The Story of NFTs, Part 2: Novelty

It had to start somewhere. Somewhere that would be funny and soft and cuddly. NFTs had been around for a while as a technology looking for a purpose but, as is often the case, they needed something to grab people’s imagination before the wider potential would be understood. They needed a simple demonstration of the tech that those early pioneers could understand and have an ‘ah, I’ve got it’ moment. And since this is the tech industry, the people we’re talking about were mostly young, western, male computer programmers – the devs (developers). The average demographic is broadening but hasn’t changed very much since.

It wasn’t long before those early demonstrations appeared. What would appeal to that group? Novelty cards and a game, naturally. The CryptoPunks and CryptoKitties were born.

CryptoPunks

In June 2017 came the rise of the Crypto Punks. John Watkinson and Matt Hall, the founders of Larva Labs, wanted to create a digital version of their childhood collectable cards but they had two challenges:

  1. How to prevent people from copying or editing them; and
  2. How to create large numbers without too much manual work.

They realised NFTs and generative art were the way forward. They created 10,000 collectable ‘cards’ as a small project that took off and did no less than kickstart a transformation of the art market. The prices that NFTs are now achieving, pioneered by the CryptoPunks, have forced the traditional art world to reassess its opinion of NFTs and digital art.

  • The images are 8-bit figurative art based on London’s iconic punks and the cyberpunk movement. There is enough detail in the image to be expressive, to inspire a connection and desire.
  • Using a generative art algorithm, Watkinson and Hall were able to quickly produce 10,000 unique crypto punks. The algorithm used a base image that was automatically embellished with combinations of other traits to produce the volume. Some have Mohawk haircuts, some have caps, and some are smoking a cigarette among other traits. There is something striking about each one. An exceedingly small number are apes, zombies, or aliens. By controlling the quantity of each trait, they were able to create rarity – a punk with a rare trait should be worth more than one with only common traits.
  • Holders of the punks quickly started using them as their social media profile picture (PFP). Amongst the early crypto community these soon became a status symbol that endures today. The attention rubbed off on other PFPs too, most notably the Bored Ape Yacht Club (BAYC) which is benefitting from immense celebrity-driven hype (see Part 4).
  • Originally the punks were given away for free but secondary market prices soon rocketed. The highest value sale was for an incredible $11.8M in June 2021. The founders originally kept 1,000 punks for themselves and would sell one of them from time to time.
  • Yuga Labs, creators of Bored Ape Yacht Club (BAYC), acquired CryptoPunks on March 17, 2022. They immediately updates the ownership model for CryptoPunk owners to more closely align with BAYC’s more permissive rights structure. The acquisition is rumored to have netted more than $100 million for Larva Labs’ founders.

CryptoKitties

CryptoKitties is a different type of project altogether but it builds on some of the techniques used by the CryptoPunks. It launched a few months later in December 2017 as a game using NFTs to represent cats. It was so popular that at one point it threatened to overwhelm the entire Ethereum blockchain.

  • The quality of the artwork moved on from the basic 8-bit to something more like today’s PFPs.
  • The point of the game is to introduce your kittie to another one and so breed another generation. Each one has certain traits (‘cattributes’) and so, by careful selection, the holders can attempt to mint new kittie NFTs that will be of high value. The process is controlled by a generative algorithm based on the parents’ traits, but the user has some control over the output. The breeding feature is an early example of NFT utility, discussed more in Part 4.
  • Just like the Crypto Punks, these cats soon achieved purrfectly ridiculous prices. In September 2021, one sold for 225 Eth (about $890K) although the average price is much lower.
Some Crypto Kitties (cryptokitties.co)

In part 3, we’ll look at the impact NFTs have had on the art market.

Crypto Punks

Crypto Kitties on Twitter

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