Fire on the Iceberg: Pudgy Penguin Holders Eye Coup Amid Acquisition Talks
A potential coup in the Pudgy Punks NFT community highlights the forces at work in the space.
By: Brady DaleDeFi News
It’s getting hot inside the igloo.
Pudgy Penguin owners are revolting against the team of four that created the cute penguin profile picture (PFP) NFTs, known collectively as 309Labs. This weekend, Luca Netz of Netz Capital held a Twitter spaces event suggesting his team was very close to closing a deal to acquire the Pudgy Penguins project for 750 ETH, but official confirmation of that has not come out on an official penguin channel.
Meanwhile, frustrated penguin owners (who refer to themselves collectively as “the huddle”) have an alternative course of action. With the help of the team at Metadrop, a startup that helps launch new NFTs, community members now have a smart contract on Ethereum that gives them an option to wrap their penguins in a way that allows owners to stay liquid but deny the project’s creators of royalties from trades. The idea here is that doing so would show the creators that they have lost the support of penguin owners and should turn the project over to the community.
NFTs started as a way for creative types to find new revenue streams but they have evolved into the seeds of community, most visibly in the profile picture (PFP) trend, and the penguins have been one the most recognizable such brands, alongside Bored Ape Yacht Club and Crypto Punks.
But the question of accruing value to such collections has become a touchy one — explosive in the penguins’ case. It’s anyone’s guess how this coup will shake out right now, but it illuminates the expectation in crypto of an ownership society, one where people who have purchased pieces of a project should not only have a say in its direction but share in the wealth it generates.
Obviously, the most important thing in any NFT community is a fundamental reverence for the art, of course, but the core tension within Pudgy Penguins has been an ever diminishing price for the least valuable NFTs in the set (the “floor price”). It has had a floor as high as 2.875 ETH in late Sept., according to NFT Price Floor, but more recently the most common penguins have been trading at under 1 ETH since mid-December.
However, since the community started to get organized, the prices have started to rise. On Monday morning, Penguins are selling for a minimum of 1.88 ETH.
Meanwhile, Colin Platt, a penguin himself, estimated in a blog post on Thursday night that the creators of Pudgy Penguins have already earned over 1,000 ETH from the project, largely through royalties on secondary market sales.
Metadrop co-founder Loomdart called the wrapped penguin tactic “a community run coup” during a Twitter Spaces on Thursday, where he explained the concept to penguin owners.
The smart contract Metadrop built should give pause to any instigator of an NFT community. It would theoretically be possible for the code to be used against any other set of NFTs where holders felt ill-used by the team. “It’s like wandering deep into the unknown and exploring what’s possible,” Loomdart said.
Netz’s bid hasn’t been the only one, but it seems to be the furthest along. The wrapping smart contract came out less than a day after Mintable founder Zack Burks tweeted a public offer of 750 ETH to take over Pudgy Penguins and deliver an aggressive licensing program for penguin IP and a Pudgy Peguins DAO. Friday morning Burks tweeted that he and the founding team were chatting.
But the Spaces with Netz was promoted in the announcements channel in the official Pudgy Penguins Discord, suggesting that it’s further along. During the conversation, Netz made it clear that some details still need to be worked out, while sounding confident that it was basically there. Netz Capital has not returned a request for comment from The Defiant as of press time.
Yet Vincent Van Dough, one of the NFT whales supporting the Metadrop plan, immediately opposed the offer. He tweeted back, “I am only interested in seeing a 100% community owned DAO take over at this point.”
309Labs has not responded to multiple requests for comment by The Defiant.
A very similar flap broke out in spring 2020 when Tron founder Justin Sun bought the company that developed the Steem blockchain and tried to sell off its developer fund. Steem is a content management blockchain created by Dan Larimer and Ned Scott. It lost the support of the community after the acquisition, so the users forked it and developed a new version called Hive. While neither is exactly a giant in the space, Hive now has a market cap of over $500M and Steem sits at around $154M.
In other words, we have already seen that, in this industry, a determined community can disrupt a very well resourced whale.
Early Days of the Penguins
Pudgy Penguins minted the entire series on July 22 and all 8,888 penguins were issued in 20 minutes, according to the project’s website.
Moose is a community member who rose to prominence in the penguin community through sheer enthusiasm, which came through clearly in a phone call with The Defiant in which he breathlessly recounted the early days of the penguins.
After the mint first happened, he skipped buying a penguin when they were cheap, even though friends of his had gotten in early, in part because his prior early picks hadn’t worked out. But as he saw the popularity and the prices of the penguins grow, he got hit hard by the FOMO and in early Aug. he decided he needed to get in, when the floor was around 0.5 ETH.
“I picked one that was a little above floor that I really liked, that I really resonated with,” he said. “I’d never felt this feeling before.”
Meanwhile, his friends in the group chat are buying penguins, flipping them and making all kinds of money. “It’s becoming madness,” Moose said.
He wasn’t alone. People were getting really excited about the super cute aesthetics of the penguins, in Moose’s telling, and all of that excitement was driving up the collection’s price, which meant the creators were making a lot of money. Everyone in the penguin community became fascinated by the 309Labs team, Moose said, particularly Cole and Mr. Tubby, because it seemed like they were printing money for themselves. So the creators started doing Twitter Spaces frequently and many members of the huddle would turn up. On one of them, Moose was permitted to take the floor and speak to the listeners, even though he was a new member of the community.
For his part, it wasn’t all about the gains for Moose. “I was going through a hard time and my penguin kind of helped me in a way, but I loved my Penguin and I felt great.”
So that’s the story he told in that Twitter Spaces.
“I ended up being a little too emotional,” Moose admitted. He was crying by the end of his live testimonial. But that emotion would be pivotal for him, because he ended up closing with the phrase that would become a meme throughout the penguin community, one that still pops up in penguin channels to this day (including a bot that just repeats it periodically). Moose said, “I am my penguin, and my penguin is me.”
Had an awesome meeting with the inspirational legend @joeymooooose (thanks for the shirt!) & nft tycoon @MauriceShalam. Really excited for the future of @Pudgy_Penguins and the convos being had on mental health issues. I AM MY PENGUIN AND MY PENGUIN IS ME @tubbyfat @ColeThereum pic.twitter.com/q4nVVGXEGn— joco.eth (@nycbornnraised) August 20, 2021
Which makes it all that much harder for Moose now that he feels like all that’s happened (or hasn’t happened) with the penguins has started to weigh down on him as a person who is trying to make a name for himself in the world of NFT art.
“It’s kind of hard now to be associated with that brand,” Moose said. His penguin, a cute bird with cucumber slices over his eyes and a matching mohawk, is his profile picture on Twitter, and this is a key part of how he represents himself online. “I always said I’ll never change it, that I’ll give it to my grandchild, but I’m having an identity crisis.”
The penguin community wanted more than profile pictures, though. They wanted work that would drive value to the penguin IP.
It had a nice boost when The New York Times ran a story about the penguins on Aug. 12, but since then there hasn’t been a lot of market moving progress.
So far, Pudgy Penguins have had at least two roadmaps. The first came out in a Discord post from one of the cofounders, Cole, on July 26, which included promises of a radio station for the community, rarity tools to assess penguins with, charity auctions and monthly airdrops to penguin owners.
Then on Aug. 29 Cole posted, “We actually destroyed the roadmap for legal reasons. Pudgy Penguins are just cute art, they are not investments.”
But another roadmap came out around Sept. 20. The precise timing can’t be determined because the announcement is no longer up in the Pudgy Penguins Discord, though a couple pieces that were screenshotted are there and on Twitter.
The idea that got holders the most excited in that second roadmap was the idea of a game. The game was described as a fishing game, where users could collect different kinds of fish, but they would also need bait and a rod to entice fish.
Details were scant, but the community seemed to like this. On Aug 28, the Pudgy Penguin twitter announced that every penguin could claim an egg on Aug. 30. The eggs would open on Christmas. When they finally did, the eggs were found to contain fishing rods (now often referred to as “rogs”).
This may or may not have been for use in the game, but there has thus far been no game. The community started to believe that the team really wasn’t making any progress on the road map.
“I can tell you nothing has happened. I know for a fact,” Nick, a former community manager for the project who goes sometimes by 0xDarth and sometimes as ColdPizza, told The Defiant in a phone call.
He was fired from the project when he tried to negotiate a raise with the four creators. He also says he was trying to persuade the team to create a community wallet that would take in the royalties from secondary sales of penguin NFTs. Platt estimated that there has been 660 ETH in royalties on penguin NFTs.
As Twitter user Economist detailed in a thread,it looks like at least some revenues have been going to personal wallets rather than a community fund.
Additionally, 309Labs also minted a second series of penguins called Lil Pudgys, but those were not nearly so much of a hit.
This is all thought provoking, because it’s not clear that the penguin creators ever committed to devoting all or most royalties to the penguins. However, there’s a growing mood in the NFT world that that is how projects like this should work, which is interesting because early in the NFT boom such royalties were touted as a way that artists could finally profit from their work.
From the Pudgy Penguins Discord
Most people in the crypto and Ethereum world probably thought that everything was largely going fine for the penguins.
Profile picture NFTs have been so hot this year that Twitter is talking about making them an official feature, and Penguins were leaders in that trend. But the huddle’s cute birds are now ranked #41 on NFT Floor Price, despite coming out strong with very good buzz when the profile picture fad took over Twitter last summer.
Still, it’s likely that few who did not hold penguins had much of an idea that so much controversy was stirring up in the huddle. Moose, for his part, who met two of the penguin leaders, Cole and Mr. Tubby, during NFT NYC argued that it’s more a case of the 309Labs team being in over their heads than it is a case of them being truly malicious.
Others argue that Cole has been part of multiple projects where he has let those who were counting on him down. Whatever the case, a vote went up inside the Pudgy Penguins Discord asking whether or not Cole should stay or go, and it came out overwhelmingly against him, with 1,045 of the 1,210 penguin owners that voted expressing a desire for Cole to leave leadership of the project.
Screenshot shared with The Defiant by Moose.
A Twitter user going by 9x9x9, the founder of the SOS Foundation and an owner of hundreds of penguins, revealed in a Twitter thread that he had taken a stab at buying the penguins himself but didn’t like the terms Studio 309 proposed. He said the team asked 888 ETH to acquire control over the project and its smart contracts, while confirming to him that all the penguins profits have been dispersed among them and an acquisition would come with no financial assets.
Then on Thursday, the main Pudgy Penguins Twitter promised imminent news to resolve the controversy, but no further announcements were forthcoming as of late in the day Sunday.
Now 9x9x9, along with Vincent Van Dough, are two of the signers on the multisig wallet that controls the wrapped penguins smart contract built by Metadrop.
It remains to be seen how many people will actually use Metadrop, too. It appears that 203 people hold wrapped penguins right now.
Wrapping appears to be a way to both quietly protest but also threaten Studio 309 and any would be acquirers with completely losing access to royalty stream. The idea here seems to be to try to convince the creators to just hand over the keys and rights to the original smart contract to the penguin holders; however during the Twitter Spaces Saturday, Netz said he had no problem with wrapping and hoped that he could convince those who did so to unwrap later.
And not everyone in the community sees the advantage of wrapping or the need so far. “Ser with due respect. Most of us here won’t go ahead,” community member UpOnly wrote to Loomdart on Discord. “We’d find a way to remove the team by ourselves and there are brighter ones in here to take over and lead the dao and what community will want. Thanks but no thanks.”
But Hunter420 wrote in Discord of the power he was feeling in the penguin community, “If anything the last few days have shown, is that this project has the attention of almost everybody in Crypto and NFT’s. BOOLISH.”