Can Pudgy Penguins NFTs Create a Successful Toy Business and Create Value for Holders?

By  Will McKinnon October 17, 2023

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  • Pudgy Penguin NFTs, featuring 8,888 unique penguin characters, has gained popularity and within the community, boasting a highest sale of 400 ETH
  • However, controversy arose when rumors circulated in late 2021 that the anonymous founder, Colethereum, might be involved in dubious activities
  • In January 2022, evidence surfaced that the project's treasury had been emptied by the founder, causing a sharp drop in the Pudgy Penguin's floor price to 0.5 ETH
  • A turnaround occurred in April 2022 when Luca Netz, a serial entrepreneur, acquired the project for approximately $2.5 million and expanded the brand to toys

While many may recognize the Pudgy Penguin characters from various memes on social media, few outside web3 know that they actually stem from an NFT collection.

The collection of 8,888 Pudgies have been a dominant force in the NFT world for two years, boasting a highest sale of 400 ETH (about $650,000 at the time of sale) The sailing wasn't always smooth for these chubby penguins, but future looks bright.

In The Beginning

The Pudgy Penguin NFT collection was originally minted in July, 2021, for 0.03 ETH a piece. The price of each penguin rocketed up to 3 ETH by the end of August. However, in late 2021 rumors that the founder, an anonymous user that goes by the name Colethereum, was potentially involved in some unsavory dealings and had intentions to abandon the project.

It's important to note in a market as volatile as NFTs, even unsubstantiated negative rumors can have significant impacts on pricing. Therefore, despite a lack of evidence, nerves mounted among the community and the floor price slowly dropped into the new year.

Pudgy #4836. Source: OpenSea

On January 6th 2022, the community would finally get some verification of Cole's intentions. Evidence that the treasury supposedly meant to fund Pudgy Penguin development had been emptied by the team was tweeted by an NFT influencer known as 999.

As more information came out, it became clear that all revenue generated had gone directly into the founder's pockets, never intending to use it to further the collection as had been indicated. This controversy caused a sharp drop for the Pudgies floor price to 0.5 ETH, an 80% drop from all-time highs, leaving the community in despair.

Despite the project left without funds and a team that was clearly not interested in continuing work on the project, there was a large part of the community that still believed. They set out to find a replacement to take over the project. In April, 2022, the Pudgies found their savior: Luca Netz, a serial entrepreneur, offered to buy out the project for a price tag of about $2.5m.

Don't call it a Comeback

While Luca justified the $2.5m price tag with $6m the project had generated in royalties prior to the acquisition, he also realized the dangers of relying solely upon secondary royalty payments to keep the project going.

What Netz needed was an alternative revenue stream, and with a background including working as the CMO for the toy Gel Blaster, he saw an opportunity in expanding the Pudgy Penguin brand.

Beginning with a massive social media campaign, the goal was to spread the Pudgy characters to as many people outside of web3 as possible. Over time, the characters became more popular, regularly ranking near the top of gif popularity on various platforms including TikTok, Instagram, and more.

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Pudgy money printing meme. Source: Lucky Trader

As NFTs are largely an attention economy, this not only set Luca up to market Pudgy-related products to web3 outsiders, but it had a positive impact on the floor price of the actual Pudgies. This all in the face of the worst NFT bear market so far. Netz gave the Pudgy community a beacon of light to rally around in a way very few projects have been able to do.

Pudgy Toys

The next expansion of the Pudgy brand came in the form of a line of physical toys. While the vast majority of NFT projects looked to generate value for their holders via giving them access to more NFT's or digital products, Luca realized there were several major issues with that concept. Minting secondary NFT collections tends to cause a price drop in the primary collection equal to the value of the second due to dilution. In addition, inevitably, project volume will drop to a point where royalties are not generating enough revenue for the project.

Pudgy Penguins figurine. Source: Amazon

With physical toys, however, there would be no dilution of the original collection, and it would give a steady alternative revenue stream to the project that could be forecasted and projected. As the toys would be created based on the likeness of the existing Pudgy Penguins NFT's, holders who gave licensing permission to the project are eligible to receive royalty payments.

A Pudgy Penguins plushy. Source: Lucky Trader

In September, 2023, a shocking announcement was made by Netz. Not only would the physical toys finally be launching, but they'd be sold in 2,000 Walmart stores in the US. Pudgy Penguin NFT volume surged over 200% off the news, as it is safe to say nobody expected a launch of that caliber.

The toys are now projected to generate $10m in revenue next year. This after subsequent integrations with other store giants like Smyths, giving way to what might be the first NFT project to create true value for its holders.


However, Netz himself is not without controversy. Recent X/Twitter posts have accused him of some unsavory business practices in his past which led to a brief flash-crash of the Pudgy Penguins floor price. Yet sentiment has recovered and it seems web3 as a whole is just happy to support a project breaking through barriers that none have before.

While it's still pretty far into the depths of the NFT bear market with few unique traders, the Pudgies have adapted and overcome immense challenges to become even stronger than they once were. Netz, as Pudgy Penguins CEO, has accomplished some incredible things during his tenure to solidify them as a top NFT collection.