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What are CryptoPunks: A simple explanation

Posted by
Ian Kane

Learn all about million-dollar pixelated faces

CryptoPunks is one of the most talked-about NFT collections available today. But why? How have these poorly illustrated pixelated faces become so hugely popular and why has their value increased so exponentially?

In order to fully understand the story, it’s vital to first understand what a CryptoPunk is. A CryptoPunk is a non-fungible token or NFT. NFTs are unique digital items that are issued on a blockchain which in many ways hold similar qualities to items in the real world. Think about physical goods like limited-edition trainers or clothing, collectible baseball cards, or original artwork.

It’s important to reiterate before we go further that CryptoPunks were the first NFT collection and so should be considered as the ‘cave paintings’ of the NFT world. 

Some are more valuable than others due to who created them, their scarcity, and also their qualities. In the real world, these items can be put in safe boxes or simply displayed with pride. In the case of NFTs, the owners of a CryptoPunk can hold them inside their blockchain wallet or display them in their virtual art gallery.

Before going any further, it is also vital to understand the concept of a store of value and why that’s important here. A Vincent Van Gogh original painting is certainly a store of value. i.e it should increase in value over time. This is true mainly due to a few characteristics of the painting and its creator. He’s dead, he was revered as an artist and his ‘brand’ is well-known around the world. 

A brand new Tesla is not a store of value due to the fact that as soon as you drive off the forecourt it will depreciate around 10/15% in value and continue to do so for its lifetime. An NFT therefore with true scarcity and uniqueness can be considered a digital store of value, but only when there’s historical significance, a famous creator, remarkable utility, or for example artistic excellence in play.

From small beginnings come great things

The beginnings of the CryptoPunks story is fascinating as it appears what occurred was a mass experiment to gauge people’s interest in NFT ownership. CryptoPunks were the first non-fungible tokens on Ethereum and arguably the inspiration for the ERC-721 standard that powers most digital art, collectibles, virtual worlds, and blockchain game items today. 

When creators Larva Labs launched CryptoPunks in June 2017, they released 10,000 NFTs with proof of ownership tied to the Ethereum blockchain for free. Anybody could claim one for free, as long as they had an Ethereum wallet and paid the gas fees. That’s right, free! Each one was algorithmically generated meaning no two characters could be alike with some having traits rarer than others. More importantly, there will never be more than the original 10,000 CryptoPunks. 

Instantly, two things should spring to mind. Scarcity – The fact that only 10,000 punks have been and will ever be created. Furthermore, the traits given to each punk define their market value. Not all that dissimilar to the physical examples given previously. Thinking about the value of bitcoin is also a good precursor for understanding CryptoPunks further as bitcoin has been set to a finite amount, therefore, justifying its value increase over time. 

So why are they worth millions of dollars? 

The base price of a CryptoPunk has steadily risen since its inception. The original owners who received them for free sold them on for small profits to new owners, who then perhaps did the same. At this point, those owners probably had no idea what they had in their hands and it is very likely an extremely rare punk changed hands back then for a measly amount. Luckily, because everything is stored on the blockchain we can dig far deeper. 

Using an example of the most recent high-value CryptoPunk sale according to DappRadar data we can backtrack through its 4-year history and see where the price started, then follow its journey to $266,000. 

CryptoPunk#2000

CryptoPunk#2000, which sold on the 13th April 2021 for over $266,000 provides a perfect example to further investigate. As previously mentioned all CryptoPunks are unique so the first port of call is to find out what makes this punk so special – if anything. 

The two rarest features are the big shades which only appear on 5% of punks and the tiara which only appears on 0.55% of punks. The fact that it’s female and has an earring are also valuable features. Now let’s look at the history of the CryptoPunk since its birth as interestingly the owner never listed the punk for sale but instead just kept receiving various priced offers. Which in itself should have been an indicator they had something valuable in their hands. 

Four years ago the punk was transferred to its owner and the first bid didn’t arrive until 2020 when the hype around NFT ownership really started reaching the media. The cheeky bid was by the now well-known NFT and Crypto art influencer Pranksy. It’s safe to assume Pranksy had spotted a punk with great qualities in the hands of an owner they believed may not appreciate that. But, after having a cheeky bid of 1.5 ETH ignored, Pransky gave up on the NFT and canceled the offer. 

Then, as if Prankys bid gave the punk legitimacy more offers came flying in. First, an offer of 0.55 ETH was ignored, and then a bid of 8 ETH. Presumably, this bid was also ignored and so canceled by the bidder. Then things started getting really interesting as a bid of 50 ETH came in from a user displaying a CryptoPunk as their avatar. But, once again the bid was rejected. It would appear Pranksy misjudged the owner of CryptoPunk #2000. 

Then, after a period of no-bidding or listing activity things came back to life. On the 12th of April 2021, a bid of 72.69 ETH came in, which on that day was worth approximately $152,000. Once again the bid was canceled. 

What’s happening here is that an owner has patiently taken bids from anonymous buyers for over 4 years, always believing their punk was worth more and also strengthening that opinion with those very offers.

After all the bids and rejections the owner finally listed the CryptoPunk for 120 ETH or around $250,000, almost 50 ETH higher than the last highest bid. The CryptoPunk then sold 5 hours later for 120 ETH or $266,000 at the time of writing. Not bad at all for something they claimed for free.  

Whoever bought that NFT believes that the value of it will surpass 120 ETH one day or they plan to flip it amidst the current buying frenzy. Either way, the value is derived from its scarcity, ability to store value as ETH, the fact CryptoPunks were the first NFT collection, and the unique traits that make it more desirable to own. 

NFT Tracking 

The DappRadar NFT tracking page provides information on the top NFT collections, sales, and marketplaces and provides live NFT data on CryptoPunk sales. Like the example given in this article, there are countless more showing the lifespan of the NFT the offers received and rejected, and overall, its rise in value.

Furthermore, DappRadar also produces regular NFT valuation reports that explain in more detail the traits and qualities that make NFTs more desirable. You can check out our guide on How to Value CryptoPunks here

Source: DappRadar

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