February 2, 2022 - 6 min read
LarvaLabs has threatened legal action against V1 CryptoPunks. We break down the sequence of events that led up to this threat (including a LarvaLabs founder selling V1 CryptoPunks) and what we think will happen next.
If you are interested in NFTs or own NFTs, we strongly encourage our readers to consider purchasing a hardware wallet, which starts at $59. Hardware wallets like the Ledger S or Nano X are the most effective ways to protect your NFT assets from scams. The following links contained below are affiliate links and we may receive a small commission if you choose to make a purchase. You can read my full affiliate disclaimer disclosure here.
If you want to protect yourself and your NFTs from scams and hacks, you can shop for Ledger Hardware wallets by clicking here.
V1 CryptoPunks wasn’t very well known, even a few weeks ago. Tokens from the project could be traded for just a few ETH.
Then, sales started rocketing and V1 CryptoPunks shot up to a 25 ETH floor.
The project is currently at a 16.4 ETH floor price on OpenSea and has 12,400 ETH in volume traded. That’s over $33 million.
There was a steady flow of volume trading into the project, but once Larva Labs publicly tweeted about its disapproval, sales started happening faster:
Note: I do not own a V1 CryptoPunk. I am not a lawyer and this is not financial advice.
Note: We wrote about how to check the distribution of an NFT project using Etherscan here. It’s a really useful technique to determine if a few holders could tank a project’s market.
But still, it was the first CryptoPunks tokens created on the blockchain by Larva Labs. Many people were interested in owning the alternative “rookie card” of Punks.
A wrapper for the V1 CryptoPunks was created and assets were listed on LooksRare. There are 0 royalty fees on the sales of CryptoPunks V1. The wrapper was just created to protect from the original contract bug that allowed users to buy CryptoPunks and get their money back.
The original faulty contract is the reason they created a V2 “official” CryptoPunks release.
Since 2017, Larva Labs dismissed the V1 version’s authenticity but was quiet until a new wrapper was created to allow the sale of those tokens.
Oddly enough, one of the Larva Labs founders decided to sell 40 V1 Punks for 260 ETH, then announce that they are worthless:
To their credit, it was announced that proceeds would be used to buy CryptoPunks V2.
However, what happens next (I promise this isn’t clickbait) gets even weirder.
A LarvaLabs founder sold $676,000 worth of V1 CryptoPunks. Then shared in Discord today (2/2) that Larva Labs plans to take legal action against V1 CryptoPunks.
There’s been discussion about where the assets are stored (there doesn’t appear to be a way for LL to take the images down) and whether or not LarvaLabs has any ground to stand on (especially after selling the assets for a profit).
However, more attention is on the way LarvaLabs is approaching V1 CryptoPunks:
There are opinions on both sides, but the entire situation is odd.
LarvaLabs created V1 CryptoPunks. It was launched before V2 CryptoPunks but pulled because of a faulty contract.
Someone built a wrapper that would allow for the purchase and sale of V1 CryptoPunks and a community formed around it.
It’s no surprise either because there has been so much interest in historical NFTs.
When sales volume got noticeable, LarvaLabs tweeted that the project wasn’t legitimate but also proceeded to sell 260 ETH worth of the tokens.
CryptoPunks V1 hit a 25 ETH floor (and has since retracted but is at 16 ETH floor), which seemed to spur LarvaLabs to take legal action against their own initial release project.
I am not a lawyer and won’t pretend to be.
There are no royalties on the current secondary markets (outside of royalties taken by OpenSea and LooksRare).
LarvaLabs created the assets and transferred them to new owners in 2017.
Individuals are trading the assets on the blockchain and there just happened to be significant interest and demand from the market.
In fact, a rare Alien CryptoPunk (V1 — #9368) hit a record when it sold for 300.69 ETH:
That’s nearly $782,000!
It sounds like LarvaLabs is serious about a DCMA Takedown, but it’s unclear if it would be effective or not.
The reality is that collectors love history.
Trading card companies didn’t threaten or sue buyers of error cards, but collectibles on the blockchain operate differently.
Despite the weird sequence of events, whatever does happen will likely set precedent and the tone for collecting on the blockchain since it is so new.
We are living through history, and one that will matter to the collectors of the future.
My guess is that Larva Labs could be successful in removing the OpenSea listings, but CryptoPunks V1 is listed on Rarible, LooksRare and has its own marketplace.
Unless someone tries to use a V1 Punk for commercial use (which V2 Punks can't even do), who could Larva Labs sue?
This reminds me of CryptoStrikers (now Wrapped Strikers on OpenSea), the first NFT soccer project, and the NFT "rookie cards" for many world-famous soccer stars. However, the product is unlicensed, but it didn't slow collectors down and there's no one to really sue. It lives on the blockchain.
We'll see how this shakes out, but my prediction is that if Larva Labs doesn't have much enforcement power, the V1 Crypto Punks will go up in value due to the attention and appeal to anti-establishment vibes of crypto and NFTs.
Again, I don't own a V1 CryptoPunk. I think they are really cool but please don't spend money you can't afford to lose.
Enter your email address below to subscribe to my newsletter
Support The Blog