Investment Thesis on Pak: A Cube and $ASH
Pak's Currency: A Cube + $ASH represent one of the best risk-adjusted returns and tokens with intrinsic value backed by future NFTs created by Pak and other artists
After PAK’s $17 million Open Edition The Fungible (Sotheby’s x NiftyGateway), PAK has created a burn process that allows PAK pieces (and NFTs from many marketplaces) to be burned for $ASH (ERC20). $ASH is already accepted on OpenSea and Rarible. Almost 1/3 of all PAK pieces burned (excluding collabs).
$ASH (or “ASH”) has intrinsic value and use cases as PAK will accept ASH for future drops and potential 1/1s. Other artists may join in accepting ASH. PAK A Cube NFTs also have a floor of 600 ASH (if all PAK pieces were burned). PAK aims to create an ASH economy that goes beyond a social token.
“ASH will have a fair launch… I will start with 0 ASH...and I will only earn it when someone buys my work from me and pays me with $ASH.” -PAK (April 29, 2021)
ASH Mkt cap (August): $8.5 million; LP: $234k; Daily Trading Volume: $50-$150k
Dextools (buying/selling): https://www.dextools.io/app/uniswap/pair-explorer/0x72af4d1d175672d1f99506e68e6e7cff484be4de
Top ASH holders include top NFT investor/collectors who publicly support PAK: Illestrater/Tim Kang (+150k ASH), 888 (48k ASH), SilverSurfer (+30k ASH)
Some of PAK’s goals with ASH:
1) Clean up the NFT space by providing an incentive to burn lower-tier ERC works in return for receiving ASH 2) social/community token
3) Medium of exchange
4) Store of value
5) Challenge NFT collectors by letting them “curate destruction” and decide what dies.
“Everyone tries to curate existence, I will curate destruction instead...and create value with it. Because sometimes, cleaning a garden makes it more valuable for all.” -PAK (April 30, 2021)
Background: How ASH is minted – Burn Mechanism and Quantitative
1. ASH can only be minted by burning NFTs. +2400 PAK NFTs burned so far (out of 6800 total PAK NFTs excluding collabs). There is a High Tier burn for Pak NFTs and a Low Tier burn for almost all other ERC721 NFTs (1 is the starting amount of ASH / NFT so that would be 1000 ASH for Pak NFTs):
2. ASH per NFT declines continuously according to decline curves, halving at 5 million ASH (minted) supply. All NFTs on Rarible, SuperRare, etc. can be burned at in the Low Tier yielding <1 ASH / NFT. The Low Tier declines faster so as to not dilute ASH supply.
3. Currently, 1 PAK NFT yields 740 ASH; current ASH supply of 2.1 million.
50-Cubes and Complexity NFTs have even been burned (valued at +$15-$30k each). 22 5-Cubes NFTs have been burned and many other multi-cubes (Source).
1. World-Class Team and Exposure to Generative Art Boom
Pak is a leading anonymous creator in the NFT art space, often employing algorithmically driven geometric shapes and sharp contrasts in black and white. Pak is a programmer as well and created Archillect, an AI that discovers and shares stimulating visual content followed by Elon Musk, Jack Dorsey, etc. Pak’s works, while seemingly simple, tend to create controversy and discussion and challenges the status quo: for example, The Title collection are identical NFT images leading to the same file, but with different titles and vastly different prices
In terms of all-time NFT sales, Pak is # 2 behind Beeple. The Fungible/Sotheby’s in April is the most successful NFT Open Edition (“OE”) and the first NFT drop done on a major auction platform ($17 million in sales and 6.3k NFTs sold). Floor pricing on A Cube is 5x original (day 1) price. Pak has been active in the world of digital art/design for over two decades*
Pak is collector focused and also pushing the new smart contract medium:
o Free giveaways to people who predicted correctly / significantly impacted NFT art space
o Whale rewards: (“Complexity”) for the top 100 buyers of The Fungible OE
o Extremely generous: supports community development
o Supremely clear communicator and wordsmith: keeps market engaged
Generative Leader: Pak understands the importance of being on-chain or in-chain for NFTs, utilizing the full ability that smart contracts allow. Fade, sold in June at Sotheby’s for ~$500k, is the first major generative fully on-chain NFT sold. Generative art is an especially hot space right now with editions from Art Blocks and generative artists sometimes selling for millions.
Does not lack funding: PAK has sold +$20 million in 2021 alone (including secondary royalties) and has plenty of funding to support future works.
PAK has also worked with Manifold.xyz on Burn.art / ASH. Manifold is the #1 smart contract creator and has created contracts for all the major NFT artists (Fewocious, Mad Dog Jones Replicator, Fvckrender, etc.). This is essentially the ASH project team.
2. Store of Value
ASH is backed by the future digital art to be created. ASH represents a call option on purchasing a % of all future PAK pieces. Notable artists like 3LAU have also hinted at PAK collaborations and possibly accepting ASH (not confirmed but 3LAU has mentioned needing to talk to PAK and ASH many times in his discord).
3. Attractive Valuation
PAK 1/1s have gone for $1.3-$1.4 million (The Pixel, The Switch) in H1 2021 and 1/1s like Fade have sold for +$500k. If PAK were to release even a small OE or 1/1 auction denominated in ASH, it would significantly increase the value of $ASH relative to its current market cap. In an auction, the demand for ASH will be far higher than the winning bid as top bidders must be “good” for the amount they bid (ASH demand in 1 ASH auction ~ # top bidders x average bid in ASH).
Comparable market cap: #1 selling NFT artist Beeple has ~5100 Everydays. Conservative total sales per NFT of $1 million per Everyday -> Beeple’s entire body of work could be worth around $5 billion as of August 2021.
Target ASH market cap: assuming $10 million of new Pak NFT sales per year x 10 years and 20% is denominated in ASH, that represents $20 million ASH demand with 0 contribution/involvement of other artists. Target market cap: $20-$50 million representing a 3x-7x upside.
4. Catalysts Forthcoming
While there has been limited news since Burn, PAK has hinted there will be an ASH drop and news coming. Currently, to be sure, ASH has no utility.
“Cooking something yummy for you all. For quite some time." -Pak (July 27, 2021)
5. A Cube NFT: Alternate play on ASH is to purchase A Cubes and multi cubes from The Fungible as PAK has hinted multi-cube utility (exclusive access) and the ability to “spawn” things. PAK NFT’s outside The Fungible do not appear to provide such access as A Cube which offers 740 ASH currently and has a floor of 600 ASH. Currently, A Cubes are for sale in the ~$2.8k range.
1. Liquidity pool is fairly small so any sizable position (>$100k) would require several days of build-up
2. ASH currently has 0 utility since Pak has not launched (nor minted) any new NFTs since early June
3. ASH is not an NFT, but an option to purchase NFTs
4. ASH price is too low to encourage low tier burns (that yield 0.8 ASH as gas costs are more then ASH’s current $ price)
5. If PAK gives up on ASH but this is unlikely as Pak as been engaged on Twitter supporting ASH:
The detail and analytics are awesome, thank you.
Nice analysis. Enjoyed it!