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As the first digital artwork on Ethereum with a built-in method of verifying ownership, CryptoPunks can capture more value than other encrypted collections.
Recommended reading: ” Selected Chain News｜NFT is on the rise, how to find the next potential project? 》
Written by: Ben Roy
Translation: Lu Jiangfei
With the continuous development of non-homogeneous tokens (NFT), whether in Ethereum or on various different blockchains, I believe that CryptoPunks can capture more value than any other digital art or collectibles.
However, before starting to explore why I have this idea, I need to explain the definition of some industry terms.
Non-homogeneous tokens are encrypted assets that represent unique (or “irreplaceable”) digital goods (such as artworks or video game projects). Like Bitcoin or Ethereum, these encrypted assets can be non-custodial and resist censorship Is held in the same way, and its proof of ownership will be stored on the public blockchain.
CryptoPunks is a collection of 10,000 numeric characters. These characters will constitute different degrees of rarity attributes according to their types (such as alien, ape, zombie), as well as headdress, beard, hoodie, etc. As one of the initial collections of NFT, the emergence of CryptoPunks means an important step forward in the development of the ERC-721 token standard-you know, the ERC-721 standard is the main “document type” used by most NFT projects today “.
Although NFT has just started, there are already people who are willing to pay a lot of money to buy this “PNG file made only by pixel art”. It sounds crazy-because some industry critics believe that if someone likes these CryptoPunks, would it? Can’t they right click and save the image?
I understand the people who have this idea very well, because they ignore some nuances in artistic value, and these differences are actually very important.
Next, let us compare and analyze NFT and so-called “real” art.
As we all know, the works of the great painter Vincent van Gogh are expensive. In the past ten years, many of his works have sold millions of dollars. At the same time, because I like Van Gogh, I have placed one of his well-known works-“Sunflowers” on the kitchen table since I was young, because I think this painting is very beautiful. But the problem is that I cannot sell this painting because it is a reproduction print, so it is worthless.
What does this show? The value of art (at least from a monetary point of view) is based entirely on the verifiable ownership of the original, not just because of its beauty. If someone owns an original work by a famous artist, they will get a certain status. For the wealthy, they are all based on this assumption to collect art and preserve its value. In fact, this situation has always existed, which is one of the reasons why so many artworks are traded in free ports all over the world so that everyone does not have to go to see the artwork in person.
“Sunflowers”, fourth edition, Vincent Van Gogh, 1888
Okay, now let’s go back to CryptoPunks. The novelty of CryptoPunks is that they are the first batch of digital art works on Ethereum with a built-in method of verifying unique ownership. This process is completed by cryptographic hashing, so that the wallet address on Ethereum can fully own the ownership of CryptoPunk.
As people pay more and more attention to this, interest in buying CryptoPunk has also surged. In the last quarter of 2020 and the first two months of 2021, sales around CryptoPunk have reached tens of millions of dollars, and for this rare product, each purchase transaction has exceeded 100 Ten thousand U.S. dollars. Please refer to the following chart taken from the trading price trend on the nonfungible.com platform in the past three months:
Someone also put forward another investment argument, namely: Why does CryptoPunks preserve their value over time? If you are interested in this issue, you can click on this link to read related content.
For me, the value proposition mainly boils down to two points:
- CryptoPunks is a valuable thing;
- CryptoPunks is a narrative reflexive asset (reflexive asset).
In terms of value storage, CryptoPunks only issued 10,000 punk tokens, and there is not enough room for new tokens-this is a supply crisis.
In terms of narrative, CryptoPunks has a great story: the launch of the project is very fair, anyone can get tokens for free within one day, the founders of the project are also very good, they are like “rookie cards” in the NFT field (Rookie card). (Chain note: The rookie card is a kind of star card introduced by the NBA, which is mainly to tap some new players. The price is lower but the potential is huge.)
Some people think that the current CryptoPunks price increase is a bubble. Although there may be some bubbles to some extent, I think it is because many people (including myself) have missed the repricing of certain assets for a long time. In addition, I expect that the total market value of CryptoPunks will continue to grow substantially in the next five years, and it may even be proportional to the size of the entire NFT market.
There is no doubt that NFT is of great significance to the digital art and collectibles industry, and may reach billions of dollars in the future. As the industry grows faster and faster, certain NFTs are bound to gain most of the value, and CryptoPunks is one of the best choices, because many large investors and small investors have begun to invest in CryptoPunks.
Let’s look at small collectors first. As more and more newcomers enter the cryptocurrency field, they are more inclined to collect something that is already valuable. In fact, nothing is more valuable than CryptoPunks because:
- They persevere
- They have a strong community;
- They are used by important people as Twitter and Discord profile pictures, etc.
For some ordinary collectors, CryptoPunks may be a bit expensive (at the time of writing, the lowest price is $26,000), but agreements such as NFTX and Niftex can allow small investors to participate.
The NFTX and Niftex protocols use different mechanisms to enable people to own a small portion of CryptoPunks through a group of index funds backed by real punks (NFTX) or a single punk (Niftex) to obtain partial ownership. With the joint support of these agreements, the ownership of CryptoPunks is spread among many high-end collectibles in an unprecedented way, and these tokens have also become more liquid in the secondary market.
As ordinary collectors begin to pour into this field, the value of CryptoPunks is bound to rise sharply, and those wealthy NFT collectors will also drive the market value of CryptoPunks to surge.
When talking about wealthy NFT collectors, I divide them into two categories:
- There is no cryptocurrency in the holding funds;
- There are native cryptocurrencies in the holding funds.
For those wealthy new investors, they are not insiders in the cryptocurrency industry. When they enter the NFT market, what they want to explore most is: Where is the most valuable asset? In fact, isn’t it exactly CryptoPunks? Last week, I was on the CryptoPunks Discord. There was a robot program in the forum reporting the latest CryptoPunks sales in real time. As a result, I saw a brand new Ethereum wallet that spent $1 million to buy several CryptoPunks in just one hour. If prices continue to increase in the future, will there be more and more people doing large transactions?
For those veterans in the cryptocurrency industry, they will turn CryptoPunks into part of their net assets. What’s the point of doing this? In fact, some Bitcoin veterans usually buy some altcoins at the same time they buy Bitcoin. If they make money from altcoins, they will reinvest the proceeds and bring them back to Bitcoin. The same goes for the old NFT guns. They will also involve other NFT projects. When they make money on these projects, they usually bring the proceeds back to CryptoPunks to buy more or more rare CryptoPunks. As the scale of the NFT industry continues to expand, these people will bring more and more profits back to CryptoPunks and push CryptoPunks to rise.
Ultimately, as capital will flow into this field from the bottom (ordinary investors) and the top (high net worth individuals), CryptoPunks will definitely gain a huge increase in value acquisition. In the next few years, we will see some very strong “Fat CryptoPunks” (fat punks).
Finally, I would like to thank Aaron Wright, Scott Lewis, Alex Gausman, Snowfro, ddaavvee, gmoney and JUSTIN for their comments and suggestions on the first draft of this article.
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