CryptoPunks are non-fungible tokens (NFT) that are collectible pieces of crypto art on the Ethereum blockchain. They are 8-bit image files with a total of 10,000. Since they are on the blockchain, their ownership and legitimacy can be publicly validated.
Normally, digital image files can be replicated and distributed to anyone. However, the blockchain and NFTs, are attempting to create ownership of these files in the same manner that art can be shared with the public, but also collected, speculated, and sold by collectors.
Some people believe it's a new asset class, some simply see it as another collectible item, while others see it as nothing more than a bubble that makes the Dutch "tulip bubble" in the 1600s look reasonable. While this argument is not going to be resolved anytime soon, what cannot be disputed is that prices of CryptoPunks have been skyrocketing in recent weeks.
Some crypto punks have recently sold for over a million dollars. And over the last couple of years, they have gone from being worth in the four figures to being sold for six and seven figures.
CryptoPunks Background
Cryptopunks was created in 2017 by Larva Labs which was founded by Matt Hall and John Watkinson as a project to introduce art as an asset on the blockchain. At first, they were distributed for free but a handful of them skyrocketed in popularity with some selling for more than $7 million. It's the most expensive piece of digital art other than Beeple's collection of art that was sold for $69 million.
There has been some mainstream validation as well. The famous auction house, Christie's, was involved in the selling of cryptopunks. Additionally, Visa recently purchased a cryptopunk for $150,000.
Cryptopunks are sold on a variety of marketplaces. However, the two most common are OpenSea and Larva Labs' own marketplace, where users can buy and sell their own. One appeal of cryptopunks is that the supply is fixed which means that no more new ones will be created after the initial 10,000.
Many other projects have been created with similar concepts to cryptopunks, however as the originator of the concept, there is more demand and liquidity in the marketplace.
For people of a certain generation, it makes no sense that a digital image file could be worth so much, so the easiest explanation is that this is simply another bubble fueled by greed and low rates. However, younger generations may think about it differently given that they are used to economies in video games where digital items have value. Additionally, people buying art has mainly been about acquiring status and signaling taste. For digital-native people, cryptopunks may be a digital way to signal status and taste.