A Bad Kids thesis

Editor’s note – Since this post was released Ethan, Zaki, and Jack have all made Bad Kids their PFP of choice

In this open source world, where applications and infrastructure can be freely forked (and vampire-attacked), the strongest long-term moat is culture (both at the developer and community level).

It is my belief that NFTs – and PFPs in particular – are perhaps the most powerful tool we have for encapsulating, transmitting, and shifting this culture.

In the words of punk4156 :

yes the pfp bubble was larger than the 1/1 bubble, but the meme that pfps are worthless and 1/1 art is the ‘true form’ of the medium is probably incorrect in the long run. if anything pfp communities are more native to the medium bc of the way network effects map to liquidity

Culture is the utility

Bad Kids became historically and culturally significant to Cosmos during a time of extreme hardship. No matter what happens going forward, it will always be known as the original OG Cosmos PFP. This gives it a timeless quality that cannot be replicated.

My perspective is that timeless PFPs are rooted in culture, not utility. In particular, they capture the zeitgeist of a community in the trenches but on the verge of doing great things.

To borrow a line of punk6529’s :

Culture is the utility

Bad Kids tells you everything you need to know about Cosmos culture

Messy, playful, irreverent, pluralistic. These are some of the values / qualities that lie at the heart of both Cosmos culture and Bad Kids art.

To quote Ben Roy:

The pfp projects that win do one or both of

a) capture the spirit of crypto culture, or

b) add to crypto culture in some way

There is a certain vibe that projects like apes or cats or punks have that just aligns with many early crypto people

Bad Kids firmly ticks both boxes; it both beautifully captures the spirit of Cosmos culture and, in doing so, contributes to crypto culture.

Bad Kids has incredible builder-culture fit

Whether it’s Josh, Sunny, Jehan, Jacob, Aidan, Riley, Sam, Billy, Joe, Elijah… Bad Kids has incredible builder-culture fit within Cosmos. Cosmos protocol devs are in touch with the culture like nowhere else, in part because they are also very active at the application layer.

Interestingly, Bad Kids seems to have the ability to cross over cultural divides, with prominent characters like Hasu and Monetsupply choosing to rock Bad Kids PFPs even though they primarily contribute to the Ethereum ecosystem.

Not only do builders have outsized influence on the cultural trends within these nascent ecoystems that they are co-creating, I think it’s quite possible that, within our lifetimes, the ability of builders to influence the wider consumption patterns of the general public will surpass that of musicians and actors today. In will.i.am’s words:

Great coders are today’s rock stars… \
Great coders are today’s wizards…

Building culture means resisting the temptation to market

To paraphrase David Horvath: Timelessness is achieved by becoming one with culture, never marketing to it. Culture needs time to take root. If you want to be timeless you need to take the time to move slowly and deliberately.

Bad Kids has made all the right moves so far on this front. Cortlandt (the founder and artist) has an incredible pulse on culture, and a profound respect for the power of bottom-up experimentation. I see no signs of this philosophy changing.

Consumption value is the dark matter of the modern world

Richard Kim’s thoughts at the intersection of web3 and creative culture have deeply shaped how I think about consumption value.

My overarching thesis is that we are at the early stages of a multi-decade super-cycle of retail empowerment driven by the fact that “consumption, culture and community” are now tradeable assets. Consumption is no longer ephemeral, but persistent. No longer private, but communal. No longer limitless, but scarce. Consumption is, for the first time, collectable.

We know that consumption value exists by looking at existing spend in large consumer markets (including gaming, collectibles, film, music, etc.). For example, according to Sensor Tower in 2020, $22.75b was spent across mobile gaming genres that include persistent cosmetics. Financial ROI: -100%. So what happens when consumers get all that same engagement value, plus ownership, provenance, scarcity, status, and a financial return (or at least, anything less than a total loss)? The effects are not additive and linear, they are multiplicative and exponential. It should be no wonder to that NBA Top Shot has sold over $300m of digital collectibles, when top grossing gaming titles generate over $1b per year.

When I think about how to measure consumption value, I start by asking two questions:

(1) What does the asset provide by way of patronage, status, access, exclusivity or utility within the community in which it is recognized?

(2) Is that community likely to be around for the long term, such that “squad wealth” can be created from sustained engagement?

From these questions, it is possible to form an investment view based on the likely trajectory of these trends over a sustained period.

This framework may be a bit too amorphous for traditional investors and collectors, who have cash flows, comparables, and heritage to form a valuation opinion on. When existing models no longer work, the default refrain is predictable: “bubble”. My view is more nuanced. I believe consumption value is the dark matter of the modern world: that it is difficult to measure does not mean that it does not exist. We may not have all the answers, but we had better keep searching. This cycle will not be about inventing new figments of “value” in our collective imagination. It will be about which of us take our blinders off and see what is already there, right in front of us, today.

And so, returning to Charlie Lee’s tweet, the analogy to 2017 obfuscates more than it illuminates. ICOs were primarily financial assets, means to some promised ends around future network utility. NFTs and digital collectibles are primarily non-financial assets, ends in and of themselves. Stripped to its core, the former is driven predominantly by extrinsic motivations (cash flows), and the latter predominantly by intrinsic motivations (consumption value). My own opinion is that there is plenty of TAM to expand into given the reflexivity of supply/demand for outstanding creative work, especially for top-tier artists and for collections with strong heritage and community.

The single biggest risk in operating in this space is linear thinking and anchoring bias, leading to a persistent underestimation of the TAM acceleration happening across huge existing markets.

Rather than spoonfeeding you my thoughts here, I encourage you to think about how this framework for measuring consumption value applies to Bad Kids and Cosmos. More specifically, how would you answer the following two questions:

• What does Bad Kids provide by way of patronage or status within the Cosmos ecosystem?
• Is this ecosystem likely to be around for the long term?

NFTs supercharge Squads

The concept of modern day Squads, mentioned above, was first introduced in the Other Internet’s seminal essay Squad Wealth:

Squads are reemerging today as a potent cultural force that rejects a strictly individualist market philosophy.

Today’s squads are expressions of digital locality and the new squad era forces us to reconsider the individuated logic of early social networks. Contrary to early visions of hypertext, the internet is not a singular World Wide Web, traversed by individuals. To be online today is to enter the global arena. Mass social media are hazardous PvP zones no one should traverse without team support.

In particular, Squads are portrayed as the basic unit of wealth creation going forward. In his piece NFTs as a Social Network: An Investment Thesis, Sander Diangelis goes one step further to make the link between Squads and NFTs:

The concept is abstract and maybe tough to grasp, but I think it’s here to stay: NFTs are an added layer to the social networking stack, establishing like-minded squads and fulfilling a fundamental human desire for status.

I’m deeply aligned with this take. I think that, for many of us, PFPs are starting to feel like the next layer on the social networking stack: allowing for communal squads to sit atop the legacy networks that have, so far, been mostly individualistic in nature.

If the Squad Wealth thesis plays out, to ignore the cultural trends of the Cosmos twitter sphere could be a costly mistake.

In summary

Putting all the above together, I put forward that investing in Bad Kids is a smart leveraged bet on Cosmos (a max convexity non liquidatable long). In particular, it’s very hard to see Bad Kids not taking off in a world in which Cosmos does.

To quote MonetSupply again:

either [the cosmos] ecosystem matures and their value grows a lot vs atom/large caps, or whole thing is a zero

Going even further, I would add that in a network of competing city states, each with their own money, NFTs are arguably a better schelling point than currency.

If you look closely you can see the nascent signs of this trend already. For example, it’s fascinating to me that we have Osmosis and Cosmoshub | Stride and Quicksilver | Notional and Informal thought leaders all wearing the same PFP, despite their respective differences.

Why am I publishing this now? This thesis has been brewing in my head for a while. And while it sounded a great deal crazier 6 months ago, today it feels like there is close to enough momentum for it to become a self-fulfilling truth. I believe that playing my part to increase this momentum now can meaningfully increase the chances of Cosmos’success.

Practically speaking, Bad Kids is probably the best performing Cosmos asset over the last 12 months, but with the current floor sitting at only ≈1/4 of an ETH (compared to a Cryptopunk floor of 50 ETH, it’s clear that we are still extremely early).

Addendum: Bad Kids transcends Cosmos

As I’ve written before, perhaps the thing I love most about Bad Kids is that you can engage with it at any level.

On the surface it’s just about having fun with frens.

But at its core it’s the freedom to think for yourself combined with the drive to bring about the change you want to see in the world.

Bad Kids may be rooted in Cosmos culture, but once you start to understand what Cosmos stands for, you begin to see why these values, rooted in a profound love for humanity and freedom, have such an appeal across ecosystems.

While some people think of Cosmos as an architecture, it is fundamentally a philosophy more than it is anything else.

A core part of this philosophy is this notion of sovereignty. Sovereignty is a difficult word to unpack, but it essentially boils down to a belief that people should be free to think and experiment for themselves, without being weighed down by groupthink or the need to adhere to someone else’s rules (in other words, it leaves little room for the ideologically rigid or “i know better than you” type of person).

To my mind, Bad Kids is the purest expression of this way of thinking. And this lies at the heart of why the project is ultimately, chain agnostic.

To zoom in on Ethereum, since experiments within the Cosmos ecosystem are continually reshaping Ethereum’s design for the better, it’s not a stretch to think of Cosmos an an Ethereum public good of sorts.

Whatever the end topology of this new internet ends up looking like, Cosmos builders will have been instrumental to ensuring we were not collectively stuck in a local optima. While today this is only really clear to those deeply immersed in protocol research, it will become more apparent to the rest of crypto with time.

To close the loop, as the Cosmos OG PFP of choice, I believe Bad Kids has already assured its place in the annals of crypto history as a timeless cultural artefact, regardless of what the future holds for the Cosmos ecosystem as we know it today.

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