The $7 million CryptoPunk and the Mona Lisa • CEO Letter #81

Taylor Culbertson -

Ahoy matey 🫡 I'm not Jimmy Jim Jim Jim Jim Jim Jim, I'm Taylor, CEO of Hedgehog, the robo-adviser that helps keep your crypto portfolio ship-shape. You're the captain of the ship, and Hedgehog is like a mech suit that you wear while standing boldly at the helm (yes I just Googled "ship steering wheel name").

Every week there's a giveaway at the end of the newsletter. Unfortunately, custom Hedgehog mech suits are not one of the prizes… yet. But we do offer socks!

Give a dog a bone

Good news for good boys: "Shibarium is a planned Ethereum-based Layer 2 network for the Shiba Inu ecosystem. Transactions on the chain will be paid for using bone, the governance token of the Shiba DAO. Bone tokens will also be used to reward validators and delegators in the Shibarium network."

I got a kick out of this announcement, I must admit. But I have to ask, do we really need this level of Shiba Inu infrastructure? …Shibastructure?

Tldr: Shibastructure. It's the future.

Smokin' hot smoking alien

Back in March 2021, the founder and CEO of Figma, Dylan Field, sold CryptoPunk 7804, the only "alien punk smoking a pipe," for 4200 ETH, which was around $7.56 million at the time, currently equivalent to roughly $6.39 million.

(Later, Field sold Figma itself to Adobe for $20 billion, so I think it's safe to say he's pretty good at selling stuff. In fact, Hedgehog uses Figma! It's a great tool.)

Field turned a substantial profit on his earlier NFT bet:

My relationship with 7804 started in January 2018, when I bought it for 12 Eth, or 15k USD. At that point, most CryptoPunks traded for about $100 or $200. So why did I pay $15k for this picture of an alien? It wasn't just how rare it was, though it was rare. 7804 compelled me. It had gravitas. I found it to be absolutely magnetic. And I had a sense that others out there would feel the same way. I also believe that the question of "What is art?" would propel the crypto art movement forward.

Field makes the money sound like an afterthought compared to the cultural impact he expected. "I personally believe, that in 100 years, we will look back on 7804 as the Mona Lisa of digital art," he claimed. As for why Field would sell such a valuable asset, he said it was so the NFT could fulfill its destiny:

I wanted to see 7804 become the patron saint of digital art. Or perhaps the patron alien, if you will. It bothered me that it was not universally acknowledged that 7804 was the best, most valuable CryptoPunk. It bothered me that it was not a symbol for the entire crypto art movement. And there's a paradox, because 7804 cannot be seen as the symbol for the crypto art movement unless it changes hands.

The buyer was an anon who whimsically called himself Peruggia, referencing a thief of the Mona Lisa, whose crime brought the painting notoriety in 1911. "I think the cryptocurrency space is going to both produce and eventually be joined by all of the wealthiest people on earth," neo-Peruggia wrote. "CryptoPunks were first. A floor punk is 2,100 times scarcer than the bitcoin I cherish so deeply. Much like bitcoin's biggest advantage being that it was first to gain adoption — as were CryptoPunks."

Peruggia's point is that CryptoPunks represent a singularity — something that only happens once, a transformative moment that ripples through the rest of time. Firstness is not a reproducible property. In this case, once the first NFT collection to gain significant hype has done so, no other NFT collection can ever claim that milestone. It's impossible.

Peruggia went on to ask, "What is scarcity worth? I like to view the Mona Lisa as the scarcest asset. If the French government were facing bankruptcy and needed to sell assets and put it to auction what should it sell for?" He continued…

My framework for valuing punks is:

• how large is the global demand for scarce assets?
• how likely is it that in the future the most valued assets are digital?
• how likely are the first NFTs to be viewed as the scarcest?
• among scarce assets what % of that value should be placed on the most esteemed?
• how likely is Punk 7804 to be viewed as one of the most esteemed?

I think it requires very minimal faith in innovation to reach a conclusion this space will be more valued in the future.

And thus from my estimates I think the 4200 ETH I spent on this punk is virtually a rounding error. Much like my namesake I may have acquired what will one day be viewed as the scarcest asset for a cost basis of roughly $0.

Will he be correct? Only history can answer that question. What's interesting to me is that Field and Peruggia viewed their participation as essential to the art. Field's instinct that CryptoPunk 7804 needed an impressive commercial track record to gain the significance he thought it deserved; Peruggia's instinct that 7804's rarity justified fulfilling and thus confirming that wish. They effectively collaborated to declare that yes, CryptoPunk 7804 is special, which made it more special than it would be otherwise.

Field ended his reflection on the NFT with this wistful warning:

Peruggia, if you're out there listening, enjoy your time was 7804. But please know that owning 7804 is a paradox, and possibly a curse. Because, if you appreciate 7804 as much as I do, then you will stop at nothing to make sure it is seen by everyone as the most valuable piece of digital art. And because of that, your time will be limited with it. And when you sell, which you will, you will forever live with the question of why you parted ways with the digital Mona Lisa.

My thanks to A Letter a Day for resurfacing this story.

Tldr: Irrational exuberance sounds pretty rational once you pull off the heist.

Quick Hits

Paywalls come to crypto, "providing access only to members who hold certain tokens in their crypto wallets." Speaking of NFTs, this is another mechanism to boost their value by providing *gasp* actual utility?!

Nice get by Ava Labs, the makers of Avalanche. Partnering with AWS is yet another sign of validation from the mainstream.

I love that the SEC only got around this after the product in question stopped being available.

Ending on a happy note 🙂 Go get 'em, tiger!

Aw yeah, time for a giveaway!

Question of the week: If you had a ship, what would you name it?

The Ship-Shape Shipping Ship for Scally & Snugglewags (S.S.S.S.S.S. Wags for short) is already taken, that's mine.

Reply to this email with your answer for a chance to win a bundle of Hedgehog swag.

Shiver me timbers,
— Taylor

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