NFT avatars have gone from complete obscurity to mainstream attention and million-dollar sales in less than a year. I’ve personally bought multiple myself, gotten immersed in the community, and written multiple articles about them.
If you’ve only just heard about these NFTs and perhaps seen a picture of a tired-looking cartoon monkey with a $3 million price tag on the news, I assume you have a lot of questions. First up, don’t worry about the crazy prices you hear about though. These are just anomalies. More on that later.
In this article, I try to explain the very basics of what these cartoon avatars are all about. I won’t cover how to invest, trade, or which are the best projects to buy. This is only meant to teach you the fundamentals of what NFT avatars are, how they’re created, and why they make sense.
What is an NFT avatar?
First up, let’s just make sure we’re on the same page here. The type of NFTs I’m talking about is what’s known as an avatar or “profile picture” NFT. Each NFT avatar is part of a collection, typically consisting of a few thousand similar-looking faces.
There have been countless of these collections created over the past year, and several new ones launching every day. They typically consist of between 2,000 and 10,000 avatars. Bored Ape Yacht Club, CryptoPunks, Doodles, and Cool Cats are just a few of the most well-known.
What’s really interesting is that all the avatars within a given collection are completely unique. This aspect, and how they’re made to be unique, is one of the primary innovations behind the success of NFT avatars.
How is an NFT avatar created?
When you look through one of these avatar collections, you quickly notice that all the avatars look similar — yet different. You can easily see that all the Bored Apes belong in the same collection and that they don’t belong in the Cool Cats collection. And yet no two avatars are the same.
Each avatar is made up of certain traits: Background color, fur, clothes, eyes, and a mouth, for instance. Each of these traits has multiple variations. In the case of BAYC, there are 8 different backgrounds, 43 types of clothes, 19 types of fur, and four other traits with their own variations.
Three avatars from the Bored Ape Yacht Club collection
All of this is created by an artist. Then, when the project launches and people go in and buy the avatars, all the different traits are automatically and randomly combined to generate 10,000 unique avatars.
This means that if you buy an NFT right when the project launches, you won’t know until afterward how your avatar looks. In fact, you’ll typically have to wait a few days for the artwork to reveal. Until then, you can still see the NFT in your wallet and on the marketplaces, but with a placeholder image.
Not knowing the avatar you get is also part of the excitement though. Especially considering that you may get lucky and buy a rare one.
NFT avatars and rarity
While all these avatars are unique, some are still considered to be rarer, and thus more valuable, than others. This goes back to the ‘traits’ we just covered.
As mentioned, the 10,000 BAYC avatars share 43 different types of clothes. These outfits aren’t evenly distributed though. For instance, the “striped tee” is worn by 412 of the Apes. The “black suit”, on the other hand, is only worn by 42. This makes the black suit-wearing apes much rarer and helps to explain why they cost around 3 times as much as their more casually dressed friends.
NFT marketplaces like OpenSea lets you see which NFTs are listed for sale and sort according to price
An avatar with a rare background, outfit, fur type, eye color, and perhaps a 1-of-1 pair of glasses will be extremely valuable relative to the rest of the collection. It will also make for a much better status symbol.
Rarity isn’t everything though. You’ll often see certain traits gain popularity simply because of their aesthetics or what they represent. Many people just buy the avatars they like or resonate with the most.
Minting vs buying on the secondary market
When a new avatar project launches, it does so with a fixed supply and a set price per NFT. At the announced time, the NFTs will be available for purchase on the project’s website. Buying an NFT in this process is known as “minting”.
As soon as you mint an NFT, you’re able to resell it to another buyer on a marketplace like OpenSea, LooksRare, Magic Eden, or Solanart. This is also where you can go and buy your favorite avatar from someone else. And all of this happens with the use of cryptocurrency, of course.
All NFT avatar collections can be filtered according to ‘traits’
On the secondary market, you can see all the available avatars and pick your favorite. This is one of the great advantages of buying on the secondary vs primary market. You’ll of course be limited to the avatars that are actually listed for sale, but at least you get to pick and choose.
Furthermore, there’s no guarantee you’ll be able to mint an NFT when a new project launches. The most popular projects sell out fast, and some require you to be on a so-called “allow-list” to even be eligible to mint. Thus, buying on a secondary marketplace is usually a better approach for beginners.
The price of an NFT avatar
The mint price for most new NFT avatars is within the $100 to $500 range. A few are cheaper or even free while some are more expensive. Moonbirds just launched with a mint price of 2.5 ETH or almost $8,000.
While the latter is certainly a high starting price for a completely new NFT, the real value is determined in the weeks and months after launch when these avatars trade on the open market.
A few examples of NFT avatars in the $100 - $250 range: Froggy Friends, Skvllpvnkz, and Winter Bears
In little less than a year, the BAYC avatars have gone from a mint price of $250 (0.08 ETH) to the current $350,000 (110 ETH) for the cheapest ones. In that same period, other avatar projects have gone from comparable starting points to anywhere between zero and thousands of dollars.
NFTCLICK and MintyScore are two of my favorite sites for tracking upcoming NFT launches
And this continues to be the case. New projects launch every day at around the same price, but their secondary market valuations vary wildly in the following days, weeks, and months.
So what makes one avatar worth 10,000 times as much as another?
The real value of an NFT avatar
It can be hard to fathom why a digital cartoon monkey is worth hundreds of thousands or millions of dollars. Even $100 or $1,000 may seem pricy.
There’s obviously the image itself and some avatars truly are works of art. Most collectors want avatars that they think look good, defined as whatever characters, art styles, and color palettes they’re into.
Three collections with highly popular artwork: Psychedelics Anonymous, Azuki, and World of Women
Some have their avatars printed and framed. Others display them in digital frames at home or as wallpapers on their devices. A few dedicated collectors even showcase their avatars and other NFT art in digital galleries.
Some avatars have gained popularity because of their historical or cultural significance. CryptoPunks fits into this category, having been created in 2017 and arguably inspired all the new avatar projects we see today.
What most people don’t know, however, and the actual real reason behind the explosion in popularity and value of these avatar projects, is this:
An NFT avatar is just a visual representation of the underlying utility you get as an owner.
This is a huge topic that I’ve written about before, so I’ll keep it short for now. Just know that holding the NFT avatar in your wallet lets you unlock a variety of cool things depending on the specific avatar.
Squishiverse and Coolman’s Universe provide two examples of NFT-gated websites
You can think of it as a key, one that can give you access to one or more of the following examples:
- Co-ownership of a business with revenue share. Gambling Apes pay out a share of their casino revenues to all wallets that hold one of their avatars.
- Exclusive access to online communities. Most projects have gated Discord servers or channels that you unlock with your NFT wallet.
- Exclusive access to online and irl events. Your NFT can serve as your ticket to meetups, talks, shows, parties, or entire conferences.
- Discounts on products and software. Some online education platforms and software providers give you a discount when you hold a certain NFT.
- Access to future NFT launches. Many avatar projects make companion collections, either for free or with a discount for their existing holders.
- Games with your avatar as the main character. In some new games, you’ll need to own and use a certain avatar to play.
Exactly what an avatar unlocks will depend on the project, and new utility is continuously invented and added to the best ones. This helps to explain why some NFT avatars keep going up in value while others fizzle away.
It’s not all about utility though. There’s definitely a large element of pure price speculation. And then there’s the less tangible “status symbol” piece.
Owning a Bored Ape is the digital-native version of flexing a Lamborghini or Rolex in the real world. And that’s simply because everyone knows how expensive it is (and that Justin Bieber, Paris Hilton, Post Malone, Eminem, and many other celebrities own one as well).
But how will the world know that you own a Bored Ape? That’s where the profile picture trend comes in, and why these avatar projects are also called “profile picture” or just “pfp” projects.
The profile picture trend
Owning an NFT avatar means being part of a community. It unlocks a gated Discord server or gives you access to community events. But it’s also just about representing your community and having your ownership publicly recognized.
Many NFT avatar collectors want to show the world that they’re part of the BAYC family or any of the lesser-known and more affordable projects. This can be about the status symbol but also about showing what you like. And connecting with other people over your shared passion for a certain project.
The primary way people go about this is pretty simple: They use their favorite NFT avatars as their profile pictures on social media.
If you’re in the NFT bubble like I am, 9 out of 10 profile pictures you see on Twitter are NFT avatars. Many people follow each other solely because their NFT profile pictures are from the same collection.
So regardless of the utility or value of your next NFT avatar, at least it will always be useful as a profile picture and an access key to community and new friendships.
What’s next for NFT avatars?
A lot has happened since the launch of CryptoPunks and the other earliest avatar projects back in 2017. The NFT has been legitimized and proven itself as a viable space for creators, attracting the best entrepreneurs, developers, artists, and other creators.
These people keep innovating and pushing the boundaries for what an NFT can be and be used for. They create amazing pieces of art. They add exciting new utilities. They bridge the gap between online and offline value.
Two of the biggest trends that everyone seems to be talking about but that haven’t yet come to fruition are gaming and the metaverse more generally. Countless projects are working on games of all kinds where you get to play as your avatar.
Even more projects claim to have big plans for “the metaverse”, which typically means letting you and all the other avatar owners hang out in a virtual world of some kind. This will likely happen in one of the many purpose-built platforms like Decentraland, The Sandbox, or NFT Worlds.
The Sandbox is one of the leading metaverse platforms where developers can build their own experiences
And then we’ve got the people saying NFT avatars, or perhaps all NFTs, are a fad or a scam. While I obviously don’t believe so, I do think it’s important to remain skeptical. I love how creators are exploring what the NFT technology can be used for — and what it shouldn’t be used for.
Where we draw these lines and what ends up looking like a good vs bad use of the technology in 5 years remains to be seen. Until then, remain skeptical and proceed with caution. If something seems too good to be true, it probably is. My last key piece of advice to newcomers is this:
Don’t buy individual NFT avatars as “investments”.
It’s tempting to think of NFTs as get-rich-quick schemes and your way to financial freedom. However, Bored Ape Yacht Club and the other top-tier projects mentioned here are the anomalies. Most projects have been terrible investments and you’re likely better off investing in the NFT infrastructure.
Just have fun with it! Stay safe and buy NFT avatars you like with money you can afford to lose. And if you ever have any questions about the market or specific projects, you’re more than welcome to reach out to me.
