Don\u2019t forget to subscribe to our Patreons. Amy\u2019s is here<\/a> and David\u2019s is here.<\/a> We need your support for projects like this!<\/p>\n The full interview with Adam McBride, mentioned in this post, is up on our Patreons for subscribers. It\u2019s a great 5,000-word historical rundown.<\/p>\n <\/p>\n <\/p>\n Six weeks after Curio Cards launched, a new crypto collectible was created \u2014 one that would serve as a template for future projects to come.<\/p>\n Matt Hall and John Watkinson, two Canadian coders living in Brooklyn, New York, were inspired by the Rare Pepes<\/a> to create CryptoPunks, from their company Larva Labs. They were also fans of combat card game Magic: The Gathering.<\/p>\n The CryptoPunks are 10,000 algorithmically created pixel avatars, each represented by a crypto-token on the Ethereum blockchain. The project was initially launched<\/a> on June 9, 2017.<\/p>\n As CurioCards did before them, Hall and Watkinson had to write their own smart contract code to implement the Punks\u2019 tokens, tweaking the existing ERC-20 standard used by ICO tokens. (NFT standards ERC-721 and ERC-1155 wouldn\u2019t come along until later.)<\/p>\n The art for CryptoPunks wasn\u2019t much to speak of. The Punks resembled two-dimensional sprite<\/a> images from a 1980s video game.<\/p>\n But for Hall and Watkinson, this was an experiment in scarcity and demand. The idea was that some Punks would trade for more based on certain traits and characteristics. Most Punks are boys and girls (more boys than girls, in fact), but they mixed in a few aliens, apes, and zombies.<\/p>\n They had been fiddling with an avatar generator to create digital representations of characters. They came up with an algorithm to compose 24\u00d724 pixel portraits with a selection of attributes<\/a>, such as hairstyle, glasses, beards, and hats, to make each Punk unique.<\/p>\n It would have been too costly to put the art itself onto the blockchain \u2014 the Ethereum transaction fees would have been too high \u2014 so every Punk contract contained a hash of a composite image<\/a> of all 10,000 Punks, basically a grid of all the tiny pixelated faces. The full image was stored on a Larva Labs server.<\/p>\n If you wanted to see your individual Punk, you would type the number of your Punk into the Larva Labs\u2019 website. Other than that, you just owned a token. Later, CryptoPunks claimed to have changed this<\/a> and put the actual images of the Punks on the blockchain. But since they claimed the copyrights of the images, you still only owned the token.<\/p>\n The Larva Labs website also featured a marketplace for trading Punks. Third-party NFT platforms like OpenSea didn\u2019t exist yet, so early NFT projects\u00a0 (they were referred to as \u201ccrypto art\u201d and \u201cdigital collectibles\u201d back then) like Rare Pepes, Curio Cards, and CryptoPunks had to build the buy-and-sell mechanisms into the smart contracts themselves, and create their own marketplaces \u2014 websites that would interact with the code on the blockchain.<\/p>\n The first CryptoPunks were given away for free. Larva Labs kept a thousand Punks for themselves (Punk 0 to Punk 999) and put nine thousand up for grabs on their website. All you needed to get a Punk of your own was an Ethereum wallet, such as Mist or Metamask, and enough ether to cover the transaction, or \u201cgas\u201d fee, which was somewhere between 11 cents and a dollar \u2014 dirt cheap at the time.<\/p>\n \u201cIt was different from buying NFTs today,\u201d NFT archeologist Adam McBride told us. \u201cYou were early if you were into Ethereum in 2017. You had to get a wallet. A lot of people were using different wallets, and there were all these weird interfaces. Nothing was easy.<\/a>\u201d<\/p>\n Hall and Watkinson announced their project on Reddit. In the days that followed, only twenty or thirty Punks were grabbed, with people taking the rarest Punks \u2014 the aliens and apes \u2014 first. \u201cSomebody showed up and took all of the aliens,\u201d Matt Hall said<\/a>.<\/p>\n At the time, most of the crypto world was focused on initial coin offerings \u2014 unregistered penny stock offerings on the blockchain \u2014 and nobody was much interested in digital collectibles. But after a story on CryptoPunks ran in Mashable<\/a> on June 16, 2017, with the headline, \u201cThis Ethereum-\u00adBased Project Could Change How We Think About Digital Art,\u201d the entire available CryptoPunks collection was snatched up within twenty-four hours.<\/p>\n \u201cThat was super cool, because when we started this, we didn\u2019t even know if anybody would care at all,\u201d said Hall. Some people helped themselves to hundreds of Punks<\/a>.<\/p>\n Once all of\u00a0 the free Punks were all taken, a secondary market developed. But those trying to sell their Punks quickly ran into a problem. Due to a bug in the smart contract, after purchasing a Punk, the money would go back to the buyer \u2014 leaving the seller with nothing, not even their Punk. [Twitter<\/i><\/a>]<\/p>\n \u201cWe thought we had blown it,\u201d Hall said.<\/p>\n At least 82 Punks were \u201cstolen\u201d this way, according to<\/a> Twitter user hemba \u2014 who claims he took 69 V1 Punks himself by taking advantage of the exploit. (He also said he gave some back.) However, Hall and Watkinson told Wired<\/a> that only a dozen people were burned by the exploit.<\/p>\n The CryptoPunks smart contract was the first Solidity code that Hall and Watkinson had ever written. They learned the painful lesson of errors in coding on the blockchain: once the code is uploaded, it\u2019s there to stay. You can\u2019t edit or undo it. This mistake would return and haunt them again five years later.<\/p>\n On June 17, a day after the Mashable article ran, Larva Labs tweeted out an urgent warning<\/a> to Punk holders: \u201cDO NOT SELL YOUR PUNKS.\u201d Five days later, Larva Labs \u201cre-minted\u201d all of the CryptoPunks (V2) and airdropped them back to the original owners. The new code included bidding, so that potential buyers could indicate serious interest in a Punk. It worked like an escrow, where the ether was actually sitting in the contract for the seller to claim if they accepted the offer.<\/p>\n After that, everyone seemed to forget about the mess with the V1 Punks, and went on to focus on the V2 Punks instead. Media articles detailing the history of Punks frequently state June 23, 2017, as the official launch date of the project \u2014 as if the initial botched launch never happened.<\/p>\n Once the marketplace was up and running, Larva Labs launched a Discord channel, where Punk enthusiast could talk about various Punks and share ideas for new collectible projects. Initially, there was a small flurry of trading. Prices of Punks went from a few dollars to a few hundred dollars. On July 1, an alien sold for $2,680 in ether.<\/p>\n But in the years that followed, CryptoPunks faded into the background. After reaching a high of $20,000 in late 2017, bitcoin was on its way down in 2018. Several early NFT projects were abandoned during the \u201ccrypto winter\u201d of 2019 and 2020. But CryptoPunks sauntered along, kept alive by a small band of enthusiasts in the Discord channel.<\/p>\n In April 2019, Watkinson and Hall released Autoglyphs<\/a>, a generative art project \u2014 but this time, the generator was in the smart contract. But the generator shut itself off after creating a mere 512 glyphs. [NFT Evening<\/a>]<\/p>\n Autoglyphs raised 76.8 ETH ($13,670 at the time), which Larva Labs donated to environmental group 350.org<\/a>. [Larva Labs blog post<\/i><\/a>]<\/p>\n In September 2020, the crypto world started to take notice of NFTs \u2014 now officially referred to as \u201cNFTs,\u201d after the ERC-721 standard came about in late 2017 \u2014 and interest in CryptoPunks began to perk up.<\/p>\n By the end of 2020, the average selling price of a Punk was $5,500 in ether, according to CryptoSlam<\/a>. By early 2021, some super rare Punks sold for millions of dollars<\/a>.<\/p>\n Just before Christie\u2019s closed the bidding on the Beeple NFT in March 2021, two alien Punks (Punk #7804<\/a> and Punk #3100<\/a>) sold for $7.5 million in ether each. In June 2021, a blue-skinned Punk with a mask (Punk #7523<\/a>) known as \u201ccovid alien\u201d sold for $11.5 million in crypto at Christie’s. The buyer was billionaire Shalom Meckenzie, the largest shareholder of fantasy sports betting company DraftKings.<\/p>\n At the height of the NFT boom, Larva Labs\u2019 founders reaped the rewards of getting into the NFT business early. Of their original 1,000 holdings, they sold nine Punks on Christie\u2019s for $16.9 million<\/a> in ether.<\/p>\n The opportunity for hauling in tens of millions of dollars during this period seemed endless. Only a week before, on May 3, 2021, Hall and Watkinson had launched another collectibles project: Meebits with a supply of 20,000. Free Meebits went to existing Punk and Autoglyph holders, while 9,000 were sold in a Dutch auction (where you start at a high price and reduce it until you get a sale), netting Larva Labs $80 million in ether. [Tweet<\/i><\/a>; <\/i>The Defiant<\/i><\/a>]<\/p>\n CryptoPunks were hot enough that in August 2021, Visa Corporation tweeted about buying Punk #7610. [Twitter<\/i><\/a>]<\/p>\n Everything seemed to be going well for Larva Labs until mid-2021, when a small group of developers revived the old V1 Punks. They wrapped the V1 Punks in a new smart contract \u2014 one that fixed the original bug \u2014 to make them tradeable as an ERC-721 contract on popular NFT marketplace OpenSea. By this time, V2 Punks were also tradeable on OpenSea.<\/p>\n Twitter user Foobar claims to have created the first wrapper<\/a> for the V1 Punks on March 25, 2021. Hemba, who had admitted to stealing dozens of the original V1 Punks, cloned Foobar\u2019s wrapper in 2022 and created another wrapper \u2014 which also had an exploit in it, letting the buyers steal everything, according to Foobar.<\/p>\n \u201cImagine getting your v1 punk stolen by hemba in 2017, buying it back in 2022, and then hemba steals it again,\u201d Foobar said on Twitter<\/a>.\u00a0 Hemba denied this on Twitter<\/a>, saying he just wasn\u2019t a fan of some of Foobar\u2019s design decisions.<\/p>\n In early 2022, Larva Labs tried to blacklist the budding V1 project \u2014 but not before the founders had a chance to dump a few of their own V1 Punks. (Larva still owned 1,000 V1 Punks, just as they originally owned 1,000 V2 Punks.) Watkinson wrapped and sold 40 V1 Punks for 210 ETH, worth $622,000 at the time, via a pseudonymous wallet.<\/p>\n The CryptoPunk community was furious. They felt V1 was dilutive to the value of their \u201cauthentic\u201d V2 Punks. Hall and Watkinson tried to backpedal: \u201cWe feel like we\u2019ve had a well-principaled approach to the CryptoPunks project from the very beginning up until the moment we did this stupid thing,\u201d they said on Discord. [Cointelegraph<\/i><\/a>, Feb 2, 2022<\/i>]<\/p>\n Hall and Watkinson proceeded to denounce the V1 project on Twitter<\/a>:\u00a0 “V1 Punks” are not official Cryptopunks. We don’t like them, and we’ve got 1,000 of them… so draw your own conclusions.\u201d<\/p>\n Larva Labs said the money from selling their V1 Punks would be put into buying V2 Punks and Meebit, thereby boosting the value of those projects. They also said they would match the money they made dumping their V1 Punks, and send it to the Rainforest Foundation \u2014 the ghastly CO2 output of the Ethereum blockchain having become a subject of discussion every time NFTs were mentioned around this time.<\/p>\n Larva then tried to enforce their copyright against the V1 Punks, issuing DMCA takedown notices for wrapped V1 Punks on OpenSea. The V1 Punks community fought back. \u201cVelinova.eth\u201d said that the V1 Punks community had spoken to a “top-tier IP attorney from the U.S.” The V1 holders got the V1 Punks put back up on OpenSea for a short while before they were removed from the site again. [Tweet<\/i><\/a>; <\/i>Tweet<\/i><\/a>; <\/i>Cointelegraph<\/i><\/a>]<\/p>\n Eventually, the V1 project solved the problem by launching its own marketplace<\/a> powered by Rarible.<\/p>\n Some people felt that Larva Labs\u2019s handing of the V1s, only served promote the project further. \u201cLarva Labs fumbled the ball completely, and actually did the V1 community huge favor,\u201d McBride told us. \u201cThey tweeted about it in a really incredibly poor way. And this generated so much buzz around it that it actually launched V1 Punks. It was critical to their success that Larva Labs actually FUDed it [\u201cFear, Uncertainty and Doubt\u201d<\/i>] and that brought a whole bunch of attention to the V1 Punks.\u201d<\/p>\n By February 2022, the CryptoPunks market was cooling down \u2014 along with the rest of the NFT market. Sotheby\u2019s announced the auction of a batch of 104 CryptoPunks, which Sotheby\u2019s titled \u201cPunk It!<\/a>,\u201d aiming to fetch $20 to $30 million. The lot had been acquired by collector \u201c0x650d\u201d in July 2021 through a single $7 million transaction<\/a>.<\/p>\n \u201cToday, I\u2019m excited to announce my partnership with @Sotheby\u2019s to create the highest-profile NFT sale of all time,\u201d 0x65d tweeted on February 8. Twenty-three minutes after the action began, he canceled it due to a lack of bids: \u201cnvm, decided to hodl.\u201d [Tweet<\/i><\/a>, <\/i>archive<\/i><\/a>]<\/p>\n In August 2021, Larva Labs signed with United Talent Agency so that its NFT projects could \u201center a broader entertainment space\u201d \u2014 though nothing ever came of this. [Hollywood Reporter<\/i><\/a>]<\/p>\n On March 11, 2022, Yuga Labs, the creators of the Bored Apes project, acquired all of the CryptoPunks IP and announced they were giving full commercial rights to CryptoPunks owners. On May 7 2022, the transfer was completed, and the whole CryptoPunks marketplace moved to the new Yuga Labs-owned website.<\/p>\n Yuga Labs now had a monopoly on the top NFT collectible projects: CryptoPunks, Meebits, and all of the Bored Ape Yacht Club\u2019s affiliated NFTs.<\/p>\n![\"\"](\"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2022\/06\/cryptopunks.png\")
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