10,000 algorithmically generated tokens, pixelated portraits of 24 by 24 size, and a market cap of $2 billion — this is none other than CryptoPunks, an NFT that has taken the world by storm.
What exactly is the CryptoPunk NFT? And how to buy CryptoPunks? Let us answer all these questions in this complete guide on CryptoPunks NFT.
Non-Fungible Tokens (NFTs)
Non-fungible tokens (NFTs) are exclusive cryptographic assets that are only available on blockchains (mostly Ethereum) and cannot be duplicated. This is because each of these tokens has unique metadata coded in the system that differentiates them from other tokens. Apart from making the tokens unique, the coded data also helps confirm and authenticate the ownership of NFTs as well as the exchange of tokens among owners.
Among the wide range of NFTs, CryotoPunk has among the biggest market caps (about $2 billion).
CryptoPunks NFT
Larva Labs, a two-person development company consisting of Matt Hall and John Watkinson, minted CryptoPunks in June 2017. They have worked on various projects, including mobile games and utilities, web infrastructure, digital design, and art. The team used the London punk movement, cyberpunk literature, and video games as an inspiration for their pixelated character generator.
The CryptoPunks NFTs have algorithmically created 24×24 pixel art pictures. The majority are, as the name suggests, punk-looking characters. But there are also some uncommon ones like apes, zombies, and even the occasional alien. As of now, there are 24 apes, 88 zombies, and 9 aliens. Each punk has a profile page that details their characteristics and possession or for-sale status.
Here are some more interesting facts about CryptoPunks NFTs:
- Current Lowest Price Punk Available. 66.58 ETH ($87,323.00 USD)
- Number of Sales (Last 12 Months) 3,810.
- Total Value of All Sales (Lifetime) 344.41KΞ ($916.27M)
But the question is, what makes CryptoPunks NFTs special?
The three main criteria to take into account when determining an NFT’s intrinsic worth are uniqueness, community as well as a role as a digital flex. (We will discuss more on these three criteria in the “The Hype About CryptoPunks NFT” section) An NFT’s value also varies depending on whether it is held for a short or long period and the asset it represents.
The Appeal of CryptoPunks
The first reason behind CryptoPunks’ popularity among collectors and investors is its uniqueness and scarcity. As mentioned earlier, there are only 10,000 CryptoPunks in existence, and each one is unique, with its distinct characteristics. This rarity makes them highly sought after by collectors and investors.
The second reason is a strong brand and a dedicated community of fans. Larva Labs has done a good job of building a loyal following for CryptoPunks, and this has helped to drive demand for digital assets.
The third reason is its potential to increase in value over time. Some rare and valuable CryptoPunks have sold for millions of dollars, and it is possible that the value of these assets could continue to rise in the future. This potential for appreciation has made CryptoPunks attractive to investors who are looking to diversify their portfolio and potentially generate a return on their investment.
In terms of copyrights, CryptoPunks are considered to be “works of authorship” under copyright law. This means that the creators of CryptoPunks, Larva Labs, previously held the copyrights to the digital assets. Now, Yuga Labs holds the copyrights as it acquired CryptoPunks. The copyright protection applies to the artistic elements of the CryptoPunks, such as their appearance and design.
When it comes to commercial rights, CryptoPunks are sold and bought like any other asset. The owners of CryptoPunks have the right to sell or transfer their assets to others, and they can also use them for commercial purposes. However, it’s important to note that the commercial rights associated with CryptoPunks are subject to the terms and conditions of the marketplace where they are bought and sold.
PFP NFTs
With the rising popularity of showcasing NFTs on social media platforms, another new term came into existence — PFP NFTs. When Twitter (TWTR) began offering to check whether users held the NFTs connected with their profile images, the link between digital image NFTs and social media profile photographs was cemented.
All of this being said, you must be wondering: how to buy CryptoPunks NFTs? Now let’s understand step-by-step how you can buy CryptoPunks.
How to Buy CryptoPunks NFT
You must first set up a digital wallet, like MetaMask, before you can purchase an NFT on an NFT marketplace. Anyone can view the contents of your wallet since it has a distinct address on the blockchain, and yet only you can use it.
Download and Install MetaMask Plugin
- Download and set up the MetaMask Chrome extension.
- This will provide website access to your Ethereum account to which you have permission.
Buy Ether
- After creating your wallet, you’ll need some ether (CRYPTO: ETH). You have two options for purchasing the token:
- using the wallet’s service
- sending Ether you already have from an exchange like Coinbase (NASDAQ: COIN) to your wallet address.
- Ensure to configure your wallet’s extension so that it can function with your webpage.
- Once the plugin is set up, this website will detect it and provide buttons so that you may immediately purchase, sell, and bid on punks.
Bid, Buy, and Sell
- The Larva Lab website has CryptoPunks NFTs that are offered for sale. For instance, Punk #3100 is available for $45.76M.
- Select a CryptoPunk you want to buy by selecting it, and then hit the buy button on that CryptoPunk’s page.
- To link your wallet and complete the transaction, your browser will prompt you.
- As soon as you authorize the transaction, the NFT will show up in your wallet and the seller will receive the Ether.
The Hype About CryptoPunks NFT
Despite not being the first NFT on Ethereum, CryptoPunks NFTs was one of the first Profile Picture projects (PFPs), which are today the most well-liked type of NFT. But there are a few more major selling points of CryptoPunks, such as its uniqueness, community as well as a role as a digital flex.
Due to the rise in demand for collectibles brought on by the COVID-19 outbreak as well as the growing popularity of cryptocurrencies and other blockchain initiatives, CryptoPunks benefitted. The conditions were ideal for prices to surge.
The last deciding factor in the cost of CryptoPunks NFTs pictures is supply and demand. Given that supply is fixed, NFT investors must decide whether they believe that the market will keep rising or has peaked.
Tax on NFTs
That was all about CryptoPunks — one of the most popular NFTs. But what about taxes? Does creating, buying, and selling CryptoPunks NFTs incur taxes?
First things first, creating an NFT is not taxable. As per IRS guidelines, every crypto-to-crypto transaction is a taxable event. As a result, all of the NFT actions listed below result in a taxable capital gain or loss situations for hobbyists:
- Using cryptocurrencies to buy an NFT
- Exchanging one NFT for another
- Getting rid of an NFT by selling it or another method for a fungible coin
Tips for Buying CryptoPunks
Here are a few tips to keep in mind when buying or selling CryptoPunks:
- Research the market: It’s important to do your research before buying or selling CryptoPunks. Look at the prices of similar CryptoPunks and get a sense of the current market conditions.
- Use a reputable marketplace: As mentioned earlier, it’s a good idea to use a reputable marketplace like OpenSea or the official CryptoPunks marketplace to buy or sell CryptoPunks. This will reduce the risk of fraud or scams.
- Keep track of your transactions: Make sure to keep detailed records of all of your CryptoPunk transactions, including the date, price, and any other relevant details. This will make it easier to accurately report your transactions on your tax return.
- Be prepared to hold onto your CryptoPunks: While it’s possible to make a profit by buying and selling CryptoPunks, it’s important to be prepared to hold onto them for the long term. The value of CryptoPunks can fluctuate, and it’s possible that you may not see a return on your investment until later down the line.
The Future of CryptoPunks
The future of CryptoPunks is uncertain, but there is potential for them to increase in value over time. The value of CryptoPunks, like any other asset, is determined by supply and demand. As the demand for CryptoPunks grows, the value of these digital assets may increase.
One factor that could potentially drive demand for CryptoPunks is the rising popularity of non-fungible tokens (NFTs). NFTs, like CryptoPunks, are unique digital assets that are stored on the blockchain. In the past few years, NFTs have become much more popular, and this is likely to continue in the future. As more people become interested in NFTs, the demand for CryptoPunks and other NFTs could increase.
However, it’s important to note that the value of CryptoPunks, like any other asset, is subject to market conditions and can fluctuate. There is no guarantee that the value of CryptoPunks will increase over time, and it’s possible that their value could decline. It’s always a good idea to do your research and invest wisely.
The Bottom Line
NFTs will indeed prove to be revolutionary. To make this prediction come true, they need to employ several techniques and attract investors.
Since some CryptoPunks NFTs have been put up for sale at Christie’s and Sotheby’s, it’s likely that they may transition from being comparatively niche collectors’ items to popular art. That may attract further bids for well-liked NFTs. And the tech-art project’s supporters are more likely to be aware of it already!
If you trade or invest in NFTs or other crypto assets, ZenLedger can help you easily calculate your NFT taxes, and also find opportunities for you to save money and trade smarter with our portfolio tracker. Get started for free now or learn more about our tax professional-prepared plans!
