If you spend your time interacting with digitally rendered cats, apes, and pixelated owls, then you’re probably no stranger to the world of NFT “Profile Picture” (PFP) communities. Often characterized by randomly generated traits and names in collections that include up to 10,000 unique NFTs, PFP communities have unlocked entirely different types of value beyond the traditional mechanics of the NFT marketplace.

10,000 Moonbirds on the Ethereum Blockchain brought in $75 million+ in revenue in a matter of hours.

Newcomers to NFTs or crypto in general find it difficult to fathom how a simple .jpeg of an ape or owl can fetch up to over 2 million dollars (600ETH) on the secondary market. It’s just a badly drawn photo of an ape! They’ll protest. Anyone can right-click save it!

I said those same words a couple months ago—If only the NFT marketplace can be explained so easily. To understand the full value that NFT PFP communities unlock, let’s dive into some of the dynamics beyond just NFTs as good, bad, or speculative art.

As someone who grew up in avatar-ized communities and online forums, I am relatively unsurprised by the momentum of NFT PFPs. Beyond the historic volume and money made from “blue chip” PFP communities, one of the most direct problems that NFT PFPs aim to solve is the fundamental human desire for belonging.

I’ve written about this previously in regards to DAOs: similar to tokenized communities that gather around the sizzle and crackle of a warm voice chat in Discord, NFT communities enable micro-economies of connection, where pseudo-anonymous strangers are able to bond in a way that feels precedented and seamless. For any digitally-native individual, we’ve spent years identifying as our online avatars, virtual pets, and gamer skins. NFT PFPs expand on this tried-and-tested business model where users have shown that they’re more than willing to pay for digital assets without direct IRL value.

Even if the art isn’t particularly groundbreaking, upon purchase of an NFT PFP, you are immediately granted the right to identify as that unique avatar, rare (or not-so-rare) traits and all. It’s an obvious segue from from the anonymous culture within crypto while offering the opportunity to identify as part of an in-group with shared values.

From a marketing perspective, this allows NFT PFP communities to easily coalesce around a common vision or brand ideals—whether it be the absurdist, uncanny valley-esque aesthetic of projects like Milady Maker, the mission of unlocking more opportunities for women via World of Women or Meta Angels, the abstract colored spheres of ZORA, or the undead cartoons of Deadfellaz. Niche digital subcultures are given instant visual identifiers that allow community members to bond over shared interests and personas. Some, like Shinsei Galverse, lay out ambitious roadmaps such as using their mint proceeds and royalties to eventually create an anime (”WAGMAA,” or “We’re Going to Make An Anime together”).

For humans, in-group identification is also one of the most effective types of social glue, especially between strangers who may never meet each other in real life. This trust is the basis for a horizontally activated community, wherein new customers are not only acquired over time, but already passionate holders and fans of a NFT project have the ability to “ape in” before a project appreciates in value, and be continuously rewarded for their loyalty. Rewards can range from merchandise to events to tokens (and even new financial products, such as NFT-enabled staking).

For example, if you owned a Bored Ape in 2018 and held it until 2022, then you would have received a mutant “serum” to transform your Ape into a Mutant Ape, and a pass to mint a Bored Ape Kennel Club dog companion. Combined, those two additional NFTs are valued at over 40ETH at current floor prices. You would have also received an airdrop of $APE Coin, which will power an upcoming Yuga Labs Metaverse project that recently teased the inclusion of other PFP projects like Cool Cats, CrypToadz, and Punks. Communities like Azuki are also implementing similar loyalty mechanisms to reward holders in their Metaverse, including the fractionalization of Azuki #40 into ERC-1155 tokens for holders, and the recent launch of BEANZ, a companion NFT to the original.

NFTs PFPs are therefore an easy means of signaling your place in the Wild Wild West of web3, and a massive opportunity for communities to build branded IP with nothing more but a passionate group of supporters, code, and digital art. When group behavioral dynamics interact with easily identifiable and inherently marketable visual assets, the result is staggering. In just 2022, the global trading volume of NFTs grew from $16.94 billion to $54.58 billion on April 17—an increase of 222.2%. Well-hyped projects like Moonbirds mint out in hours despite a 2.5ETH price tag, with thousands of holders immediately changing their profile picture to that of a pixelated owl to claim their place in the community.

Beyond just randomly generated digital avatars, it’s clear that NFT PFPs have managed to unlock entirely new value chains powered by cryptocurrency. At this stage, NFT PFPs are still relatively new, and whether any of these projects will materialize into a sustainable brand for years to come, is yet to be seen. But the impact of PFP communities on the NFT space has been tremendous, and it’s undeniable that we’re seeing a fresh wave of consumer-powered digital IP like we’ve never experienced before—especially with the rise of CC0 projects, which allow entire PFP collections to be included in the public domain.

At Layer3, we believe in the power of NFT PFPs to activate and reach large communities. That’s why we’ve partnered with PFP projects like Astro Girls Society to activate and reward existing NFT holders. In the coming weeks, we’ll combine elements of traditional loyalty programs with educational initiatives to empower the AGS community, such as allowing holders to instantly claim free $MATIC by setting an Astro Girls NFT as their Twitter profile picture.

If you’d like to partner with us on instant bounties, contests, and projects for your NFT community, feel free to reach out to Brandon (brandon@layer3.xyz).

Thanks for reading! Interested in web3 communities? Check out Layer3’s links below:

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by Sarah at Layer3