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).
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 of time and the asset it represents.
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.
- 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 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
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!