The continuously differentiating NFT market: a new pyramid is forming

Author: 0xCookie, Rhythm BlockBeats

After more than a year of development, the NFT market, a new field with a trading volume exceeding $50 billion, has accumulated enough project samples. To distinguish the quality of various NFT projects, the concept of "blue chip," a traditional market term, has been introduced into the NFT market to label outstanding NFT projects.

In most people's perception, "blue chip" describes some common characteristics:

• High market capitalization

• Long lifecycle

• A large and active user base

• Investors can continuously receive returns while holding

However, for the nascent and rapidly changing NFT market, this label seems too general and vague.

In mid to late March, Yuga Labs launched a powerful combination that almost single-handedly chased away the bears. Since then, a subtle differentiation has emerged among "blue chips": the floor price of BAYC has returned to above 100 ETH, Azuki has continuously set new historical highs, while CyberKongz and land projects have faded into the background during this round of frenzy.

The differentiation of various NFT projects in terms of their capabilities and development directions is dynamic. Using "blue chip" to classify project levels is not only vague but also has a time lag. From the recent differentiation among "blue chips," clearer hierarchical levels have emerged, forming a new pyramid: whether the "metaverse ecosystem" can sit at the top of the pyramid, followed by "metaverse brands," while the remaining projects are striving to evolve upwards, with some standing out and others feeling disappointed…

In this article, Rhythm BlockBeats attempts to re-layer the "blue chip" segment, observing what the pyramid of current blue chip projects should look like from the perspectives of operation, marketing, and development.

"Metaverse Ecosystem" ------ "Ecosystem Builders" Yuga Labs and the Return of "Infrastructure Providers" in Land Projects

Yuga Labs has reached the top of the new pyramid in the NFT market ------ the "metaverse ecosystem" and occupies the throne exclusively.

Acquisitions, token issuance, and land determination. Yuga Labs has demonstrated its ambition to build a self-sustaining metaverse ecosystem. Building something that has never truly existed in the market, Yuga Labs not only dares to say it but has also made it believable.

To construct a "metaverse ecosystem," it is essential to have both a sufficiently robust project lineup (PFP) and a reliable integration platform (land). Land is always just a form of "infrastructure." Just like the iOS/Android ecosystem would be empty if it only had the technical foundations provided by Apple/Android without countless application developments. However, in the early environment, PFP projects are eagerly seeking new narratives to open up new imaginative spaces for investors, and "metaverse integration" has sprung up in the roadmaps of various PFP projects. Yet, PFP projects themselves lack sufficient resources to build their own "infrastructure," making land projects like Sandbox and Decentraland, which have strong resource support, more dominant in this mutual pursuit, widely regarded as "ecosystem builders."

Many projects have purchased their own land, but the formation of the "metaverse ecosystem" has been very slow:

1. A considerable number of projects purchased land solely for marketing, with slow or even no subsequent development.

2. Actual interactivity is weak. The imagination that a PFP can provide to its holders is limitless, merely offering them a thematic environment or allowing them to use their PFP as an avatar wandering in the game map, which far from meets the demand for interactivity.

3. The connections among projects within the ecosystem are difficult to form. Each PFP has a unique community culture, but under the current conditions of low freedom and limited functionality, they cannot be showcased on the metaverse integration platform, making it hard to form good interactions within the platform.

In light of these existing issues, some land projects have shown investors new possibilities and have risen as new "ecosystem builders." In February, the leading land project NFT Worlds, backed by MineCraft, has the potential to attract a large number of non-Crypto users, stepping out of the competition for existing users, and has mature SDK and development experience to draw upon, providing greater imaginative space for out-of-the-box thinking and interactivity. Moreover, several projects developed based on NFT Worlds have already gained market attention, such as Gray Boys, Property's, The Doge Pound, and so on.

The promotional effect these projects have on NFT Worlds even surpasses NFT Worlds' own promotion. As for WorldWide Webb3, the number of projects purchasing land has exceeded 50, and more importantly, some of the projects that have settled in have begun to form interactions, providing new potential holders for each other.

Spontaneous "Street Battle" among projects within the WorldWide Webb3 ecosystem

But the NFT market is ultimately a magical place. Since the birth of BAYC, which is just under a year old, it has grown from a PFP project into a giant with enough resources to build its own ecosystem, directly declaring war on land projects with various PFP factions.

Yuga Labs, which plans to encompass both PFP and land, has more possibilities to convince the market:

1. Strong and Deep Ecosystem Project Lineup

After acquiring the two giants CryptoPunks and Meebits, and showcasing Cool Cats, World of Women, CrypToadz, and Nouns in the "Otherside" promotional video, the number of PFP NFTs that can be labeled as part of the "Yuga ecosystem" has reached 9. Among these 9 projects, except for Nouns, the total market capitalization of the others exceeds $100 million. In the top 12 ranked PFP projects by total market capitalization, "Yuga ecosystem" projects occupy 8 seats. The remaining 4 seats are held by Azuki, Clone X, Doodles, and CyberKongz, which seem to be fighting alone and isolated.

Heavyweight Yuga Spaceship

In addition, Yuga Labs' humble attitude in respecting project cultures and listening to community voices instills enough confidence in their ability to develop the potential of their various factions. After acquiring CryptoPunks and Meebits, Yuga Labs chose not to act quickly but to slow down, deepening their understanding of project culture through community-driven actions. Projects within a metaverse ecosystem should not be fragmented; the unique charms of each project should be seen and attracted to one another. In-depth understanding and engagement can form effective connections between projects, making the internal relationships of the ecosystem tighter.

Yuga Labs is not in a hurry to do anything with CryptoPunks and Meebits but chooses to first observe what their communities do

2. Ample Resources and Sufficient Product Development Funding

In March, Yuga Labs completed a $450 million financing at a valuation of $4 billion, with a star-studded lineup of investors.

A major confusion for investors regarding the current metaverse integration platforms is that they only realize one mini-game after another, failing to provide users with the feeling of being "natives of the metaverse." The processes of these mini-games are similar, with low fun, unable to enhance users' social needs for the entire platform through gaming. Once the novelty wears off, users find that apart from strolling and enjoying the scenery in the game, there are very few other things to do. This is not only a technical issue but also a problem in product form planning. With sufficient funds, it means having a sufficiently professional team to plan and implement products, allowing users to truly "settle" in the ecosystem.

From the total amount of land Yuga Labs is set to issue (200,000 plots), they do not intend to play in isolation with a group of top PFPs but are more likely to create an open ecosystem that allows countless PFP projects to settle in and co-create prosperity. Returning to the position of "infrastructure providers," members of the land sector must quickly strengthen their connections with PFP projects, providing more support for their development and guiding the formation of cultural connections within the ecosystem.

"Metaverse Brands" ------ Various Factions Compete, Azuki Leads the Charge

Under the highest level of the "metaverse ecosystem," Azuki's breakout is particularly striking. Since March 17, Azuki's floor price has continuously set new historical highs, peaking at nearly 30 ETH, with an increase of over 200%.

The Advancing Azuki

"Metaverse brand" is how Azuki positions itself, and they have a profound understanding of this ------ a "metaverse brand" is not a brand that exists within the metaverse, but one that is born in the metaverse and becomes famous outside of it, which is often referred to as "breaking out." Not only "breaking out," but also establishing a firm foothold outside the circle.

The vision left by Azuki on their official website

To achieve this, the following foundations must be in place:

1. Unique aesthetics. Aesthetics are one of the value foundations of PFPs; different aesthetics attract potential consumers with different traits, and only standout and unique aesthetics can truly accumulate "diamond hands."

2. Strong community. Brand cultivation is a grand vision that requires holders to "believe in the process." Each holder is a billboard; they communicate like friends within the community and create like artists, enriching the culture bit by bit and radiating outward.

3. Mature operations. For many projects, the moment of selling out is the last glory; when the game of hunger marketing ends, the project team becomes a headless chicken in subsequent operations. Physical products, entering the metaverse, providing free data analysis tools, hosting offline gatherings… These operational methods are repeatedly used by countless projects, which actually reflects the weak operational capabilities of most projects ------ homogeneous content is difficult to solidify existing users and cannot attract new ones.

These three foundations determine the ranking of NFT projects in the brand evolution competition. The more solidly they are built, the larger their foothold in the NFT circle will be. The more they become top players in a circle, the greater the possibility of radiating outward. Among the blue chip projects under the "metaverse ecosystem" level, Azuki has squeezed to the front in the race towards brand evolution:

1. Unique Asian Anime Style

Before Azuki, there had not been a blue chip of this style in the NFT market; Asian NFT players actually lacked a truly appealing artistic creation. Azuki's leader, Zzzagabond, was born in China, and he once said, "My intuition is that they (buyers) are Asians, and they see art that truly resonates with them for the first time. I have talked to Asian investors a few times, and they told me this is the first NFT they have purchased."

Moreover, this artistic style provides a vast imaginative space for holders, with a strong sense of immersion. It is not only excellent material for secondary creation but also stimulates holders to continuously generate imaginative ideas about their Azuki, laying the foundation for a strong community.

2. Strong Community

Before Azuki's sale, secondary creations on Twitter were emerging endlessly, and after the sale ended, this creative enthusiasm did not wane due to "liver white" but continued to persist.

Azuki holders are having a blast with their Cosplay

In addition to high community activity, the strong consensus within the Azuki community was also demonstrated in a recent airdrop. Azuki's new NFT series BEANZ opened its airdrop box to find just a pile of dirt, yet almost no Azuki holders thought it would be just a pile of dirt, with the order volume consistently terrifyingly below 350. Without a foundation of consensus, whatever is airdropped could only be worth a real pile of waste in the real world, but under strong consensus, teasing only makes holders more imaginative.

From the market order history trend of BEANZ, we can see Azuki holders' confidence in "a pile of dirt"

3. Textbook-like Operations

Some project teams fear that "over-promising" will harm consensus, thus falling into the dilemma of "good wine fears a deep alley." In contrast, Azuki has grasped the timing perfectly.

First, they provided a grand vision ------ "Web3 streetwear," which was clearly defined from the beginning, allowing holders to understand the project's development direction while leaving enough imaginative space for them.

Secondly, they have shown reassuring caution in the details, such as their attitude towards game development:

We know it's difficult, but we have the ability to do it. We will do it, and we will do it best

In addition to online artistic creation activities, they also held themed parties offline. Not only did they invite big names like Wiz Khalifa, but they also announced the airdrop news at the party. The moment participants opened their wallets to check the airdrop at the party, the intersection of Web3 and reality maximized their experience.

The competition for brand evolution is becoming increasingly intense. Projects with the potential to evolve into brands each have their own logic for the market to bet on: Clone X is the leader in 3D PFPs, and its project team RTFKT Studio, as a leader in the virtual sneaker field, was acquired by Nike last December. Doodles recently brought itself into the SXSW art festival, exploring new paths that combine 2D and 3D expressions through Space Doodles. The top project in identity recognition, mfers, has already seen numerous spontaneous community offline activities; could they bring DAO into the offline world…

Ambitious projects are also making their moves, exploring ways to expand their influence, especially offline. Karafuru held an offline themed exhibition at the end of March, attracting over 200,000 participants in just 10 days. At the recently concluded NFT LA, many projects went offline to preach. These all show us new ideas ------ themed parties, art exhibitions, sports events, and other offline activities gather a large number of people with different interests, using their interests as a starting point to attract more people from the real world to be drawn in by virtual images; could this be a new way to rise to the forefront of the brand evolution competition? Ambitious PFP projects are racing against time on the road to "connecting Web2 and Web3."

Karafuru's offline themed exhibition was a great success

The Disheartened "Application Faction"

In this wave of top PFP frenzy, one leading blue chip project seems to be quite disheartened, and that is CyberKongz.

CyberKongz continues to decline amidst the surge of top PFPs triggered by Yuga Labs

When PFPs first fell into the traditional scoring items of artistic style, identity recognition, and social attributes, CyberKongz successfully broke through by issuing its own token BANANA and empowering it with breeding, renaming, and other features, establishing its status in the community.

Compared to other top PFP blue chips, CyberKongz resembles a student with a narrow focus, overshadowed by other top PFP blue chips in terms of artistic style, community culture, and operations. Although they are also exploring the metaverse ------ developing land in Sandbox, purchasing a penthouse in Worldwide Webb3… the results show that their main focus remains on perfecting their internal economic mechanisms. This has been their path to success, but sometimes failure stems from past successes. As the pioneer of the "application faction," CyberKongz's future imaginative space is gradually shrinking:

1. CyberKongz is Becoming More DeFi

CyberKongz actually has three series: Genesis CyberKongz, Baby CyberKongz, and CyberKongz VX. These three series resemble three different levels of mining machines: Genesis CyberKongz is the highest-end mining machine, with the highest floor price, maintaining in the range of 50-70 ETH, earning 10 BANANA daily. The floor price of Baby CyberKongz is currently around 4 ETH, earning 10 SHARDZ daily, which are non-tradable and used to mint enhancement items in their game Play 2 Kollect. The current floor price of CyberKongz VX is 1.1 ETH, which can serve as a character model in Sandbox and is also an entry ticket to participate in the Play 2 Kollect game. Participating in Play 2 Kollect is the only way for Baby CyberKongz and CyberKongz VX holders to earn BANANA; the more points they score in the game, the more BANANA they can share.

The project team seems to want to attract more potential holders by lowering the entry cost, which is quite different from the development ideas of the "metaverse ecosystem" and "metaverse brands." This may not be the team's original intention, but it inevitably leads more potential holders to consider their first reaction when contemplating a purchase as "calculating the payback period."

2. Weak BANANA Applications, Limited to Internal Projects and Strongly Bound to Project Value

Initially, the most significant application of BANANA was to breed Baby CyberKongz. With the breeding of Baby CyberKongz ending and the BANANA SHOP (a store for purchasing wearable equipment in Sandbox) still not launched, BANANA could only be used for renaming their monkeys, writing autobiographies, and trading in the secondary market for a period.

To address this issue, CyberKongz launched the KONGZ TANK plan, promoting new projects through community voting and team selection, allowing BANANA to circulate in these new projects. So far, the KONGZ TANK plan has successfully incubated two projects, The Littles and ZenApe. However, the problem remains: apart from breeding, applications such as renaming, writing autobiographies, and modifying traits only consume BANANA in minuscule amounts, and holders are more willing to sell BANANA in the secondary market for profit rather than using it for DIY.

The launch of the Play 2 Kollect game has added a new consumption channel for BANANA, but its use remains confined to its internal projects. The project team must find ways to maintain the value of BANANA and avoid the collapse of BANANA from backfiring on their NFTs.

Although Yuga Labs' combination has siphoned off a large amount of funds from the land sector in the short term, it has clarified what the land sector should do to meet the market's demand for the "metaverse ecosystem." The products within the land sector each have their strengths and diverse forms, and these "application factions" still have significant space in the long run. However, for PFP "application factions" led by CyberKongz, focusing on DeFi-like gameplay has become increasingly difficult to achieve breakthroughs, and it is time to consider changing the market's interest in them from investment to consumption.

Conclusion

A new pyramid is forming in the NFT market, and the label "blue chip" as a project level has become too general. At the top of the pyramid, the "metaverse ecosystem" Yuga system stands alone in its pursuit. Below it, in the "metaverse brand" tier, although no significant project has firmly established itself yet, there are promising projects striving forward.

The new levels are ultimately caused by differentiation in operations, marketing, and development routes, and how to provide holders with diverse experiences will become increasingly important. Truly captivating NFT projects will continue to widen the gap with ordinary projects and, with the development of the metaverse, bring more genuine consumers to the market, completing the true maturation from speculation to consumption.

In the ever-changing NFT market, will new projects emerge with new development ideas to reshape the pyramid? For example, the recently popular "cross-chain" concept can be expected to lead PFPs like Gh0stly Gh0sts and tiny dinos to develop new forms of applications, and "infrastructure provider" land projects are surely gearing up for cross-chain integration.