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Korean crypto firm raises $140M, China’s $1.4T AI sector, Huobi battle: Asia Express

Korean crypto firm pulls off the biggest raise in Asia this year, AI market in China is now worth $1.4T, and Huobi trademark court battle.

Our weekly roundup of news from East Asia curates the industrys most important developments.

South Korean nonfungible token developer Line Next secured a $140 million investment on Dec. 13 from a consortium led by Peter-Thiel-backed private equity firm Crescendo Equity Partners. It’s the largest blockchain series funding round in Asia this year.

The firms NFT platform, dubbed “DOSI,” is scheduled to premiere in January, integrated with Japanese NFT marketplace Line NFT. 

“With this investment, Line Next also plans to introduce new services to further accelerate Web3 popularization. These include introducing a social app that allows users to communicate based on the characters they made utilizing AI technology and launching new Web3 games utilizing BROWN & FRIENDS characters that anyone can enjoy.”

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J1mmy.eth once minted 420 Bored Apes… and had NFTs worth $150M: NFT Creator

NFT collector J1mmy.eth trades like Warren Buffett, his collection peaked at $150 million, and he once minted 420 Bored Apes with Pranksy.

When the history books are written, and the documentaries are made on the formative days of NFTs, Jimmy McNelis, aka j1mmy.eth, will hold a special place in history as a creator, as a passionate advocate, and for having one of the greatest NFT collections of all time. 

An NFT OG who started his journey on Dec. 5, 2017, when he purchased his first CryptoKitty, the 45-year-old American is also the founder of Avastars, an early PFP project from February 2020 that set the scene for intellectual property (IP) rights being given to holders. 

That was popularized by Bored Ape Yacht Club and the 2021 PFP mania that saw IP rights for holders becoming the standard for most projects. Avastars was also a pioneer in putting the project on-chain, inspired by Autoglyphs, which minted 10 months earlier. 

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Deepfake K-Pop porn, woke Grok, ‘OpenAI has a problem,’ Fetch.AI: AI Eye

AI Eye: 98% of deepfakes are porn — mostly K-pop stars — Grok is no edgelord, and Fetch.AI boss says OpenAI needs to “drastically change.”

AI image generation has become outrageously good in the past 12 months … and some people (mostly men) are increasingly using the tech to create homemade deepfake porn of people they fantasize about using pics culled from social media.

The subjects hate it, of course, and the practice has been banned in the United Kingdom. However, there is no federal law that outlaws creating deepfakes without consent in the United States.

Face-swapping mobile apps like Reface make it simple to graft a picture of someones face onto existing porn images and videos. AI tools like DeepNude and Nudeify create a realistic rendering of what the AI tool thinks someone looks like nude. The NSFW AI art generator can even crank out Anime porn deepfakes for $9.99 a month.

According to social network analytics company Graphika, there were 24 million visits to this genre of websites in September alone. You can create something that actually looks realistic, analyst Santiago Lakatos explains.

Such apps and sites are mainly advertised on social media platforms, which are slowly starting to take action, too. Reddit has a prohibition on nonconsensual sharing of faked explicit images and has banned several domains, while TikTok and Meta have banned searches for keywords relating to “undress.”

Around 98% of all deepfake vids are porn, according to a report by Home Security Heroes. We cant show you any of them, so heres one of Biden, Boris Johnson and Macro krumping.

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HK game firm to buy $100M crypto for treasury, China/UAE CBDC deal: Asia Express

Hong Kong game firm to add $100M of BTC and ETH to treasury, UAE and China strike CBDC deal, Victory Securities starts new HK Bitcoin fund.

Our weekly roundup of news from East Asia curates the industrys most important developments.

Boyaa Interactive International, a publicly traded Hong Kong holding company specializing in online card and board games, wants to secure the approval of its shareholders to invest $100 million in crypto.

According to this weeks announcement, Boyaa Interactive directors want to allocate $45 million of corporate funds to Bitcoin (BTC), $45 million to Ether (ETH), and $10 million to stablecoins such as Tether (USDT) and USD Coin (USDC). As for rationales for the investment, the directors wrote:

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Web3 Gamer: Games need bots? Illivium CEO admits ‘it’s tough,’ 42X upside

Games overrun with bots just show bot owners care, claims Pixels founder. Plus we review Galaxy Fight Club, chat to Illuvium’s CEO and more.

Some think that bots in games is a sign of the apocalypse, or perhaps just the makers trying to fill up an empty venue to make it look popular.

But Pixels founder and CEO Luke Barwikowski says that conversely, if people arent trying to fill your game with bots, then it’s probably because the game isn’t exactly the talk of the town.

If people aren’t trying to bot your game it’s not because they can’t it’s because they don’t care enough to do it.

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Expect ‘records broken’ by Bitcoin ETF: Brett Harrison (ex-FTX US), X Hall of Flame

Brett Harrision (ex-FTX US) dishes the dirt on the “insecure, prideful” SBF and tips a spot Bitcoin ETF will shatter the futures ETF’s records

The former president of FTX US dishes the dirt on his falling out with former Jane Street colleague Sam Bankman-Fried and predicts the spot Bitcoin ETF will far outshine the record-breaking success of the Bitcoin Futures ETF.

Who is this guy anyway?

The ex-president of FTX US, Brett Harrison, tells Magazine that he didnt say a single word to Sam Bankman-Fried during the two-month notice period after he resigned, which was only months before the whole exchange blew up. Even getting a message to SBF to say he was resigning in the first place was hard work.

I had to talk to other people in the company to formally resign. I wrote one text to Sam and I got back a single heart emoji. That was the last I heard from him, Harrison declares.

Harrison and Bankman-Fried had been colleagues years earlier at quantitative trading firm Jane Street, where Harrison saw his potential while teaching SBF in a course on programming for traders. But things went south real quick between them at FTX.

Harrison claims it was due to Bankman-Frieds inflated ego and his reluctance to accept any feedback or advice.

Sam hated criticism and, as a result, refused to communicate with me. It drove my decision to quit even further, he says.

Yet, Harrison says he had no clue of the storm about to engulf the company with FTX declaring bankruptcy only a few months after he bailed from the U.S. arm of exchange.

The rest of us, especially in the U.S., were blindsighted. We were working with regulators, top lawyers, and to have the whole organization fail because of one persons greed, will stay with us for the rest of our life.

However, he feels justice was done in the recent fraud trial against his former boss.

I do feel the result was absolutely just, and I’m glad that justice was served quickly; I think it was essential that Sam was held accountable for his actions, he declares.

Meanwhile, Harrison wasted no time diving into a new project.

He co-founded Architect.xyz, a DeFi platform that focuses on bridging all the different opportunities in the digital asset space for both institutional and retail investors.

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Harrison is a bit of a brainiac and has a computer science degree focused on artificial intelligence (AI) from Harvard University. So, who better to ask about the potential for AI to take over the world?

I do not think AI is a threat to humanity, he declares, pointing out that AI has been in development for much longer than people think:

Lots of people are now seeing AI for the first time, they don’t appreciate the decades of progress that has gone into it.

Harrison is more concerned about humans using AI to pull off scams and swipe identities more effortlessly.

It truly is just linear algebra,” he says. “The idea that linear algebra is some existential threat to our survival just feels somewhat fanciful to people who have been practitioners in the field for a long time.

What led to Twitter Fame?

Harrison is a smart guy who drops interesting stuff on social media that people seem to dig.

But let’s not dance around the fact that the FTX connection is what blew up his follower numbers, with his count hitting its highest weekly peak when FTX took a nosedive in November 2022, when he gained 2,140 followers, according to data from Social Blade.

Back in January, his long rant about his departure from X got nearly 3 million eyeballs. He said he wasn’t canned from the FTX gig; it just wasnt his dream job, and SBF was an insecure, prideful manager.

Content people can expect

If you scroll through Harrisons timeline over the years, you’ll notice his glam lifestyle has toned down considerably since the FTX days. 

Back then, he was often seen hanging out with celebs and former prime ministers.

Nowadays, its way more low-key. Besides throwing in some market talk, Harrison’s been sharing snippets about his family life lately. 

He’s even flexing about saving toys from the FTX US office that somehow dodged the whole bankruptcy drama.

What type of content does he like?

Harrison loves the blend of genius and goofiness on Crypto X getting a daily fix of humor and high intellect.

One of the things I love about Crypto Twitter  is the perfect mix of highly intellectual cerebral, either Market structure or political commentary, and degenerate memes.

However, when we asked about the accounts he’s into, hes not that forthcoming. 

After doing some light digging, it turns out hes following 2,100 accounts, and guess who’s in the mix? None other than Bankman-Fried’s pal Tiffany Fong.

Bitcoin predictions?

Harrison used to avoid making predictions, saying hed never have predicted the events that happened to him. But that was when things were going too smoothly, and that’s all changed. 

Harrison declares there is a very high probability that a spot Bitcoin ETF will get approved in the first quarter of 2024.

As for price predictions? Harrison isn’t tossing out any six-figure numbers right away.

In Q1 assuming there is an ETF that’s approved. I think something in the $50,000 to $55,000 range feels pretty probable, he states.

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He doesnt see Bitcoin hitting six figures until toward the end of 2024 or early 2025 at the earliest.

He points to the first day of Bitcoin Futures ETF as just a little hint of how optimistic he is about the spot Bitcoin ETF:

If you remember the day when a Bitcoin Futures ETF was listed the inflows were some of the highest ever seen in the history of ETFs. I think we’re going to see even more records broken for a spot Bitcoin ETF.

Another $18.9M Hong Kong exchange scandal, HTX ‘sorry’ airdrop: Asia Express

Hong Kong rocked by another $18.9 exchange fraud scandal, HTX offers airdrop in wake of $30M hack, and digital yuan takes off in HK and China.

Our weekly roundup of news from East Asia curates the industrys most important developments.

Yet another crypto scandal in Hong Kong 

Scammers posing as investment experts allegedly enticed 145 victims to tip $18.9 million into the unlicensed Hong Kong crypto exchange Hounax.

According to reports earlier this week, the police said investors were allegedly promised up to 40% return per annum with “no risk” in its advertisements. After users deposited their funds, they were unable to withdraw them. On Nov. 1, the Securities & Futures Exchange (SFC) of Hong Kong listed Hounax on its billboard of suspicious crypto exchanges but clarified that because Hounax was unlicensed at the time of the incident, it was not subjected to the regulators enforcement actions.

This was the second scandal involving a crypto exchange in Hong Kong in recent months. In September, another unlicensed exchange, JPEX collapsed after allegations of a Ponzi scheme unsurfaced, leading to 66 arrests and an estimated $205 million in investors’ losses.

Despite the scandals, Hong Kong regulators appear to remain steadfast in their commitment to transforming the city into a major Web3 hub. On Nov. 27, SFC CEO Julia Leung explained that “even if the grace period ends tomorrow, fraud will still occur, so there is no intention to modify the grace period and other measures for the time being.”

Under current regulations, a grace period for crypto exchanges to operate without registration will end in June 2024. On Nov. 30, the SFC stated that it seeks to legitimize initial coin offerings in the city to create more revenue for the national budget.

A former ad from the defunct Hounax exchange.
A former ad from the defunct Hounax exchange. (Medium)

In other Hong Kong crypto news, the financial institutions Interactive Brokers and Victory Securities this week announced they had secured crypto licenses, with the former partnering with licensed crypto exchange OSL to immediately provide Bitcoin and Ethereum trading services to its Hong Kong clients.

And on Nov. 29, Darryl Chan, deputy chief executive of the Hong Kong Monetary Authority, announced a multinational effort to create a cross-chain bridge for Chinas digital yuan central bank digital currency. Dubbed “mBridge,” the protocol seeks to reduce transaction fees and improve speeds for cross-border uses of the digital yuan CBDC. The first pilot tests will begin in mainland China and Hong Kong.

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Foreign banks join e-CNY pilot testing

Standard Chartered, HSBC, Hang Seng Bank, and Taiwan-based Fubon Bank have begun testing the digital yuan in cross-border transactions.

According to local news reports on Nov. 28, the four foreign banks will also integrate digital yuan transfer services for their clients and enable them to deposit and withdraw digital yuan. Personal banking accounts will also support the official digital yuan app and self-custody wallet. Yuesheng Song, president and vice-chairman of Hang Seng China, commented:

“The central bank’s launch of the digital RMB, a legal currency in digital form, is an important step for China to explore the development of digital currency and promote the internationalization of the RMB. Hang Seng China follows the national financial development policy advocacy and actively supports the application and development of the central bank’s digital currency.”

In the first three quarters of 2023, the use of the digital yuan in transactions was up 35% year-on-year, reaching $1.39 trillion, China Daily reported. On Nov. 29, the first-ever digital yuan student loans were issued in the province of Suzhou, with $26,230 worth of loans being issued directly into the digital wallets of 13 recipients.

List of banks supported by the e-CNY app, including Standard Chartered, HSBC, Hang Seng Bank, and Fubon Bank. (Baidu)
List of banks supported by the e-CNY app, including Standard Chartered, HSBC, Hang Seng Bank, and Fubon Bank. (Baidu)

HTX back to normal

HTX exchange (formerly Huobi Global) has reopened deposits and withdrawals after a devastating hot wallet hack that drained the exchange of $30 million on Nov. 22.

According to the Nov. 26 announcement, the exchange has since resumed deposits and withdrawals on the Bitcoin, Ethereum and Tron networks.

“Huobi HTX once again promises to fully compensate for the losses caused by this attack and 100% guarantee the safety of user funds. The amount of funds lost by Huobi HTX this time accounts for a very small amount of the total funds of the platform,” the exchange said.

The firm has also announced that a special airdrop will take place in December designed to reward its “loyal users.” Airdrop tokens will reportedly come from “upcoming high-quality projects,” and the amount to be received will be determined by a users’ average net assets on the HTX exchange denominated in Tether (USDT).

Justin Sun, de-facto owner of the HTX exchange (Twitter)
Justin Sun, de-facto owner of the HTX exchange. Incredibly, Warren Buffett did not convert to crypto following the meeting. (X)

Immediately after the incident, Justin Sun, founder of the Tron ecosystem and de-facto owner of the HTX exchange, commented, “we will cover the loss and all assets are SAFE.” Despite assurances, however, this was the fourth exploit involving the HTX ecosystem within the past two months. Around the same time as the HTX exploit, the HTX Ecosystem Chain (HECO) bridge was hacked for $87 million.

On Nov. 10, Poloniex, an exchange acquired by Sun in 2018, was hacked for $100 million due to allegedly compromised private keys. The exchange resumed withdrawals on Nov. 30. On Sept. 25, HTX was drained of $8 million in a security incident. The exchange has since clawed back $8 million in stolen funds and issued a 250 Ether bounty to the hacker.

Pudgy Penguins CEO says praise he gets ‘is actually pretty sad’: NFT Creator 

Pudgy Penguins now has 1M Instagram followers and is stocked in 2000 Walmarts. CEO Luca Schnetzler, 25, explains where everything went right.

Pudgy Penguins minted in July 2021, but quickly saw high drama after its former founder came under suspicion he was going to rug the project. 

A few months later Luca Schnetzler stepped in. With an entrepreneurial streak since his early teens he had a history of building internet businesses and bought the project and its intellectual property of 8,888 cute little Pudgys for $2.5 million in April 2022.

It was an instinct and intuitive decision. I saw this thing that I was hugely invested in before I bought it that I thought had all of the potential. I was complaining and crying on a daily basis to the founders about how they sucked, and how they could do better. Rather than just doing that, I just stepped up to the plate, Schnetlzer says.

The narrative of quickly shifted from a rug that could trend to zero to one of hope and optimism when Schnetzler set out a vision for the project the community could rally behind. 

Schnetzler became one of the standout PFP project leaders during the NFT bear market, and the Penguins bucked the trend of cratering floor prices. Since he took over as CEO, the Pudgy Penguins floor has risen from around the 1 ETH mark to 6.32 ETH. Holders and the wider NFT community believe that Schnetzler has a game plan for success and the ability to execute it.

Pudgy Penguins - A Brave New World
Pudgy Penguins – A Brave New World (X)

He says the decision to snap the project up wasn’t as risky as it may have seemed.

We bought something that netted almost $10 million in six months for $2.5 million. Royalties were making it half a million dollars per month. It was a pretty good business on its face. Intuitively, I think it just comes down to the vision when you close your eyes and you picture Pudgy Penguins, it’s pretty easy to see where this thing can go. 

Constant momentum and growth has been key to Pudgys ascent into one of the top PFP projects, with the cute penguin brand spreading across social media outside of traditional crypto channels like X and Discord. Pudgys Instagram has just crossed 1 million followers, while its GIF strategy has been highly effective, only days ago crossing the 10 billion views chasm.

Schnetzler thinks its a little bit sad that he gets such praise, when it just highlights how little effort other PFP projects put into trying to grow their brands. 

Everyone’s been saying that their NFT project is a brand, they have hundreds of millions of dollars that they raised from the community and venture capital at ridiculous valuations. Yet none of them are actually doing the basics of building a brand, he says. 

Some people really sing my praises, and it’s actually pretty sad because I do think we do some things really well, dont get me wrong, but I mean, this should have been the bar all along. The fact that we are doing so many things that so many projects are not doing when they have 10-20 times the resources and 2-3 times the experience is pretty shameful.

Pudgy Penguins #6775
Pudgy Penguins #6775 (OpenSea)
Pudgy Penguins #6179
Pudgy Penguins #6179 (OpenSea)
Pudgy Penguins #3564
Pudgy Penguins #3564 (OpenSea)

Finding the entrepreneurial spirit

Despite only being 25 years old, Schnetzler actually started his entrepreneurial journey over a decade ago. Growing up poor and bouncing around couch to couch at friends places, Schnetzler says he needed to start earning at a young age.

I’ve really been out of school working for 10 years and it’s pretty crazy to say, but thats what its been,” he says, noting most people dont even start working until they finish college in their 20s

Then you do 10 years after you leave college and you’re 33, and then people start to see success in their 30s. That seems to be the time horizon. I think my childhood forced me to start early. I didnt have the luxury of chilling out or having a childhood where I could just go home and play video games and not worry about anything. I was forced to go work and figure things out.

Character building versus brand building 

To date, most PFP projects are built around a centralized character with a variety of different traits to give each NFT a slightly different look and feel. Take the OG collection CryptoPunks, the Bored Apes, and it is also true for the Pudgys. But it’s not the case for Gary Vees VeeFriends, which boasts 270 individual characters.

Schnetzler believes character building around one individual character is the easier of the two options. 

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At the end of the day, I think Gary is trying to tackle a tougher challenge. It’s part of the cards I was dealt and have, and he created his cards. I think he’s doing a great job with VeeFriends. I think ultimately he has to create familiarity. Creating familiarity around a character is a lot easier than creating familiarity around a brand, says Schnetzler.

Theyre two different things and because his universe isn’t predicated on one character, but a multitude of different characters and different animals in different shapes. He is betting and taking a shot at the brand, and the brand name versus the character. 

I’m going after the character first and then worrying about the brand because I believe there’s enough people that love penguins and few enough penguin brands out there.

Luca Schnetzler IRL at Walmart
Luca Schnetzler IRL at Walmart (X)

A brave new world – Walmart pallet program 

In September this year, Pudgys announced a groundbreaking deal with retail giant Walmart that saw Pudgy Penguin physical toys available for sale and in prominent locations in over 2,000 stores throughout the U.S.

The pallet program is one of the most prestigious places you can get because it gives prime real estate to people walking the floor. It signals Walmart’s belief in the brand and their belief in NFTs and Web3 being a vertical for their retail locations, says Schnetzler.

If that can become a general norm in the worlds biggest retailer it gives us a real shot to succeed. Its one thing to be in the crevices of the toy shelf, its another thing to be front and center for everyone to see. That program doesnt happen for brand-new brands. Its normally a program for Barbie, Teenage Mutant Ninja Turtles or people that have movies and TV shows off the backs of their releases.

Building a legacy brand with no playbook 

One of the most common questions consistently thrown at a PFP project is “how do you drive value back to holders?”

In response to criticism about its toy product extension, Schnetzler laid out his plan on how Pudgy Penguins are thinking about value accrual to holders using a classic funnel diagram.

The funnel is not something that I’ve really invented. I mean, you can throw Star Wars and any other big legacy IP onto that funnel, and thats the strategy. The idea, though, with NFTs is the value of the first edition collectible is a huge anchor to the business. If you put any first edition collectible at any legacy brand on the bottom of that funnel, it still makes the most sense, he says.

I want to build a legacy brand, the likes of a Hello Kitty, a Star Wars and a Pokemon.

That’s easier said than done, he admits, saying theres no roadmap to follow for a PFP project.

Hello Kitty took 60 years to build. My holders dont have 60 years for me to go build something. If I lose momentum and traction within the holder base, then I ultimately lose everything because I dont believe you can build a successful Web2 business while your Web3 business fails.

Pudgy World
Pudgy World (pudgypenguins.com)

Rapid-fire Q&A

Your entrepreneurial inspiration 

I love everything that I think Steve Jobs represents. For me personally, I’ve tried to be my own man, but the one person that I found huge inspiration from, you can kind of tell it in my leadership style, is really Steve Jobs.

The intense pressure of a founder 

It’s not easy, but it’s also not the worst thing. One of the reasons why we got here is because of the community. I think I’m in a great situation because I bought the project and I didn’t take any money from them. The nature of people who hold Pudgy Penguin PFPs, theyre good people.

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You cant really be an angry, miserable person and then go click buy on a Pudgy Penguin. The art kind of creates a culture that already filters a lot of that nonsense out. Now, I empathize with a lot of other people who I see go through the chaos.

What you would tell a Mom about Pudgys

What I would tell a Mom is, hey, this is a great value proposition for your son or daughter. This is way more fun than any other $10 toy.

Why? Because they unlock a bunch of things in the digital world that not only entertain them when they go to bed or when theyre at recess or on the playground. But also entertains them when they are at home on their iPad and computer. It’s a 2-for-1 bang for buck special.

Were the Pudgy gifs planned?

The gifs were totally random. But the second we saw it, we quadrupled down, but it was totally random in the beginning. It was a sheer accident but a happy accident.

I don’t need people to know about Pudgy Penguins now, but you want to know something when NFTs are the talk of the town again, and all those people have been using Pudgy gifs the whole time, that’s going be a really good source of credibility for them once everyone starts to want to buy NFTs.

Whats your position on royalties?

It shouldn’t be 0% and it shouldnt be 5%. I think it’s somewhere in the middle. I think the number is between 1% and 1.5% is where I think the enforceable royalty should stand. The reason being is because you just have to incentivize the creator. [That’s] what made YouTube great, what made TikTok great.

Are you a Wim Hof fanboy? 

Every day I do his breathing technique and I get high doing it. I recommend it because it’s the quickest way you can get high for free. I’m also setting up my cold plunge now. 

Where are Pudgys three years from now?

We’re the face of NFTs, we’re the face of Web3. We have brought the most value to holders emotionally and fiscally. Three years from now were probably launching a movie. The movie is close.

Links:

X: twitter.com/LucaNetz

Website: http://www.pudgypenguins.com

Pudgy Penguins GIFs top 10B views, CEO sets sights on Disney, Hello Kitty: NFT Creator 

Pudgy Penguins now has 1M Instagram followers and is stocked in 2000 Walmarts. CEO Luca Schnetzler, 25, explains where everything went right.

Pudgy Penguins minted in July 2021, but quickly saw high drama after its former founder came under suspicion he was going to rug the project. 

A few months later Luca Schnetzler stepped in. With an entrepreneurial streak since his early teens he had a history of building internet businesses and bought the project and its intellectual property of 8,888 cute little Pudgys for $2.5 million in April 2022. 

It was an instinct and intuitive decision. I saw this thing that I was hugely invested in before I bought it that I thought had all of the potential. I was complaining and crying on a daily basis to the founders about how they sucked, and how they could do better. Rather than just doing that, I just stepped up to the plate, Schnetlzer says.

The narrative of quickly shifted from a rug that could trend to zero to one of hope and optimism when Schnetzler set out a vision for the project the community could rally behind. 

Schnetzler became one of the standout PFP project leaders during the NFT bear market, and the Penguins bucked the trend of cratering floor prices. Since he took over as CEO, the Pudgy Penguins floor has risen from around the 1 ETH mark to 6.32 ETH. Holders and the wider NFT community believe that Schnetzler has a game plan for success and the ability to execute it. 

Pudgy Penguins - A Brave New World
Pudgy Penguins – A Brave New World (X)

He says the decision to snap the project up wasn’t as risky as it may have seemed.

We bought something that netted almost $10 million in six months for $2.5 million. Royalties were making it half a million dollars per month. It was a pretty good business on its face. Intuitively, I think it just comes down to the vision when you close your eyes and you picture Pudgy Penguins, it’s pretty easy to see where this thing can go. 

Constant momentum and growth has been key to Pudgys ascent into one of the top PFP projects, with the cute penguin brand spreading across social media outside of traditional crypto channels like X and Discord. Pudgys Instagram has just crossed 1 million followers, while its GIF strategy has been highly effective, only days ago crossing the 10 billion views chasm. 

Schnetzler thinks its a little bit sad that he gets such praise, when it just highlights how little effort other PFP projects put into trying to grow their brands. 

Everyone’s been saying that their NFT project is a brand, they have hundreds of millions of dollars that they raised from the community and venture capital at ridiculous valuations. Yet none of them are actually doing the basics of building a brand, he says. 

Some people really sing my praises, and it’s actually pretty sad because I do think we do some things really well, dont get me wrong, but I mean, this should have been the bar all along. The fact that we are doing so many things that so many projects are not doing when they have 10-20 times the resources and 2-3 times the experience is pretty shameful. 

Pudgy Penguins #6775
Pudgy Penguins #6775 (OpenSea)
Pudgy Penguins #6179
Pudgy Penguins #6179 (OpenSea)
Pudgy Penguins #3564
Pudgy Penguins #3564 (OpenSea)

Finding the entrepreneurial spirit

Despite only being 25 years old, Schnetzler actually started his entrepreneurial journey over a decade ago. Growing up poor and bouncing around couch to couch at friends places, Schnetzler says he needed to start earning at a young age.

I’ve really been out of school working for 10 years and it’s pretty crazy to say, but thats what its been,” he says, noting most people dont even start working until they finish college in their 20s 

Then you do 10 years after you leave college and you’re 33, and then people start to see success in their 30s. That seems to be the time horizon. I think my childhood forced me to start early. I didnt have the luxury of chilling out or having a childhood where I could just go home and play video games and not worry about anything. I was forced to go work and figure things out.

Character building versus brand building 

To date, most PFP projects are built around a centralized character with a variety of different traits to give each NFT a slightly different look and feel. Take the OG collection CryptoPunks, the Bored Apes, and it is also true for the Pudgys. But it’s not the case for Gary Vees VeeFriends, which boasts 270 individual characters.

Schnetzler believes character building around one individual character is the easier of the two options. 

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At the end of the day, I think Gary is trying to tackle a tougher challenge. It’s part of the cards I was dealt and have, and he created his cards. I think he’s doing a great job with VeeFriends. I think ultimately he has to create familiarity. Creating familiarity around a character is a lot easier than creating familiarity around a brand, says Schnetzler. 

Theyre two different things and because his universe isn’t predicated on one character, but a multitude of different characters and different animals in different shapes. He is betting and taking a shot at the brand, and the brand name versus the character. 

I’m going after the character first and then worrying about the brand because I believe there’s enough people that love penguins and few enough penguin brands out there.

Luca Schnetzler IRL at Walmart
Luca Schnetzler IRL at Walmart (X)

A brave new world – Walmart pallet program 

In September this year, Pudgys announced a groundbreaking deal with retail giant Walmart that saw Pudgy Penguin physical toys available for sale and in prominent locations in over 2,000 stores throughout the U.S.

The pallet program is one of the most prestigious places you can get because it gives prime real estate to people walking the floor. It signals Walmart’s belief in the brand and their belief in NFTs and Web3 being a vertical for their retail locations, says Schnetzler. 

If that can become a general norm in the worlds biggest retailer it gives us a real shot to succeed. Its one thing to be in the crevices of the toy shelf, its another thing to be front and center for everyone to see. That program doesnt happen for brand-new brands. Its normally a program for Barbie, Teenage Mutant Ninja Turtles or people that have movies and TV shows off the backs of their releases.

Building a legacy brand with no playbook 

One of the most common questions consistently thrown at a PFP project is “how do you drive value back to holders?”

In response to criticism about its toy product extension, Schnetzler laid out his plan on how Pudgy Penguins are thinking about value accrual to holders using a classic funnel diagram. 

The funnel is not something that I’ve really invented. I mean, you can throw Star Wars and any other big legacy IP onto that funnel, and thats the strategy. The idea, though, with NFTs is the value of the first edition collectible is a huge anchor to the business. If you put any first edition collectible at any legacy brand on the bottom of that funnel, it still makes the most sense, he says. 

I want to build a legacy brand, the likes of a Hello Kitty, a Star Wars and a Pokemon.

That’s easier said than done, he admits, saying theres no roadmap to follow for a PFP project.

Hello Kitty took 60 years to build. My holders dont have 60 years for me to go build something. If I lose momentum and traction within the holder base, then I ultimately lose everything because I dont believe you can build a successful Web2 business while your Web3 business fails.

Pudgy World
Pudgy World (pudgypenguins.com)

Rapid-fire Q&A

Your entrepreneurial inspiration 

I love everything that I think Steve Jobs represents. For me personally, I’ve tried to be my own man, but the one person that I found huge inspiration from, you can kind of tell it in my leadership style, is really Steve Jobs.

The intense pressure of a founder 

It’s not easy, but it’s also not the worst thing. One of the reasons why we got here is because of the community. I think I’m in a great situation because I bought the project and I didn’t take any money from them. The nature of people who hold Pudgy Penguin PFPs, theyre good people.

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You cant really be an angry, miserable person and then go click buy on a Pudgy Penguin. The art kind of creates a culture that already filters a lot of that nonsense out. Now, I empathize with a lot of other people who I see go through the chaos.

What you would tell a Mom about Pudgys 

What I would tell a Mom is, hey, this is a great value proposition for your son or daughter. This is way more fun than any other $10 toy.

Why? Because they unlock a bunch of things in the digital world that not only entertain them when they go to bed or when theyre at recess or on the playground. But also entertains them when they are at home on their iPad and computer. It’s a 2-for-1 bang for buck special.

Were the Pudgy gifs planned?

The gifs were totally random. But the second we saw it, we quadrupled down, but it was totally random in the beginning. It was a sheer accident but a happy accident.

I don’t need people to know about Pudgy Penguins now, but you want to know something when NFTs are the talk of the town again, and all those people have been using Pudgy gifs the whole time, that’s going be a really good source of credibility for them once everyone starts to want to buy NFTs.

Whats your position on royalties?

It shouldn’t be 0% and it shouldnt be 5%. I think it’s somewhere in the middle. I think the number is between 1% and 1.5% is where I think the enforceable royalty should stand. The reason being is because you just have to incentivize the creator. [That’s] what made YouTube great, what made TikTok great. 

Are you a Wim Hof fanboy? 

Every day I do his breathing technique and I get high doing it. I recommend it because it’s the quickest way you can get high for free. I’m also setting up my cold plunge now. 

Where are Pudgys three years from now? 

We’re the face of NFTs, we’re the face of Web3. We have brought the most value to holders emotionally and fiscally. Three years from now were probably launching a movie. The movie is close.

Links:

X: twitter.com/LucaNetz

Website: http://www.pudgypenguins.com

HTX hacked again for $30M, 100K Koreans test CBDC, Binance 2.0: Asia Express

HTX hacked for $30M — the ecosystem’s fourth hack in recent months — 100K Koreans test out CBDC, and Binance is dead, long live Binance!

Our weekly roundup of news from East Asia curates the industrys most important developments.

HTX exchange hacked… again 

In the fourth hack affecting the HTX (formerly Huobi Global) ecosystem in just two months, the exchange lost $30 million via a hot wallet hack that occurred on Nov. 22. 

In its Nov. 23 announcement, the exchange promised to fully compensate for the losses caused by this attack and 100% guarantee the safety of user funds,” as well as restore services within 24 hours of the attack. The day prior, the HTX Eco Chain (HECO) bridge was exploited for $86.6 million. An investigation is ongoing. 

In September, the HTX exchange was hacked for $7.9 million; this was followed by a $100 million hack against the Poloniex exchange, a related entity, in November. Justin Sun, the Chinese blockchain personality and de-facto owner of HTX (not to mention an “advisor” to, but probably owner of, Poloniex, founder of Tron and CEO of BitTorrent), stated after the attack that “HTX Will Fully Compensate for HTXs hot wallet Losses. Deposits and Withdrawals Temporarily Suspended. All Funds in HTX Are Secure.” Sun previously also madeassurancesthat “all user assets are #SAFU” in the aftermath of the September hack against HTX.

Huobi rebranded to HTX during this years Token 2049 event in September. Although its executives have repeatedly reassured that the exchange is doing well, the exchange ran into a number of serious incidents this year, including an alleged employee revolt.

Justin Sun during Web3 Hong Kong. (Twitter)
Justin Sun blushes as he shares a stage with Nina on April 11.

Binance pleads guilty, settles criminal charges for $4.3 billion

Crypto exchange Binance has agreed to plead guilty to violating the U.S. Bank Secrecy Act, knowingly failing to register as a money-transmitting business, and willfully violating the International Emergency Economic Powers Act. The exchange will pay $4.3 billion in penalties and forfeiture to the U.S. Justice Department. 

According to the Nov. 21 announcement, Changpeng Zhao, co-founder and CEO of Binance, has also pled guilty to one count of willfully violating the U.S. Bank Secrecy Act. Zhao has since entered his personal plea in the District Court for the Western District of Washington.

At the time, Zhao was granted a $175 million bond that allowed him to reside in Dubai pending his sentencing hearing on Feb. 24. However, the U.S. Department of Justice has since appealed that decision, asking to confine his residence to the U.S. pending the sentencing hearing due to Zhao allegedly possessing an “unacceptable risk of flight.”

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In its indictment, the Department of Justice noted that, in a few noticeable incidents and despite reassurances, Binance facilitated over $1 billion in illicit transactions for Iranian users, the Russian marketplace Hyrdra and cryptocurrency mixer Bestmixer. and it solicited U.S. users without prior registration. Binance was also accused of deliberately masking such actions as “complying with U.S. law would stifle their efforts to grow Binance’s profits, market share, and trading volume.”

The same day, Zhao stepped down as the CEO of Binance. “I made mistakes, and I must take responsibility. This is best for our community, for Binance, and for myself,” he stated. 

“Binance is no longer a baby. It is time for me to let it walk and run. I know Binance will continue to grow and excel with the deep bench it has.”

While Zhao still owns a majority in the exchange, he will be barred from being involved in the exchange’s everyday operations. Richard Teng, Binance’s global head of regional markets, was named the exchange’s new CEO. In his inaugural statement, Teng stated that the exchange’s fundamentals were “VERY strong” and that Binance is still “the world’s largest crypto exchange by volume.”

Blockchain analytics firm Nansen has noted that despite the guilty plea, it did not witness any “mass exodus of funds” after the incident. While the exchange witnessed nearly $965 million worth of withdrawals, its total holdings increased to $65 billion. On November 23, CZ’s X account was temporarily suspended after removing “Binance” from his profile name. 

U.S. Attorney General Merrick Garland during the indictment announcement. (DoJ)
U.S. Attorney General Merrick Garland during the indictment announcement. (DoJ)

South Korea invites 100,000 people to test CBDC

The Bank of Korea, South Korea’s central bank, will invite 100,000 Korean citizens to purchase goods with deposit tokens issued by commercial banks as part of its central bank digital currency (CBDC) pilot test. The first of such trials began in October. 

According to local news reports on Nov. 23, “participants will be restricted to using the currency solely for its designated purpose of payment. Other uses, including personal remittance, will not be permitted at this time.” Although the Bank of Korea has not yet decided whether or not to implement a CBDC, further trials are expected, including an integration simulation system for carbon emissions trading on the Korea Exchange. It said: 

“Recently, the rapid digitalization of the economy has led to a growing demand for a digital form of public currency. This demand is evident in the private sector, where new payment instruments such as stablecoins have been developed and are already widely used in certain sectors.”

Evening in downtown Seoul.
Evening in downtown Seoul. (Source: Pexels)