CryptoPunk'd - The Daily Gwei #168

Non-fungible drama.

As I’m sure you’ve all seen on Twitter lately, the NFT space is really heating up again. One particular project that is getting lots of attention is CryptoPunks - the original Ethereum-based collectible launched back in 2017. The reason so many people are talking about CryptoPunks lately is because the market for them is going crazy with some punks going for hundreds of thousands of dollars!

Many people seem to find it hard to understand why digital collectibles can and do have value. Well, there are lots of reasons and it really depends on what the collectible actually is. Let’s use CryptoPunks as an example here - basically, the rarest ones are those that have unique traits and one of the reasons the punk above sold for $761,000 is because it is only 1 of 9 punks (out of 10,000) with the ‘alien’ attribute. But this doesn’t go deep enough as to why someone would pay so much money for what many people consider to just be a pixelated image that they can save to their hard drive by right-clicking on it.

Well, what they are paying for is:

  • The cryptographic proof of ownership of the punk (this cannot be altered without taking over the entire Ethereum network)

  • Being part of an exclusive club as there are only 10,000 punks available (acts as a status symbol)

  • Scarcity as only 9 alien punks exist (status symbol/bragging rights)

  • Collecting punks in general (maybe they want to be the person with the most punks)

  • Nostalgia as they may have been around when CryptoPunks were created in 2017 and want to own some because of that

  • To own a piece of original NFT culture

  • General speculation (they believe someone else will buy it for more later on)

There’s probably more reasons that I’m missing here but I think that is the gist of it. If you’ve never collected anything before then the above reasons probably won’t resonate with you personally but you should still be able to see why it resonates with other people. Maybe it helps you to think about what things you find valuable and would spend money that other people wouldn’t - I’m sure you could think of something!

Okay so I’d be remiss if I didn’t mention the fact that it is quite easy to spoof/wash-trade these things on Ethereum. All a person would have to do would be use a few different Ethereum addresses to create the illusion that these punks were selling for a high value (by selling them to their own addresses). Though in the above punks case, it was actually bought by a known entity called FlamingoDAO so it’s inaccurate to say that all NFT trading is money laundering or fraudulent. The same is true for the non-digital art world but that hasn’t really stopped people from being art collectors.

In the end, value is subjective and different things will be more or less valuable to different kinds of people. There’s also the concept of time which plays a large part in the value of all assets. As an obvious example, a year ago someone would’ve only paid $150 for ETH but today they’ll pay $1400. On top of that, there are some people who will never pay anything for ETH because they don’t consider it to be valuable or don’t care to own it (same is true for CryptoPunks or anything else). Obviously ETH as an asset isn’t a 1 to 1 comparison to digital collectibles for various reasons but I don’t think that takes away from my point.

Have a great day everyone,
Anthony Sassano

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All information presented above is for educational purposes only and should not be taken as investment advice.