Right now it’s nearly impossible to scroll through any cryptocurrency-related forum or Twitter thread without seeing a colorful profile picture of a person, penguin or ape with randomly generated attributes. The pictures are derived from multiple collections of non-fungible tokens (NFTs) on the Ethereum blockchain. Many members of the community strongly believe that NFT collectibles are the next generation of art.
The most popular collection of NFTs right now is a set of 10,000 pixelated pictures of randomly generated characters called CryptoPunks. Even celebrities are investing in the project, including rapper Jay-Z, NFL wide receiver Odell Beckham Jr., entrepreneur Gary Vaynerchuk and internet personality Logan Paul. What’s even more shocking is the price tags on these NFTs. Most, if not all, punks are now worth more than a decently sized house. The cheapest punk available to purchase in August was priced at 66.66 Ether — worth about $222,000 now.
What are CryptoPunks?
CryptoPunks were created by Larva Labs, an experimental software company, and were intended to be its first foray into NFTs and art. Larva Labs Co-Founders Matt Hall and John Watkinson built a game and a few mobile applications by the time they started working on CryptoPunks. They likely had no idea that this simple art project would outshine everything they have accomplished before. Larva Labs minted 10,000 unique characters with a myriad of different attributes that anyone with an Ethereum wallet could have redeemed 1 for free at release. They were all quickly claimed and have since risen dramatically in price.
You can think of CryptoPunks as a type of cryptocurrency, although they are quite different from Bitcoin and other regular cryptos. Most fiat currencies and cryptocurrencies are fungible, meaning that each asset of a certain type is identical in value and can be mutually substituted. Non-fungible tokens, as you probably guessed, aren’t identical to others of the same type. Each CryptoPunk is a unique token on the Ethereum blockchain, representing a collectible image. They are similar to rare baseball cards, stamps and anything else that people like to collect. They don’t have any real uses beyond this, but they are still incredibly popular and fetch ridiculous amounts of money.
Largest CryptoPunk Sales
Investors have spent billions of dollars on NFTs in the last few years and a large portion of total sales come from CryptoPunks. The most expensive NFT ever sold was not a CryptoPunk, although most of the top 10 were. CryptoPunks with the rarest attributes that only a handful of them have can go for millions of dollars worth of Ether. The most expensive Punks so far, #7804 and #3100, both sold for 4,200 Ether (each worth $7.67 million at the time and nearly twice that as of mid-August). Both have the alien attribute, the rarest type of punk with only 9 ever minted out of 10,000. However, neither of these is the absolute rarest NFT in the collection. CryptoPunk #8348 is the only punk with 7 attributes, possibly making it the most expensive if it's ever sold again.
Above are 2 of the largest punk sales. Each Alien Punk shown above sold for over $8 million, and the only CryptoPunk with 7 unique attributes is listed for $200 million.
Why are CryptoPunks Valuable?
CryptoPunks are valuable because they are popular and scarce. Thousands of people are willing to buy them for a lot of money, and there are only a few available. The reasoning behind why Bitcoin is worth so much is similar, and there are far fewer CryptoPunks than Bitcoin. Their value is also higher because they were one of the first collections of NFTs ever minted. Rare attributes make specific CryptoPunks even more expensive because they are more scarce.
CryptoPunks and most NFTs in general have no inherent value beyond what investors pay for them, but that's no different than many other cryptos. There are also a few attributes like the hoodie that many investors seem to prefer over others that are rarer. Crypto investors with a lot of money to throw at NFTs probably want to find themselves a stylish profile picture that will hopefully increase in value too. Therefore, rarity isn’t always the main consideration in the NFT market.
How to buy a Piece of CryptoPunks
One of the largest issues the NFT market faces today is accessibility. You might find CryptoPunks interesting but can’t imagine dropping hundreds of thousands of dollars worth of Ether for a picture. Luckily, you don’t need to buy an entire punk. The decentralized platform on Ethereum called unic.ly and a few others break punks up into tokens, allowing users to buy a piece for much less than the total price.
Unfortunately, most NFTs are not fractionalized so you won’t have too many choices. Unic.ly split up a relatively large collection of CryptoPunks into thousands of tokens called uPunk. To buy some uPunk from unic.ly, first, make sure you have some Ether in a software wallet like Coinbase Wallet. Some of the best trading platforms to purchase Ether from are Coinbase, Binance, Gemini, Voyager and Crypto.com. Then go to the unic.ly website, find uPunk and click Buy. You will be taken to a swap page on the site to easily swap Ether for uPunk.
If you want to get started with NFTs and DeFi, check out some of the top U.S cryptocurrency exchanges shown below.
Are NFTs a Bubble?
NFTs could certainly be overvalued significantly, and they likely won’t hold value well through crypto bear markets. However, the most popular NFTs, like CryptoPunks, will likely hold up better than many other less popular projects. Altcoins during bear markets often see even larger drops than Bitcoin and NFTs may act similarly. Altcoins may perform better because many of them have more functionality than NFTs. The largest exception to this right now is the NFT-based game Axie Infinity. The game is built around unique battling creature NFTs called Axies that can breed with each other to make more Axies. Hopefully, new projects will see the game’s success and explore how they can make NFTs more useful and functional in the future.
The Future of CryptoPunks
If any collection of NFTs out now has a bright future, it's probably CryptoPunks. The project is still the most popular and influential in the market, and punks are selling for more than ever. Larva Labs’ other NFT projects have been extremely successful, too — especially Meebits, which are unique 3D characters similar to CryptoPunks. Meebits are much newer and not quite as popular, but the cheapest still sell for a few Ether each. It might be smart to watch for new projects from Larva Labs because so far, all of the platform’s NFTs have skyrocketed in value.
About Henry Stater
Henry is an expert in all things crypto. He stays up to date with all the latest coins, platforms and technologies in the field. He has particular expertise in the burgeoning decentralized finance ecosystem and loves trying out all the new platforms. He also always follows major events in other financial markets and geopolitics as a whole, especially when an event’s effects ripple through the crypto market.