CryptoPunks and Bored Ape Yacht Club NFT Collections: What You Need to Know! (#89 - 26 March 2022)

Dear Friends,?

In today’s newsletter, we will explore the backgrounds, features, major milestones and future outlook for two of the biggest collections in today’s NFT ecosystem: CryptoPunks and Bored Ape Yacht Club (BAYC).??

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What You Need to Know about the CryptoPunks and Bored Ape Yacht Club NFT Collections?

NFTs surged into the mainstream in 2021, with cumulative sales reaching over $17 billion - a more than 200-fold increase from the previous year.?

And two collections at the center of NFTs’ banner year - CryptoPunks and Bored Ape Yacht Club - continue to climb to new heights.?

CryptoPunks

Launched by development studio Larva Labs all the way back in 2017 - making it one of the earliest NFT collections alongside those CryptoKitties we’ve previously discussed - CryptoPunks is a series of 10,000 24x24 pixel algorithmically generated images tokenized on the Ethereum blockchain.

Source: Sotheby's

As we’ve covered in this newsletter before, NFTs are unique digital assets like audio clips, photos, GIFs, or other digital items that are verified and secured on the blockchain, representing a deed of ownership to the buyer.

Holding a CryptoPunks NFT means that you and you alone are the owner of this digital image.?

CryptoPunks are randomly generated from dozens of physical features and attributes, from beanies and tiaras to mohawks and medical masks.

They even come in alien and zombie versions!

Incredibly (especially considering the figures that CryptoPunks sell for today), the collection was released for free when the project launched five years ago.

At that point, Larva Labs (which consisted of two employees) developed the idea as an experiment before releasing the NFTs to the public.

Soon afterward, 9,000 were scooped up by Ethereum wallet owners. The remaining 1,000 CryptoPunks, meanwhile, remained with Larva Labs.?

As NFT transaction volumes gradually rose over the next several years, each CryptoPunk continued to steadily rise in value before catapulting to new heights last year, which saw a bundle of Punks auctioned for $17 million at Christie’s.

Source: Christie’s

Whilst CryptoPunks has long been one of the most expensive collections on marketplaces like OpenSea, prices (and sales volumes) have surged even more over the past two weeks, with the news that Larva Labs has sold the IP for CryptoPunks to Yuga Labs, the creators behind the other wildly popular NFT collection on the market: Bored Ape Yacht Club (BAYC).

Bored Ape Yacht Club

Launched in late April 2021 by four once-pseudonymous developers, BAYC is heavily influenced by CryptoPunks.

And just like Punks, the collection consists of 10,000 unique images tokenized on Ethereum.

Source: Yuga Labs

BAYC was one of the clear winners of 2021’s crypto breakout, with prices for a single Bored Ape steadily rising through summer and fall, culminating in a September auction at Sotheby’s, where 101 Bored Apes sold for over $24 million.

A few months later, iconic shoe and clothing brand Adidas purchased a Bored Ape as part of its metaverse strategy.

Twitter soon became flooded with Apes, as well, with prominent crypto personalities ditching their old avatars in favor of their prized BAYC (or CryptoPunk).

Celebrities were especially drawn to the collection, with Steph Curry purchasing a Bored Ape for $180,000 worth of Ethereum last August.

Other notable BAYC holders include Mark Cuban, Paris Hilton, Serena Williams, and Snoop Dogg.

Given all of the adoption we’ve seen, just what is it that makes BAYC such a hot commodity?

To truly understand, think of BAYC less as a popular NFT collection than an ultra-exclusive, high-end club, with a single BAYC NFT unlocking membership to all sorts of perks.

Holders, for example, earn immediate access to a special Discord server, where Steph Curry and other Bored Ape-owning celebs have been known to hang out.?

And beyond the obvious status symbol that BAYC has become, holding a Bored Ape grants access (in the form of airdrops) to additional NFTs churned out by Yuga Labs, including Mutant Ape Yacht Club and Bored Ape Kennel Club.

Source: OpenSea

But over the past several months, BAYC, whilst still hauling in astronomical sales volumes (at the time of writing the floor price on NFT marketplace OpenSea is 101 Ether, or over $300,000), has become bogged down in multiple controversies.?

In January, for instance, an exploit on OpenSea allowed one user to snag a number of Bored Apes for tens of thousands of dollars lower than the listed floor price.?

And in February, Buzzfeed published an investigation into the origins of the project, revealing the identities of two of the four founders, who had continued to remain anonymous whilst their collection soared to new heights.???

Whilst Buzzfeed's investigation into a project that had turned into a multi-billion dollar enterprise is pretty much standard practice in financial reporting, the outlet drew the immediate ire of the crypto and Web3 communities, opening up a new debate over whether the crypto and Web3 space is truly as accountable and transparent as it claims to be.?

After all, Buzzfeed’s reporters obtained the BAYC creators’ identities simply by searching Yuga Labs’ corporate records, records that are available to anyone with an internet connection and some basic research skills.

Again, this is a common procedure for lawyers, journalists, and law enforcement, hardly fitting the definition of “doxing” that several prominent crypto personalities leveled at Buzzfeed.

Whilst Crypto Twitter remained embroiled in the feud, the actual men behind BAYC took the investigation in stride, quickly jumping on the latest Twitter craze and posting their “Web2 selves” next to their “Web3 selves.”

The meat of the Buzzfeed story, that BAYC is no longer an internet fad but a gigantic, multi-billion dollar source of intellectual property, is more evident than ever when looking at the variety of different entertainment avenues that Yuga Labs has been exploring.?

Last October, for example, the studio signed a representation deal with Guy Oseary, a talent manager that has long represented the likes of Madonna and U2, two of the highest-selling musical acts of all time.

Yuga Labs now appears to have Hollywood and the Billboard Hot 100 in its sights.?

Meanwhile, Larva Labs' sale of CryptoPunks to Yuga Labs has led to rumors of an imminent BAYC-CryptoPunks metaverse (alongside some other key Yuga Labs IP like Cool Cats, Meebits, and Nouns).

A week after the acquisition of CryptoPunks and Meebits, for example, Yuga Labs dropped a trailer that showcased all of its prized IP.

The trailer debuted one day after the launch of ApeCoin, an ERC-20 token that was airdropped to Bored and Mutant Ape Yacht Club owners.

Source: ApeCoin DAO

Launched on ApeCoin DAO, a decentralized autonomous organization affiliated with the BAYC franchise, ApeCoin has attracted interest from around the industry.

For example, blockchain metaverse developer Animoca Brands, which already counts popular metaverse platform The Sandbox as a subsidiary, has announced that they are entering the BAYC-CryptoPunks metaverse.

(For anyone interested in learning more about Animoca Brands and The Sandbox, I recommend listening to these episodes of my Future of Money podcast).

Venture capital group Andreesen Horowitz is heavily involved in the project, as well.

In fact, according to Bloomberg, Andreesen Horowitz and Animoca Brands received a combined 14% (or 140 million), of the issued ApeCoins, giving both actors sizable sway and influence over ApeCoin DAO.

After all, as we discussed here in our deep-dive into DAOs, governance and voting rights within a decentralized autonomous organization are determined by the number of tokens held.?

For a group that is in theory supposed to be decentralized, the presence of Andreesen Horowitz and Animoca Brands opens up questions over concentration of power.?

For example, a day after its public release, ApeCoin surged as high as $14.36, reportedly netting the project’s biggest stakeholders over $2 billion in returns.?

This is just the latest example of a development that has quietly divided the Web3 community in recent months, with notable figures like Jack Dorsey and Elon Musk claiming that VCs are killing the original ethos of crypto.?

Also of concern to the sprawling BAYC franchise is the proliferation of overt BAYC knock-offs and derivatives that have spawned on a number of rival blockchains like Solana, which features parallel universe versions of BAYC on leading NFT marketplaces like Magic Eden (which also features the Solana version of CryptoPunks: SolPunks).

OpenSea has even gone so far as to ban PHAYC (an inverted version of BAYC) and Phunky Apes Yacht Club from its platform, as the divide between parody and plagiarism grows increasingly blurrier.?

And last month, an NFT collection launched in China known as Bored Wukong faced heavy accusations of copying the BAYC model, leading the collection’s creator to publicly argue that his collection was modeled after human features, not apes.?

Meanwhile, in a recent cover feature for Time, Ethereum creator Vitalik Buterin appeared to call out BAYC’s utility to the crypto ecosystem.

Vitalik has since clarified that he’s not anti-BAYC; rather, he simply wants such high-value projects to reflect the values of the early crypto community, one which prioritized the funding of public goods like open source technology and infrastructure that would benefit the broader Ethereum and blockchain ecosystem.

Although, it should be noted that Yuga Labs recently donated $1 million in BAYC sales to fund humanitarian initiatives in Ukraine.

And as each collection continues to grow even more popular, questions over ownership and IP rights continue to grow.

For example, Larva Labs, the previous owner of CryptoPunks, didn’t attach IP rights to CryptoPunks, meaning that even if you owned, say, CryptoPunk #5423, Larva Labs could still license your Punk and display it on apparel or use it for entertainment purposes.?

BAYC differs in that regard as Yuga Labs grants each holder an unlimited worldwide license, which allows the holders of the NFT to monetise their unique BAYC.

For example, some holders have even formed a BAYC band, created a music video, developed a comic series, and even launched an Ape-themed beer!

Source: North Pier

One such holder, who happens to be a restaurateur, is even preparing to launch a burger popup built around his Bored Ape in Southern California next month!

But the fact that there is still no broad consensus on how IP rights can be applied to NFTs will be something to monitor moving forward.?A great opportunity for the lawyers out there!

In any event, both CryptoPunks and BAYC have been on a wild ride over the past twelve months, and things show no signs of slowing down anytime soon!

Definitely a development to follow.?

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My Latest Podcast Episode

Looking to learn more about today’s fast-growing Web3 ecosystem? How can institutional investors exploring the space gain more exposure? And what do the explosive levels of interest in NFTs and the rise of decentralized, blockchain-based gaming mean for the broader ecosystem?

I cover it all with Mason Nystrom, Senior Research Analyst at Messari.?

This episode is ideal for anyone interested in an in-depth overview of all the major developments taking place in Web3.

You can listen to/watch the podcast here:

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Henri Arslanian

*Please note that this newsletter reflects Henri’s personal views and not those of any organisation he is involved with. This newsletter is for educational purposes only and none of its content should be construed as investment or financial advice of any kind.