Introduction

PFPs were among the earliest use cases for NFTs, designed to be used as profile pictures for online identities: for example, on Twitter. These digital avatars often contain randomly generated traits that determine their rarity.

Besides functioning as a means of self-expression, PFPs are also akin to social networks where users can signal their affiliation with a particular NFT community or showcase their status through ownership. The success of a particular PFP collection extends to factors beyond just its aesthetic appeal. In this report, we explore three major PFP ecosystems and delve into how they are positioning themselves for success.

PFPs Remain the Most Popular NFT Category

Among the various NFT categories on Ethereum, PFPs represent 70% of the total NFT market cap, with generative art in second place at 13.5% and virtual land in third at 8%.

But what is driving the popularity of PFPs?

PFPs are easy to understand. There is also the potential for price appreciation, making them an attractive entry point for NFT speculation. News and announcements stir up excitement and can cause floor prices to rise. This attracts the attention of traders and collectors.

The success of Bored Ape Yacht Club back in April 2021 unleashed a wave of new PFP collection launches as new projects aimed to emulate its achievement.

Top PFP collections on Ethereum have been affected by the NFT and crypto market downturn since last year. BAYC/MAYC experienced a drawdown of 20%, while Clone X and Moonbirds suffered declines of 55% and 65%, respectively. Despite this, the initial minters of these collections are still in profit.

PFP Collections Are Building Ecosystems

We derived market capitalization using Nansen’s Price Estimates Machine Learning Model. You can find out more about the methodology here.

BAYC’s dominance in the PFP ecosystem is notable, with a market cap more than four times larger than its closest competitors combined. This success can be attributed to several factors, including the strength of its community building and its ability to garner mainstream attention from celebrities such as Neymar, Stephen Curry, Steve Aoki, and Justin Bieber.

Product Differentiation

However, prices ultimately have to be justified by fundamental drivers beyond speculation. BAYC recognizes this and has been proactive in differentiating itself from the competition. Yuga Labs, the team behind BAYC, has continuously sought to expand its offerings beyond the initial 10k PFP collection, exploring new niches and utilities such as the launch of APE coin and the announcement of Otherside in Q1 2022.

Other top PFP projects are exploring different playbooks. Doodles has ventured into the Flow blockchain with Doodles 2. Azuki and Clone X are carving out their own niches by integrating blockchain technology into retail apparel and streetwear culture. Azuki’s Physical Backed Token and Clone X’s World Merging Chip both offer innovative solutions that bridge the gap between physical and virtual worlds, allowing their physical merchandise to be tied on-chain for verifiable ownership.

These PFP projects are creating unique ecosystems to differentiate themselves from the competition. Additionally, the top PFP teams have attracted strong funding and backing from notable VCs (except Azuki, although rumors are circulating about a possible fundraise), giving them the runway to achieve their roadmaps.

Bored Ape Yacht Club has emerged as a leader in the NFT space and has the largest community by size. BAYC has over a million Twitter followers, while Azuki, Clone X, and Doodles have over 300k. In terms of Discord size, Clone X stands out with more than 245k users, with BAYC in second place at 171k. Azuki trails in third place, followed by Doodles and Moonbirds.

Moonbirds stand out in its percentage of committed holders. Over 68% of NFTs in the collection are held by “diamond hands,” a term referring to holders who have never sold any NFTs from the Moonbirds collection.

Moonbirds owes this in part to its “nesting” feature, which allows NFT holders to stake their Moonbirds without transferring them to a separate wallet. This allows them to earn cumulative rewards based on the duration that each NFT is “nested” or staked. However, this feature might just be a temporary solution to prevent holders from selling