Pudgy Penguins’ Abstract Network Struggles to Hold Liquidity

On its debut, the network processed an impressive 711,000 user transactions, signaling strong initial interest.

Source: Pudgy Penguins via X

However, a closer look at the numbers reveals a different story. According to L2Beat, The total value secured (TVS) sits at just $33.37 million in ether (ETH) and stablecoins—significantly lower than the massive inflows seen in other high-profile Layer-2 launches.

Source: L2Beat

Liquidity concerns are becoming increasingly evident. NOXA, Abstract’s native decentralized exchange, has seen a sharp decline in total value locked (TVL). From an initial $515,000 on launch day, its TVL has plummeted to just $109,231, according to data from Defi Llama. That drop has overshadowed the project’s ability to retain liquidity despite the substantial early transaction activity.

Source: DeFi Llama

The platform was marketed as the start of a “new era of consumer crypto,” offering users a simplified onboarding experience that allows wallet creation through email. While that approach was expected to bring mainstream adoption, the network’s ability to hold user engagement remains in question.

Abstract introduced an incentive mechanism where users can accumulate “XP points” through interactions with the network, with the promise of unlocking rewards. However, the reception has been lukewarm. A supporter of Abstract said:

 “Most people don’t care about XP as much as flipping their NFTs.”

The NFT sector has struggled to reclaim the heights of the 2022 boom. OpenSea’s trading volume, which spiked in December amid airdrop speculation, is now averaging $15 million per day in January—a steep drop from $160 million daily three years ago. That trend has impacted interest in blockchain-based reward systems as users increasingly prioritize immediate financial incentives over long-term engagement schemes.

Despite its struggles, Abstract allows users to bridge funds, swap tokens, and launch new tokens via zoo.fun, a token launchpad similar to pump.fun. However, none of that has been enough to bring the liquidity required to sustain the network’s growth.

Luca Netz, CEO of Pudgy Penguins and the driving force behind Abstract is steering the project away from traditional DeFi-heavy applications that typically attract liquidity. He made his stance clear, stating:

“If it’s not fun and viral there’s no reason for you to build on Abstract. I’m optimizing for fun, viral, simple, stupid. If you want to build the next DeFi application, I really recommend you use Berachain or Arbitrum.”

That strategy sets Abstract apart from its competitors, which tend to focus on maximizing DeFi adoption. While Netz’s vision aims to cultivate an ecosystem that thrives on entertainment, social engagement, and viral trends, it remains uncertain whether such an approach can sustain long-term user investment.

The market has not responded kindly to the launch. Pudgy Penguins’ native token, PENGU, has dropped 5.80% in the past 24 hours and is down 40% over the last week. While broader market trends have been weak, some analysts argue that the lack of direct rewards for Pudgy-linked assets on Abstract has accelerated the token’s decline.

On-chain analytics platform Parsec Finance weighed in on X, stating:

“The reaction suggests that [Pudgy Penguins NFTs] were being priced with the expectation of a mainnet [token generation event] with a healthy drop to Pudgy holders, not a prolonged XP/Points program.”

That sentiment reflects a common issue in crypto—investors expect immediate value rather than long-term incentives, and when expectations are not met, sell-offs quickly follow.

Despite its network struggles, Pudgy Penguins is gaining ground in the NFT space. According to Messari, the collection has been closing in on CryptoPunks in terms of floor price, a development that could signal a shift in dominance within the NFT market. The late 2024 surge in Pudgy Penguins’ valuation was fueled by strategic airdrops and a growing presence in both Web3 and mainstream markets.

Source: Messari

CryptoPunks, once the gold standard for NFT valuations, has experienced fluctuations but remains a significant force in the space. That shift highlights the changing dynamics of NFTs, with newer collections challenging long-established names. If Pudgy Penguins continues on that trajectory, it could redefine the pecking order in the digital collectibles market.