As one of the NFT (non-fungible token) projects, CryptoPunks has earned the OG title. According to Decrypt, CryptoPunks achieved more than $1.75 billion in trading volume as of December 2021, but obstacles come with that advantage. Being early on the NFT scene means that you get hit with technical kinks that can lead to problems down the line. CryptoPunks is looking at a possible lawsuit.
The original CryptoPunks V1 had blockchain coding issues that left sellers without the ability to cash out. CryptoPunks NFT maker Larva Labs fixed the issue with CryptoPunks V2, but the V1 collection is still out there. The crypto community has taken things into their own hands, and Larva Labs might sue.
What's the difference between V1 and V2 CryptoPunks?
More than five years ago, 10,000 of the original CryptoPunks released into the world. These NFTs were tied to the Ethereum blockchain and purchased using Ether (ETH).
CryptoPunks were encoded with a smart contract that allowed buyers to withdraw the Ether after purchase, which was a mistake. In reality, the seller is supposed to be the one who withdraws the assets after an NFT transaction. This led to buyers getting soon-to-be valuable CryptoPunks for free in the early days.
Larva Labs quickly realized this and disassociated with the collection. Larva Labs fixed the error with 10,000 new CryptoPunks V2.
Since then, the crypto community has wrapped the V1 collection. They've wrapped the contracts with a new set of trading standards that ultimately fix the withdrawal issue and make the NFTs and underlying ETH tokens tradable. With only a background color to differentiate them, the two versions are practically indistinguishable from one another. As a result, it’s difficult to determine authenticity for Larva Labs-approved CryptoPunks.
Larva Labs wants V1 Punks out.
Larva Labs has made it clear that the only true CryptoPunks are V2. Much to the company’s dismay, V1 is still out there and trading on the Ethereum blockchain among NFT enthusiasts. Larva Labs says that this confuses the public and dilutes the value of authentic CryptoPunks.
Larva Labs has worked with NFT marketplaces like OpenSea to ban the decommissioned collection. If necessary, Larva Labs might pursue litigation to ban the smart contract used in V1. The community only wrapped V1 and didn't change the governing smart contract for the NFTs.
The crypto community isn’t jiving with Larva Labs, but they might not have a choice.
Larva Labs actually owns a portion of V1 CryptoPunks. Prior to alleging copyright infringement, executives sold their V1 assets and profited.
This upset the crypto community, which viewed the move as a dump. The concept of intellectual property in relation to NFTs is also difficult to ascertain.
Mark Buchanan, the Managing Partner at Meta4 Capital, holds a stake in CryptoPunks V1 through his company. Buchanan told reporters that the V1 collection isn’t different than a recalled set of comic books, which can gain value and trade freely as collectibles on the secondary market.
Still, Larva Labs' developer Matt Hall says that the team will be working to protect the CryptoPunk art and name.