The growth of NFTs this past summer was nothing short of astounding. Opensea, the leading NFT marketplace jumped from $125.2 million in volume in June, to $282.2 million in July to over $3 billion in August![1]

Clearly, there’s been a massive amount of capital that has flooded into the market, signalling a seismic shift in how NFTs are being understood (and valued) by everyone from mainstream audiences and retail crypto users, to specialty crypto VC funds.

Since its formation in January, Pluto Digital has been positioning itself to take significant upside in the growth of the NFTs ecosystem. We have actively built a comprehensive NFT portfolio that is comprised of historical, current and upcoming projects, doubling down on our belief that this technology will fundamentally change how people operate online.

https://tylerxhobbs.com/fidenza Fidenza #612 by Tyler Hobbs
Fidenza #612 by Tyler Hobbs

What is a NFT again and why are they important?

Before we dive into more detail about our holdings, it may be helpful to have a slight refresher on NFTs (Non-Fungible Tokens) as we know the term is thrown around a lot, often without a real explanation.

A NFT is a unique, irreproducible token. Every NFT possesses a different ID that distinguishes it from every other — no two are the same. This is unlike cryptocurrencies such as bitcoin, where, one bitcoin can be exchanged for any other bitcoin and it equals the same value.

NFTs are differentiated through their smart contracts, which is where their identifying information is recorded and stored on the blockchain. It’s this information that makes each NFT “non-fungible,” or unable to be directly replaced by another token.

As mentioned in Pluto’s previous post about : These one-of-a-kind tokens verify official ownership of digital items, formerly infinitely reproducible assets can now be represented by tokens that are scarce and tradable.

This technology allows for a paradigmatic shift culturally and technologically. As more and more value is created in online worlds, ownership in these ecosystems becomes crucial. This is made possible via investing in NFTs.

The NFT landscape is exceptionally dynamic, thus, we are continually iterating and adjusting our framework, however, we do tend to consistently evaluate our investments via a few key tenants:

- Cultural and/or technical importance within the NFT landscape
- Credible team, investors, collectors behind the project
- Incentives or utility built into the asset
- Low total supply or favorable scarcity model for project

With that being said, we would like to outline some of our most significant investments below, and highlight why we are so excited about them.

Avatars/Profile Picture Projects (PFP)

PFP or avatar NFT collections have definitely grabbed the most headlines as of late (i.e. CryptoPunks, Bored Ape Yatch Club).

They have become increasingly more important as there are a growing number of people who value their online identity just as much or even more than their “real world” identity.

PFPs provide immediate and simple utility because they signal social capital, indicating your community allegiances and values to your social media circles on Twitter, Discord etc.

Because these PFP communities are based around NFT assets, this allows for not only social groups to form around them but also mini economies where members can take part in the upsides of a community’s growth and development as they own a piece of it. Typically, brands operate via a largely transactional and economically extractive model but NFTs allow this to morph into an equity model.

The largest position we have in our portfolio is in CryptoPunks, widely agreed to be the most significant historical NFT offering. There are 10,000 CryptoPunks, each a 24 by 24-pixel avatar with a distinct assortment of traits. They launched in 2017 as one of the first projects built using non-fungible token (NFT) technology on the blockchain.

Figure 1 Jay-Z’s CryptoPunk, which he displays as his Twitter avatar
Figure 1 Jay-Z’s CryptoPunk, which he displays as his Twitter avatar
Figure 1 Jay-Z’s CryptoPunk, which he displays as his Twitter avatar

They have established themselves as somewhat of a luxury brand, reflected in their high prices and famous owners, including the rapper Jay-Z and NFL player Odell Beckham Jr.

Pluto has been buying punks since the floor was under 20 ETH (now the floor is often hovering around 100 ETH) and believe in the long-term viability of this community due to its dynamic participants and storied history within the wider crypto world.

What has grown into the kind of successor of CryptoPunks in the last 6 months has been the Bored Ape Yacht Club (BAYC). This 10,000-piece avatar collection dropped in April and was seen as an alternative for people who were priced out of CryptoPunks. We started buying them when the floor was below 1 ETH and the floor currently hovers around 40 ETH.

The developers of BAYC (Yuga Labs) have shown a tremendous commitment to adding value to their holders, including introducing free dog “companions” to the apes in a collection titled The Bored Ape Kennel Club and a slightly scarier, “mutant” version of your ape in a collection called The Mutant Ape Yacht Club (MAYC) — these are basically bonus NFTs you received simply for holding your Bored Ape. 10,000 MAYC were released to members of the BAYC while another 10,000 were released to the public to buy, for the purpose of getting people onboarded into the Bored Ape ecosystem who had been priced out of the original Bored Apes.

Their newly updated project map (Roadmap 2.0) is highly anticipated and should be released in the coming weeks, which will have more information as to how the dogs and mutants will fit into the Bored Ape universe and what we can expect in the coming months. What we know for sure is that that the team will focus on adding utility and “member’s-only benefits” to everyone who is part of the Bored Ape family.

CryptoPunks may boast some pretty famous names but BAYC holds its own on that front too. Former NBA MVP Stephen Curry, NFL player Von Miller and EDM band The Chainsmokers sport BAYC profile pictures, among many others.

Stephen Curry’s Twitter profile, sporting his Bored Ape Yacht Club Avatar
Stephen Curry’s Twitter profile, sporting his Bored Ape Yacht Club Avatar
Stephen Curry’s Twitter profile, sporting his Bored Ape Yacht Club Avatar

Both the Bored Ape Yacht Club and CryptoPunks have also been featured at the most prestigious auction houses in the world — Christies and Sotheby’s.

A group of 101 Apes sold at Sotheby’s for $24.4 million (putting the average for each ape at over $240,000) earlier this month. A bundle of nine CryptoPunks for 16.9 million in May and a rare CryptoPunk has sold for $11.8 million by Sotheby’s in June.

There is also a current auction on at Christie’s that features both Punks and Bored Apes, concluding on September 28th so keep your eye out for those results.

Generative Fine Art

We also believe NFTs have enabled an evolution in fine art collecting and fundamentally expanded what artistic practice can look like. Nowhere is this better exemplified then through the growth of generative art.

Derek Edws and Stephen McKeon, partners in crypto focused investment fund Collab Currency explain that generative art is “a category of digital art in which artists use an algorithm to create randomness as part of the creation process, producing both expected and unexpected.”[2]

The foremost curation platform and marketplace for generative art is undoubtedly Art Blocks. It was founded by Erick Calderon, also known as Snowfro, in November 2020. Since this time, it has had over $700 million in generative art sales by over 15,000 collectors.[3]

It is also home to some of the most prestigious collections of generative art including Tyler Hobbs’ Fidenza, Dmitri Cherniak’s Ringers and Snowfro’s Chromie Squiggles (the inaugural drop on the platform) amongst others. We own pieces from all the works mentioned above as well as several more Art Block releases, as they represent substantial holdings in our portfolio.

We view these as significant crypto, artistic and digital cultural artifacts which will grow in value from year to come.

Christie’s is even including the first 31 collections (including all the ones mentioned above) from Art Blocks in their October 1st auction which will be part of their A “Post-War to Present” series.

Gaming Assets

Currently, there are approximately 10 million active DeFi users, over $75 million crypto wallets in the world…and 2.5 billion gamers.[4]

Revenue in global gaming is estimated to garner $175 billion in 2021…[5]

We can’t ignore these massive numbers and believe there is tremendous opportunity for a significant portion of gamers to consistently use blockchain based games.

NFTs represent a revolution in gaming as they allow you to actually own the assets you use in game play — you not only become a user, but an investor in the game.

As such, we want to continue to invest in virtual worlds and gaming projects, including, perhaps the most well-known being Star Atlas, a space-themed grand strategy game whose marketplace launched earlier this month.

NFTs and Beyond

NFTs allow artists, digital storytellers and video game developers to build and create groundbreaking products that facilitate vibrant supportive communities across multiple digital environments.

We believe that our investments in NFTs situate Pluto for continued upside as we are aligning ourselves with the expanding definitions of gaming, culture, creativity and digital expression.

We’re still in the early days of understanding the possibilities of NFTs but we are constantly refining our portfolio and strategy and adjusting accordingly and are excited to support growing crypto communities and culture.

A crypto technology and operations company that connects Web 3.0 decentralised technologies to the global economy.