Ethereum L2 abstract network will stop operations by mid-December, joining a growing list of L2s and crypto platforms calling it quits.
The chain was acquired in 2024 as Frame and later rebranded and improved by Igloo Inc., the company behind the NFT marketplace Pudgy Penguins.
What derailed Pudgy Penguins’ Ethereum L2?
In an X post, Luca Schnetzler, Igloo’s CEO, justified the move, saying they can’t bleed more money from Pudgy Penguins to fund a chain that hasn’t found product-market fit.
After losing tens of millions of dollars over two years building consumer products, we still had not found product-market fit. We could no longer justify taking from the Pudgy Penguins business.
Schetzler further highlighted that the chain’s woes were deepened by limited DeFi activity and liquidity.
AMBCrypto found that Abstract’s TVL (total value locked) contracted by 83%, from $56 million to $9.5 million. That’s about a 6x decline from the little DeFi activity it had in the past year.
The stablecoin market cap, which tracks liquidity, also trended downwards from $12M to $5.6M.
Besides, Schnedtz cited “prohibitively high costs” as a setback for the chain’s growth in key winning areas. Worth noting, Blast, another L2, also announced it would wind down, citing the same reason.
That said, airdrop farmers, users who bring utility to new platforms expecting to be rewarded with the project’s token, seemed disappointed.
Previously, Abstract announced XP, a reward or point system that let users farm in anticipation of the final token debut. Some users felt they should be compensated now that there won’t be a token.
I think after encouraging users to farm points for a couple years, you have kind of a duty to launch the token if you’re not going to compensate them some other way. Some spent a lot of time, money, and effort on accumulating XP. Not great.
But what’s the need to issue a token that will eventually go to zero if you shut down? It would raise the scam claims that rocked Blast’s BLUR.
In fact, Igloo CEO Schnetzler echoed a similar sentiment and added,
A token only works if there is something driving demand to it, and launching a token that we don’t have conviction in would have been a disservice to our community.
Will PENGU benefit from Abstract’s shutdown?
The exec said their focus will return to Pudgy Penguins to make it a “global and cultural phenomenon.”
Interestingly, the update saw a $1 million freshly funded wallet jump in to acquire PENGU. Perhaps the investor viewed the development as a bullish catalyst for the memecoin.
On the price charts, though, PENGU was down 21% from its recent high of $0.01. However, the pullback and downtrend could be due for a reversal if the $0.0089 support (golden zone) holds.
Final Summary
- Pudgy Penguins-backed Abstract will shut down by mid-December, citing “millions” in losses.
- The CEO said they’ll focus on PENGU, triggering renewed whale interest in the token.
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