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How to understand and buy CryptoPunks

An in-depth review of the CryptoPunks phenomenon, what makes them so valuable and how to buy and own one.

CryptoPunks is a pioneering collection of pixelated non-fungible token (NFT) collectables that live on the Ethereum blockchain. The pixelated characters have been making waves in the art, tech and finance worlds since 2017. They are, supposedly, the oldest NFT project in existence. While this claim may be debatable, the collection’s popularity is not. Currently, these blockchain-based, 8-bit characters are appearing in auction houses around the world, fetching millions of dollars paid by a new breed of NFT enthusiasts and art collectors.

On May 11, 2021, the UK-based auction house Christie’s announced the US$16.9 million sale of 9 CryptoPunks. It was the second biggest NFT sale in history, behind Beeple’s US$69 million sale of Everydays: the first 500 days, in March 2021. Not bad for a bit of code and some jpegs!

Conceived in 2017 as a radical idea to represent digital asset ownership, CryptoPunks has taken the worlds of art, tech and crypto by storm. The collection inspired the creation of the ERC-721 token standard that is used by most of today’s NFTs. As a result, it has helped pave the way for the CryptoArt era.

This guide looks at the impact of CryptoPunks, what makes them unique and valuable, how to buy them and whether they are a good investment.

What are CryptoPunks?

CryptoPunks is a collection of 10,000 unique low-fi digital art pieces. Each piece is an 8-bit, 24×24 pixel humanoid creature with different algorithmically rendered features. Each CryptoPunk’s rarity and ownership are certified through the use of NFT technology.

Drawing inspiration from the golden age of the English punk scene, CryptoPunks come in a variety of different forms. Some are human-like in appearance while others are based on zombie, alien or monkey-like characters. Most Punks also wear accessories such as hoodies, glasses, hats, bandanas and pipes, for example, which add to their rarity.

The CryptoPunks project was started in 2017 by two New York-based Canadian software developers, Matt Hall and John Watkinson (who make up Larva Labs). They began a project that served as an experiment in NFT technology and commoditization using blockchain technology. The experiment was to leverage NFT technology in the creation of digital art.

Regardless of where and how they appear, all 10,000 are stored on the Ethereum blockchain and cannot be replicated. Their appearances can be duplicated, but their underlying metadata cannot.

CryptoPunks and their furry cousins CryptoKitties (which gained notoriety during 2017’s bull run for clogging the Ethereum chain) are some of the first pieces of digital art to be considered CryptoArt. They are highly collectible and are beginning to appear in art markets and auction houses across the world.

CryptoPunk types, attributes and accessories

CryptoPunks are algorithmically created. Certain qualities are rarer and correspondingly more valuable than others. For example, there are only 11 CryptoPunks that look like aliens, with one, Cryptopunk #7523, dubbed “Covid-Alien”, selling for a staggering US$11.7 million in June 2021.

CryptoPunks are divided by type and subdivided by attributes and accessories. There are 5 types of CryptoPunks – aliens, apes, zombies, men and women.

Aliens, which are identified by their light blue skin, are the rarest type since there are only 11 of them in existence. Apes and zombies are the next rarest at 24 and 88, respectively. Humans are the most common types of Punks, with 3,840 female and 6,039 male versions.

CryptoPunks are also subdivided by their accessories and individual characteristics. They can have between 0 and 7 unique items. A CryptoPunk with zero attributes appears as a bald, unadorned face. There are only 8 of these bald punks, which make them rare and valuable, despite their plain appearance. Conversely, there is only 1 punk with 7 attributes, who basically looks like a bearded homeless person smoking a cigarette.

The average CryptoPunk has between 2 and 4 accessories. These may include beanies, chokers and pilots’ helmets. These types of accessories are comparatively rare in comparison to others like earrings and cigarettes. This combination of different classes and accessories creates enough diversity to make each CryptoPunk valuable in its own right.

How to buy CryptoPunks

The following section covers 4 steps a prospective buyer should take before buying a CryptoPunk.

Are CryptoPunks a good investment?

  • Step 1: Before buying a CryptoPunk, you should first carefully consider your finances and the associated risk.

CryptoPunks are still a very new and highly volatile asset class. They are definitely not a traditional investment type. There are no historical precedents for them and, therefore, no way to ascertain their future value. The NFT market is quite illiquid and highly dependent on trends and social sentiments to drum up demand. With the cheapest CryptoPunk priced at tens of thousands of dollars right now, investing is only for the brave and wealthy. If you are financially secure and can accept the risk then proceed with caution.

How can I buy a CryptoPunk?

  • Step 2: Convert your fiat currency into Ethereum (ETH) or an ERC-20 stablecoin (TUSD, USDC) at a cryptocurrency exchange, such as Binance or Coinbase.

After you find an entry into the ETH ecosystem that fits your needs you’re ready for the next step.

  • Step 3: Move your ETH or ERC-20 stablecoins to a digital wallet.

While some exchanges support NFT ownership, it is still advisable to create a digital wallet where only you can access its private key. There are several excellent Ethereum wallets available such as MyEtherWallet (MEW), TrustWallet and Exodus, but the most widely used is often MetaMask – this is the wallet we will refer to for the remainder of the article.

Once you set up a MetaMask account, transfer your ETH into the digital wallet. Depending on how much you have, you’re now ready to buy yourself a CryptoPunk.

  • Step 4: Connect to Larva Labs and pick your CryptoPunk.

Larva Labs is the primary market for these assets and, therefore, the best place to buy or sell Punks. Visit its site and connect your MetaMask wallet to the marketplace through the browser extension. You can also bid on one through the drop-down menu in your Account Details section.

When the CryptoPunks project was launched in June 2017, the current ERC-721 token standard that is so ubiquitous with NFT ownership did not exist. In fact, CryptoPunks helped inspire this token standard. ERC-721 is a set of rules for NFTs that helps uniquely identify something and secures it for sale. It is interoperable with different marketplaces.

Therefore, if you want to sell a CryptoPunk on another NFT marketplace, it needs to be standardized and “wrapped” within the ERC-721 standard. After this process, it can be traded on other platforms like OpenSea and Rarible. Each WrappedPunk, as they’re known, is backed 1:1 by the CryptoPunk they represent at the Larva Labs site.

Other CryptoPunk marketplaces

Thanks to Wrapped Punks, Larva Labs is not the only marketplace that sells these NFTs. Therefore, buyers do not need to worry about their ability to resell a punk should Larva Labs go down. The following high-profile NFT marketplaces also sell CryptoPunks:

  • OpenSea – the world’s premier NFT marketplace
  • Rarible – a smaller and more targeted NFT marketplace
  • Nifty Gateway – a renowned digital art dealer
  • SuperRare – another well-regarded digital art dealer

Can you make money with CryptoPunks?

If you want to make money with CryptoPunks, you should treat it like any other investment and do research to understand where its value is derived. While several people have made money buying and selling CryptoPunks, there’s no guarantee that you will experience the same level of success.

CryptoPunks are merely digital versions of physical collectibles, like baseball cards but without the century-long precedent. This makes them riskier but also potentially more undervalued.

Serial entrepreneur Gary Vaynerchuk, who is well-known for predicting the rise of the social media revolution since 2005, had referred to CryptoPunks as a “30-year play” as he strongly believes that NFTs are not going anywhere. However, it might not be the best idea to buy Punks, or any NFT for that matter, during the height of a bull run where valuations tend to be extremely high.

Verdict

  • There are 10,000 Punks in total, each with unique types, attributes and accessories combinations.
  • Some Punks have fetched millions of dollars.
  • CryptoPunks are the precursors to ERC-721 NFTs, which means that they need to be wrapped in order to sell them on multiple marketplaces.
  • Similar to other collectibles, CryptoPunks can be utilised as an investment asset, with its own potential risks and rewards.
  • CryptoPunks aren’t backed by anything other than a community that perceives them as valuable assets. As a result, there are no future guarantees.

Conclusion

Whether or not CryptoPunks will retain their value in the future remains to be seen. At present, buying Punks poses some risk due to the lack of historical data to go by. Nevertheless, with the cheapest one currently going for 42 ETH, these digital collectibles are beyond the reach of most retail investors. Irrespective of their insane increase in value, CryptoPunks are a revolutionary experiment in art that will likely remain historically significant for their inspirational early use of NFT technology. Who knows, as one of the first NFTs, they might be the most sought-after art pieces to be found in the coming Metaverse!

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