CryptoPunks: The NFT Gold Standard

read time 4 mins

Welcome to Bit Education. A daily newsletter where I provide simple, informative articles to enhance your knowledge, protect your investments, and feel at peace with cryptocurrency.

Today at a Glance:

• What are CryptoPunks? How they became the standard for NFT collections.

• Understanding digital scarcity. How each CryptoPunk is unique.

• Flash Loan, the lead to the $500M CryptoPunk sale.

CryptoPunks: The NFT Gold Standard

CryptoPunks is an NFT (Non-Fungible Token) collection on the Ethereum blockchain. The collection launched June of 2017 by Larva Labs, and was inspired by the London punk scene, cypherpunk movement, and electronic music artists Daft Punk.

The project was inspiration for the ERC-721 standard for NFTs and the modern crypto art movement. It has since become a part of cryptocurrency and decentralised finance ecosystems on multiple blockchains.

CryptoPunks is commonly credited with the NFT craze of 2021, along with other projects, CryptoKitties, Bored Ape Yacht Club, and the sale of Beeple’s “Everydays: The First 5000 Days”.

Digital Scarcity

CryptoPunks are digitally scarce items, with 10,000 tokens total, the volume will never increase. Each token is algorithmically generated, and no two characters are exactly alike. Some traits are rarer than others, they typically represent humans, but there are special types, Zombies (88), Apes (24) and Aliens (9).

The collection was originally released for free, collectors only had to pay the ETH “gas fees” which were very low at the time. Since its release CryptoPunks have traded a total volume of $2.59 billion.

Because CryptoPunks are digitally scarce, and the supply is fixed, the value of a CryptoPunk would increase assuming the demand increases. Simple supply and demand.

Flash Loan

In October 2021 a single NFT transaction was made for 124,457 Ether (US$532 million) regarding CryptoPunk #9998. Much higher than any previous NFT sale.

A lot of speculation was made on how this was possible, many considering it to be a scam. Larva Labs stated that the purchase was made with a flash loan. The NFTs owner bought the item with borrowed money, taking out and repaying the loan within a single transaction.