Forbes: How Azuki Became the Hottest NFT Project in the World?

Author: Jeff Kauflin

Translation: Meme.Mio / The SeeDAO

Editor: Long Jijiao

On January 12, at 10 AM Pacific Time, four men in their 30s living in Los Angeles released 8,700 NFTs. These animated characters, known as Azuki, were priced at $3,400 each at the time. They sold out in three minutes, generating over $29 million in sales. A few days later, Azuki also conducted a $2 million private sale.
At this point, Azuki's popularity really took off.

In the four weeks leading up to February 11, Azuki reached nearly $300 million in trading volume on several major NFT marketplaces like OpenSea. The most expensive Azuki is now trading at $500,000; the cheaper ones can be subscribed for $36,000.

In the past month, Azuki's total sales have easily surpassed more famous NFT projects like BAYC and CryptoPunks. Azuki has become the eighth largest NFT project in terms of historical trading volume.

The startup team behind Azuki—Chiru Labs—earns a 5% royalty every time an Azuki NFT is resold, meaning they have not only accumulated $31 million from the initial launch but also gained an additional $15 million in royalty income.

The four founders of Chiru Labs are all anonymous, which is not uncommon in the privacy-focused cryptocurrency world (recently, the identities of two co-founders who profited millions from the BAYC project living in South Florida were revealed, angering a vocal minority on Twitter).

**But the fifth key figure at Chiru Labs is relatively well-known, at least in the gaming industry: ** Arnold Tsang. Until two weeks ago, the 39-year-old concept artist Tsang was leading character design for Overwatch. Overwatch is a first-person shooter game published by Activision Blizzard, with 60 million registered players. Today, Tsang officially joined Chiru Labs full-time to promote the Azuki brand he previously designed in his spare time into areas like fashion apparel.

Tsang stated, "The dream of Azuki is to have a big IP, big enough to have a series of animations, and possibly games and various merchandise." He added that he chose to reveal his identity as "a commitment to trust. This is me, this is what I do. Please believe me, I won't run away with the money and live in seclusion."

Tsang and the four founders of Chiru Labs are among the recent beneficiaries of the NFT boom. In the past year, this industry, which has only developed for five years, has exploded—OpenSea alone had $5 billion in NFT trading volume in January. According to data from analytics firm Nansen, the total value of the 10,000 NFTs that make up CryptoPunks is about $4 billion, exceeding the market capitalization of Nordstrom or H&R Block.

This is also a market shrouded in mystery, filled with a large number of potential fake transactions. A recent investigation by Reuters found that the 27 most expensive NFT transactions last month totaled over $1 billion, but were conducted in only two wallets; the top 100 expensive NFT transactions occurred across just 16 wallets.

Top collections fuel the NFT craze
According to Chainalysis analysis, over 1,000 NFT series are launched each month, and the mystery lies in why only a few projects succeed while the vast majority fail.

Andrew Steinwold runs a $100 million NFT investment fund in Chicago, which has subscribed to some Azuki. In his view, the artistic quality of Azuki is "relatively high." Other collectors have pointed out the unusually high productivity of the Azuki website, which features a gallery with complex filtering functions similar to OpenSea.

You can find an NFT artwork by its presentation through hats, clothing, or facial expressions in the images. Chiru Labs has also released open-source software that allows others to mint multiple NFTs at lower gas fees, which can otherwise reach up to $300 each time.

Tsang's theory is that Azuki captures the "rebellious culture of skateboarders," which resonates well with the culture of NFTs and the cryptocurrency space.

Another factor driving interest in Azuki is the pent-up demand for anime art. In recent years, Netflix has increased its anime content, and by the end of 2020, it announced that 100 million households had watched anime shows on Netflix in the previous year. In August 2021, the 0N1 Force NFT series was launched in an anime style.

Less than two weeks after its release, its average price rose from $1,500 to $30,000 (since then, interest in the project has sharply declined, with some blaming its leadership team for poor management).

Even the creators seem a bit confused. As one of the founders of Chiru Labs, Zzzagabond is the type of account online that has a strange nickname. Zzzagabond suspects that Asian investors are driving some of the most expensive Azuki NFT subscriptions.

"My intuition is that these Asians are seeing art that truly resonates with them for the first time," said Zzzagabond, who was born in China. "I've had several conversations with Asian investors, and they told me this is their first NFT purchase."

Zzzagabond leads the Azuki project and mentioned that he previously worked in business development at Google and then spent four years at a decentralized finance platform (he declined to disclose which one). Another founding member, who goes by the name Location Tba, said he was a software engineer at Facebook. There is also a founding member named Hoshiboy, who claims to have incubated two projects at Y-Combinator.

Why are they so secretive about their identities? "If this project doesn't really involve our identities and past experiences, then there's a sense of mystery, magic, and allure," Zzzagabond said. "I think we will eventually be doxxed," he added, using the term to mean "to reveal someone's identity on the internet."

To build a sustainable business project, Chiru Labs will attempt to focus on the Azuki brand and explore new revenue sources beyond royalties. At the end of February, the company will launch an Azuki clothing line starting with a red jacket, with the ultimate goal of reaching Hollywood. Perhaps a TV show will pay for the rights to use Azuki's IP, Zzzagabond mentioned.

He speculated that perhaps in the currently popular reality TV show The Masked Singer, one of the costumes might feature an Azuki design. In the metaverse, there are also many similarly vague plans targeting Azuki's IP. After all, when you've made over $40 million out of thin air in a few weeks, everything seems possible.