It’s the most expensive NFT ever sold, at least on paper. A few days ago someone bought a CryptoPunk NFT, or nonfungible token, for 124,457 ethereum – about $532 million. However, as is often the case in NFTs and cryptocurrency, things aren’t exactly what they seem.
CryptoPunks are collectable pieces of digital art that have been algorithmically generated, each with its own traits and distinctive attributes.
There are a total of 10 000 Cryptopunks and each punk is completely unique because of the combination of certain accessories and traits.
Some attributes are shared only with a few other Cryptopunks which makes certain punks more valuable than others.
The concept of Cryptopunks started as an experiment into the value of non-fungible tokens and digital art. It begged the question: could a few lines of computer algorithm code translate to a feeling of meaningful ownership?
Cryptopunks launched in 2017 at a time when the NFT hype was non-existent and was initially given away for free.
Over the years, the artworks gradually became more popular and reached their famed status after auction sales reached 7,5 million dollars in 2021.
Cryptopunks is the brainchild of New York-based Larva Labs, founded by Matt Hall and John Watkinson, who was inspired by the rebellious punk rock scene, which at the time resembled the upcoming blockchain revolution.
As one of the first famous NFT projects, Larva Labs inspired digital artists to offer their works as NFTs, putting Cryptopunks at the forefront of the CryptoArt movement.
However, a few days ago one artwork, in particular, the white-haired green-eyed number #9998, broke the NFT world with the biggest sale to date.
The catch? – whoever was behind this hefty transaction, bought the Cryptopunk from themselves. Like cryptocurrency, NFTs are held in digital wallets. There’s no limit to how many wallets one person can create.
Twitter and Discord, the platforms where most NFT discourse happens, quickly discovered the sale and speculated on the motives behind it.
They claim it was simply a publicity stunt, with the owner probably trying to drive up the price of his CryptoPunk.
So, no, someone didn’t spend half a billion dollars on an NFT. Well, they did but they didn’t.
The person behind this stunt took out what’s called a Flash Loan. A Flash Loan is a crypto-native transaction that allows buyers to take advantage of the price difference between assets offered at different exchanges.
This price difference is usually so minuscule that it does not impact normal trades. But when trading hundreds of millions of dollars in cash equivalents, you can make a nice chunk of change.
In this case, specifically, the owner of CryptoPunk #9998 took out a Flash Loan, sold the punk to themselves, and returned the flash loan in the same transaction.
Of course, transactions of this size bring out the best and worst of the NFT community-breaking big amounts of trust.
People were originally shocked and excited that NFTs seemed to finally get that mainstream attention we’ve been clamouring for – well lesson learnt for the NFT community.