going to get us there because it's just a better value proposition leveraging what has already worked for many many years or honestly hundreds of years at this point I mean Collectibles is not a a foreign a foreign thing and so this is kind of how we thought about it how we kind of came into this thesis and this Mission and why pudgy Penguins I mean there were a lot of distressed nft projects a lot of different things that you could have come over and taken over what was the call to these cute little penguins yeah I think if you just understand but you know there's we we see it now in the bare Market but there's communities forming and and cultures forming if you've been around for nfts and you've seen nfts for a while now you know that paji Penguins is Allah in a place that I think very few projects can ever get to just out of its provenance and its Cadence it was one of the great projects that kicked off the 2021 nft Bull Run I mean if you remember it was all over CNBC all of the news stations it was the only nft project to be printed in the New York Times and this was before you know the headlines were around board apes or even Crypt punks and sure they might have been you know in the in the alleys or through the grape Vines but I think one of the first mainstream projects to ever hit the the shelves as you would call it in the space was a pudgy penguin and that created a community and a culture that very few situations can lead you to acquire and purchase and fundamentally I think the IP is special I I made a tweet about this I put it in my drafts but maybe you guys will see it sometime soon there's you can copy every tactic that we can do we do you can cop copy our social strategy our product strategy you can spew the same vision that I'm spewing but at the end of the day our character is just better I had some really important meetings before I came to Korea and Japan and everybody that we showed the pudgy penguin to freaked out and they do this thing in Tokyo called Kawaii and they all would just say that when we show them the pudgy penguin and that's our Edge we just have a better character we have a character that makes sense in Asia we have a character that makes sense in Europe we have a character that makes sense in America and if you look at all the other nft projects which ones can you really say that about it's always segmented to a certain culture and I think pudgy Penguins is the most universal IP in the entire nft and web 3 space and I think every data point supports that thesis it's a very confident Vision it's good to hear it's good to hear that people actually care about bringing this beyond the current crypto demographic and the groups that are participating at the moment but going back to the general theme of nfts and the place that we find ourselves now you said that digital Collectibles are just better Collectibles they are representations that people can interact with in a better form than having baseball cards or having little figurines um what was the impetus to then take these digital Collectibles and decide to do a physical representation as you guys have been doing with these little figurines that you have yeah because there's this thing in crypto and it's and it's I think it's one of the Achilles heel with this entire space is it almost is like forcing this contrarian narrative down people's throats and it seems like almost everyone refuses to meet people where they are and the truth is is digital Collectibles are not where we want them to be and you have a responsibility as a project founder to bridge that Gap everybody understands figures and collectibles and plushies and toys everybody understands social media content you spend hours a day on your social medias and why is nobody meeting these consumers where they are because crypto just waits for tides and waits for cycles and waits for fomos to create adoption and I refuse to wait for adoption I will create it and that's the difference between me and I think everybody else in the space and how do these interactions with the figurines and the digital Collectibles work so there's a couple value propositions with our toys so I think our toys are more than just toys for the sake of us being a Korea blockchain week I'll kind of use a narrative that I don't really speak about often uh because it's a little taboo but the toys and the Collectibles are really a trojan horse to getting people onto the blockchain every toy and collectible that we sell comes with a birth certificate and a QR code that leads people to sign up to pudgy world and get their first nfts for no cost so a gasless experience all you got to do is sign up via an email and a password and for a $10 purchase in a toy you can unlock three to four to five wearable nfts that you can go then play around with in our pudgy world and that is just a unique value proposition that hey I buy this toy for $10 I can unlock these nfts at no cost to me and then when you compare that to other toys on the similar shelf it gives us an edge in the traditional business where instead of pushing nfts down people's throats I'm really just leveraging the nft technology as a better value proposition and I think that's important right it's all about value proposition it's all about what you can do for other people not what they can do for you I think a huge part of our success up until this point has been how much we've done in terms of either bringing people into the space or giving them products that they want and ultimately I think the toys are that vehicle so on its face you might look at a pudgy penguin toy and you might think to yourself oh this is a cute toy people like it people enjoy it but if you actually understand the scale of it you know this is not a public number but pudy Penguins is on Pace to do $10 million in toy sales in our first s months in in being around that's $10 million of real Revenue that has been generated through a product that makes people more familiar with our IP that's sustainable that's growable that's forecastable that's projectable and I think that is very unorthodox in a space that is completely dependent either on royalties or Mint or extracting liquidity out of their community at some point you have to ask yourself are you here to give to the space or are you here to take from it and I know which side I'm on SO to go from the digital to the physical pipelines I'd love to hear a little bit about some of the things you guys have learned setting up physical manufacturing some of the things that are sort of important to know when you're interacting in that world yeah this is kind of our bread and butter so this is my experience right we came um multiple you know direct consumer and consumer product Brands now up until this point my last one being probably one of the more successful ones so we have experience here I think ultimately you know I'm not going to sit here on the stage and try to educate people on Logistics and consumer pipelines and consumer Behavior I think you probably find a lot of Google videos that'll do a better job but what I can say is this this is where you have to go if you actually want to win if you actually want to be here 5 years from now if you actually want to grow and be a staple and a pillar in web 3 and in nfts you have to go this route because this imaginary thesis and this imaginary narrative that you're just going to stay a digital product it has never been done before and it will be possible I'm not saying it won't be possible it probably will be the narrative 5 to 10 years from now but what are you going to do until then twiddle your thumbs I don't I refuse to do that I want to I want to bring people into this space I want to get them familiar with the blockchain I want to get them familiar with nfts I want to get them familiar with pudy penguins I want to get them familiar with our product lines and what it is to be in the pudgy ecosystem and I don't want to wait for the cycles and for other people to do all the hard work uh and so I think ultimately if there's anything that I can kind of give you from a product standpoint is just do it and I think anybody can do that right I think there's there's plenty of different products that you can kind of scope out that your community will enjoy and it's about the network effect I made a I made a tweet a couple months ago but how powerful do you think it is to be a holder of a paju penguin and then on your children's birthday or your nieces or nephews birthday or friends and Family's birthday you get them toys or Collectibles or any other experiences in their product Pipeline and you get them to sign up and get their first nfts and you just go through the the funnel that is the pudgy toy funnel there's nothing like it in the space and so that that you can share the joy of of of what you spend your time consuming if you're a web 3 native if you're an nft consumer if you're a web 3 consumer you can then share that experience with people who are not necessarily on the same curve as you and get them familiar instead everybody seems to take the path of hey download a metamask or hey come enjoy this experience but you have to make it easy for people consumer behavior is about removing and abstracting the steps if you understand consumer behavior and product pipelines it's about as little friction as possible as little amount of buttons as little amount of attention curve and explanation and education possible how do you make it easy for people well the first thing that I can do as a pudgy penguin holder or as a pudgy penguin Community member is I can just give you a pudgy penguin plush and all of a sudden I've made it that much more familiar and that much more easier for you to start consuming into our ecosystem and so the space is just so far removed from that right now and I think it's been our biggest Achilles heel but as we've seen these last couple of months there's been blowup after blowup disaster after disaster and now people are waking up now Luca who all of a sudden it didn't really seem too feasible or too viable or everyone would try to abstract this thesis today after the disasters that have transpired over the last three or four months it seems like the most obvious one and it is and unfortunately it had to take a lot of pain and suffering and financial losses for people to get it but that's that's just the space that we're in um ultimately I I believe more more people will migrate towards this direction as I believe it's the only model that I've come up with or that I've thought of uh and and that I think will actually work on a long-term Horizon and so so how do you go from the plushy to getting the people to have nfts on the blockchain do they do you guys have a wallet that you've created or do they get gas how do they figure those yeah custody steps out custody wallet solution so we have a couple announcements that I won't jump ahead of but I mean we've built our own custody solution so all all you need to do is buy a pudgy toy scan the QR code sign up at pudgy World via an email and a password unlock your traits via the QR code the code that was given to you redeem your traits we pay for the gas uh we've been fortunate enough to get grants to to cover for all that stuff and within three minutes of buying a pudgy toy if you follow the instructions clearly you will have your first nft and this is not something that I preach to the public but it very much is a trojan horse it's hey you know nothing about nfts you know nothing about web 3 I understand you think it's a scam I understand you think it's taboo here's a pudgy toy follow the steps and it's so familiar to what they're already doing it's so in line with what Roblox is already doing it's so in line with what fortnite is already doing all you have is this backend layer of ownership right because that's what crypto and blockchain is Right everyone tries to abstract it and or tries to make it the forward- facing narrative in reality blockchain and crypto is the back end it's the technology that powers the stuff it's not the selling point the selling point is accessibility the selling point is ownership right it's not the fact that it was you know built on this blockchain on this layer two or this layer one and so I think eventually the space is slowly but surely going to mature and I believe the nfts are going to be the vehicle that brings it sounds corny but that bring the masses in I think this is the the pretty picture of the digital identity the ownership with like a lot of the layers that crypto and coins have I think this is really going to be the Breakthrough technology and breakthrough narrative to really push this space forward in a tremendous way I'm like unequivocally confident that's going to be the case it's just about who's really building the right levers and the right facets to make that happen and so on my end it's consumer product and content on others it may be you know SASS and and tooling however which narrative you want to do it again I think I have you know I believe in my narrative for my own reasons but I ultimately think the the picture element and the emotional attachment that brings in the community aspect I mean owning an an nft a JPEG and wearing that as your identity is so much more powerful than owning 10,000 of some token and being in some Discord I mean it's it the the levers are two completely different lever I think ultimately it's just how do we how do we create that value proposition to get people excited um I think is really the key are you able to disclose how much gas you've covered for folks yeah it's like uh I think $50,000 right now but uh I think uh last time I checked it was over 880,000 loot boxes opened uh 29 or I think 30 just around 30,000 accounts created so we have about 15% conversion on the sale to the thing so we're working on optimizing that better uh we've just crossing about 250,000 toys sold uh we want to close out obviously toys and quarter four is really the year I want to close out the year with over half a million I think we can do it easily um and so we have a lot of exciting things ahead one thing I wonder about is as a lot of these nft projects do well the core collection tends to go up in price a lot which makes it harder for like these net new people do you think that's going to be through Vehicles like these customizable items and stuff that come with the Plushies that let these other people have the blockchain experience or further collections down the line how do you think about that side of things yeah I think right now we've created what I believe is the best value proposition for nfts at scale at our core we have our first additions which are 888 py Penguins then we have our little putes and our rods and ultimately the one that cost you no money that has no friction and no barrier to entry outside of a $10 physical toy purchase which you'd probably buy anyway uh is really the pudgy World Experience Because the actual pudgy penguin that you unlock in pudgy world is soulbound so you can't trade it you can only you know trade and exchange the traits and I think that is going to be a benchmark for what it's going to for what we would consider a mass Market nft product to be because it's non-dilutive it's additive it really gives people a familiar experience but it doesn't give them the benefits of what it really is to own a pudgy penguin you know when you own a pudgy penguin you can license it you can monetize it I can make it into a toy or put it into a piece of content you have that opportunity you get access to our events you get access to the community in a deep way you know you don't really do that if you buy a toy and you get some you know pudgy World traits and so I think it's that it's that defining layer and balance between the two that I think is really important uh but ultimately uh I'm really proud it on its on its base for the MVP that we've created I think it is the best mass Market nft solution today I think recently you probably saw this Mr Beast controversy with the I think it's called Creator pass where it has like some backend in blockchain and he onboarded a bunch of very large creators and these creators ended up rebelling once their audiences found out it had blockchain when you speak to sort of like consumer audiences what is the impression they're giving you when they think about nfts is this maybe just localized to gaming or is this more of a general sentiment it's uh I I do an interesting metric and I think one that the audience will appreciate and and one that people who listen to me speak I've mentioned this a couple times but there was an interesting thing in our Instagram growth strategy if you guys don't follow us on Instagram yet I highly recommend I think it's it's the bar for nft Content uh at least today and I I I I personally think it can get a lot better and it will get a lot better but today out right now what's around it's definitely the bar we gain about 3 to 4,000 followers a day and before that about a couple months into the strategy it wasn't working and I identified why it wasn't working and we had nft in our bio or web 3 was in our bio I believe yeah uh spreading Good Vibes across web 3 or the blockchain or something along those lines and we removed that we were gaining maybe 3 400 followers a day we removed that and our follower growth 10x and so again it's not the value proposition it's not the hook nfts and and blockchain and crypto can't be the defining hook to make this stuff accessible and to make this stuff exciting it really is the backend and so for me I love the term digital Collectibles I think it's the one that really resonates and sticks with a lot of people uh we've had backlash you know the the hardest thing for us I think is going into business meetings and trying to broker collaborations the biggest and hardest hurdle of them all is the fact that we are an nft and that we have that layer and so there's definitely an educational curve uh that is taking place but I think that comes with all new things and unfortunately in this situation you know our space got uh hit with a Cascade of inappropriate uh rollouts and quote unquote scams as we would call it but it is what it is I think every part of a decentralized type of ecosystem or business model is going to have that negative connotation and flip side but this is where companies like ours are really imperative for the success of this I believe and I bear this responsibility right now on my shoulders I believe it's our responsibility as py Penguins to break those barriers and to make it not taboo and to put it in the retailers and the biggest retailers in the world and to get the biggest Partnerships with the biggest companies and to get the best collaborations and the more that companies like pudgy Penguins succeed the better that that narrative will change cuz the guy who backed out of the Mr Beast deal he has a a narrative about nfts he has an opinion about it and rightfully so we've done a lot of bad work up until this point but I think if there's more people like pudy penguins more people um like board Apes more people that are coming out and creating interesting value propositions I think that narrative will change we just need more what do you think about nftf ah an interesting one I think um I think the beauty of uh tokens is is the power that it gives you uh and the edge case that it gives you that is not traditionally or easily accessible uh I follow this guy on Twitter named Cyrus he's a a pretty big pudgy penguin holder and supporter but he posts all these amazing things of what arcade is doing with certain loan mechanics and that's beautiful I mean I'm talking about nfts and nfts as pfps and IP and that narrative but if you really abstract and you and you look at the most macro lens possible of what the upside is for nfts if you understand Logistics and authentication I mean nfts can power you know indexing of shipments I mean it it can get really big really fast uh in terms of what the underlying technology can actually do and so I think the opportunities are endless in that respect uh and it's not just you know IP I think pfp specifically I think our best position to tackle the IP business uh but there's definitely a lot more use cases for the technology than that and then my final question is how do you see this core community of 8,888 people melding with the overall vision of the consumer product are they the Evangelist are they something else yeah this is an interesting one I think uh I think their participants is kind of the narrative I think the difference if you really look at our value proposition what we want to create I'm trying to reinvent the world of Ip and what does that look like I think today the VIP business is built off of a relationship of brand and consumer and I think the relationship that I want to create is a relationship between brand and participant I.E this year we'll do $10 million in pudgy toy sales every single toy that we're selling is an nft that lives on the blockchain I licensed that from the holder and I basically said I'm going to give you a percentage of every time I sell these toys and so every time I sell a toy if they get a percentage in perpetuity that's never been done before and we're the first people to do that and so what is that relationship that's not a relationship of brand and consumer that's a relationship of brand and participant and I think that's the way it should be and so that that's kind of how I look at that relationship and uh how I plan on inventing a a new narrative not just in nfts and web 3 but in the traditional IP business as well cool thank you for coming on stage good having you thank [Applause] [Music] you