Pudgy Penguins NFT Project Ousts Founders as Mood Turns Icy

There’s trouble brewing in the huddle.

The beloved NFT project Pudgy Penguins voted out its founders on Thursday after they allegedly failed to deliver on stated goals and drained the treasury of funds. And now at least one splinter group is arguing that the entire project should be decentralized, potentially an industry first.

Launched in July, Pudgy Penguins has become one of the most successful NFT projects, raking in over 45,400 ETH in sales on NFT marketplace OpenSea. (That works out to about $140 million in today’s ether (ETH) prices.) NFT stands for “non-fungible tokens,” a subcategory of cryptocurrencies that represents ownership in a unique asset, from art to real estate.

The collection of 8,888 chubby and flightless Antarctic creatures – donning accessories such as baseball caps and fishing rods – were available to mint last July for 0.03 ETH and sold out in less than 20 minutes.

According to Twitter user and Pudgy Penguins owner @9x9x9eth, Pudgy Penguins co-founder Cole Thereum “promised a game, a token, an educational book on NFTs and more” to the community last September.

“After a half year, they still have not yet set up the team, they are still in the stage of hiring,” 9x9x9 told CoinDesk via Twitter.

(9x9x9 publicly stated he has spent nearly 600 ETH on the collection and holds 242 Pudgy Penguins NFTs and one rare “banana” penguin, purchased for 100 ETH.)

Pudgy Penguins pseudonymous co-founders Cole Thereum and Twitter user @tubbyfat didn’t immediately respond to a request for comment via Twitter direct message.

On Wednesday evening, 9x9x9 published a Twitter thread claiming the Pudgy Penguins founders were looking to abandon the project and offered to sell him its shell for 888 ETH (about $2.8 million), an offer he turned down.

Since the tweets, the floor price of a Pudgy Penguin shot up from about 0.6 ETH ($1,860) on Wednesday evening to 1.7 ETH ($5,270) as of press time.

Now, the project has received buyout offers as high as 750 ETH ($2.3 million) from other prominent individuals in the NFT market, including Mintable co-founder Zach Burks, NFT collector @beaniemax and Netz Capital’s Luca Netz.

Others in the community are more wary of a buyout. NFT hedge fund Starry Night Capital’s @Vince_Van_Dough and eGirl Capital’s @loomdart – other prominent stakeholders in the project – have floated the idea of migrating the community to a new project called Wrapped Penguins.

The Pudgy Penguins founding team receives a small percentage in royalties from each NFT sale, meaning founders of successful projects can continue to line their pockets as long as trading volume persists.

Wrapped Penguins, available as a free mint on NFT platform Metadrop for current Penguin holders, would sever all ties with the original founding team with the new project in the hope of creating a parallel community that would be governed using a decentralized autonomous organization (DAO) framework.

A wrapper is a smart contract that takes an asset and issues a parallel asset, allowing the Pudgy Penguins NFT holder to hold an identical “wrapped” penguin. The Wrapped Penguins project has said the holder will be able to “unwrap” their token into the original NFT at any time.

Profile picture projects (PFP) such as Pudgy Penguins, Larva Labs’ CryptoPunks and Yuga Labs’ Bored Ape Yacht Club have driven the recent boom in NFT sales, often run by centralized founding teams who tease new releases for their holders.

Pudgy Penguins “could be the first pure decentralized PFP project ever,” 9x9x9 told CoinDesk.

The battle for control over the Pudgy Penguins project also raises governance questions surrounding NFT communities – or more broadly, what happens when founders fail to deliver on stated goals or the communities themselves experience infighting.

Recent events are reminiscent of battles that have plagued major blockchains such as Bitcoin and Ethereum, known in the industry as “hard forks.”

“In real life, stakeholders can use the board to dump a poorly performing CEO. This is the first attempt I’ve seen in crypto to do in essence the same thing,” tweeted Jordi Alexander, chief investment officer of Selini Capital. “The community forks everything out without the baggage of the CEO.”

Amid the turmoil, some Pudgy Penguin holders have used the spotlight to spread a popular Pudgy rallying cry: “I am my penguin and my penguin is me.”