You’re not going to believe what just happened last night on Cryptopunks.
Last night at 7:52 PM EST, this tweet came across everyone’s timeline:
— CryptoPunks Bot (@cryptopunksbot) October 28, 2021
You read that right, one CryptoPunk sold for 124,457.07 ETH or USD $532,414,877.01. Of course, this raised eyebrows across the internet
THIS PUNK WAS JUST BOUGHT For 124.46K ETH AKA 532 MILLION DOLLARS. WHAT IS HAPPENING. 🤯🤯🤯🤯🤯🤯🤯🤯🤯🤯🤯🤯🤯🤯🤯🤯🤯🤯🤯🤯🤯🤯🤯🤯 pic.twitter.com/1HjKKkC5xi
— Farokh (@farokh) October 28, 2021
So What Actually Happened?
No, someone didn’t spend half a billion dollars on an NFT. Well, they did but they didn’t.
The person behind this stunt took out what’s called a Flash Loan. A Flash Loan is a crypto-native transaction that allows buyers to take advantage of the price difference between assets offered at different exchanges. This price difference is usually so minuscule that it does not impact normal trades. But when trading hundreds of millions of dollars in cash equivalents, you can make a nice chunk of change.
5/ Within a single transaction, the attacker will:
1. borrow a large amount of DAI (or any other crypto)
2. swap DAI for ETH at a favorable rate at exchange A
3. swap ETH for DAI at a favorable rate at exchange B
4. return the same large amount of DAI
5. arbitrage profit
— azf.eth 🥃 🍌 🔮 (@azfnft) October 29, 2021
In this case, specifically, the owner of CryptoPunk #9998 took out a Flash Loan, sold the punk to themselves, and returned the flash loan in the same transaction.
– Punk was put up to sale by contract A
– Contract B takes out a massive flashloan and buys punk from contract A
– When contract A receives ETH from B it immediately sent all of it back to B
– Contract B then used the ETH to repay their flashloan https://t.co/Ww8MDNGPlb
— @bertcmiller ⚡️🤖 (@bertcmiller) October 29, 2021
The Blockchain Never Lies
Every transaction is public, which means it’s pretty hard to trick people. But plenty of people still fell for this stunt last night, thinking someone actually paid $500 million for the punk. Mark Cuban’s own firm even got duped:
BREAKING: Cryptopunk #9998 has sold for $532.4 million.
That’s not a fat finger error.
— Darren Rovell (@darrenrovell) October 29, 2021
Of course, transactions of this size bring out the best and worst of NFT Twitter. People were originally shocked and excited that NFTs seemed to finally get that mainstream attention we’ve been clamoring for. And of course, as with any large NFT transaction, the money laundering narrative started:
You’re crazy if you think this punk really sold for $500,000,000 and there’s no money laundering involved. pic.twitter.com/VwyWvkakok
— Godfather (@CryptoGodfatha) October 29, 2021
This punk sale for over $500M is bad news for the NFT industry. I wouldn't pay more then $5M on this.
Obvious money laundering. 👎🏼 pic.twitter.com/PzZGPws7ZP
— Moshe Hogeg (@moshehogeg) October 29, 2021
So What’s The Big Takeaway?
This highlights the good and bad of the crypto/NFT world. First, this stunt demonstrated that very cool, innovative things can be done with cryptocurrency. This, simply put, was a brilliant marketing technique. Look at what happened with Richerd’s punk a couple of weeks ago.
Why I rejected a 2500 ETH ($9.5M USD ) offer from @poapxyz on CryptoPunk #6046
This could have been the largest ever on-chain NFT sale in USD, but I chose to reject the offer.
Here is the story and why 👇 pic.twitter.com/zeURo4C5z6
— richerd.eth (@richerd) October 16, 2021
Top-tier, blue-chip NFTs are more than just tokens on the blockchain. They are morphing into brands themselves, that carry more value than the floor of the collection. Cryptopunk 9998 is now synonymous with the Flash Loan event, and has started to be called “Flash Punk”. Now imagine when this punk is sold for real.
Punk 9998 aka the ⚡Flash Punk:
If the 124,457 ETH ($530M) sale were real, it would've made #CryptoPunks the 3rd largest "crypto-asset" after $BTC and $ETH, with a market cap of 84M ETH ($366B). https://t.co/BY3JGdTPwj pic.twitter.com/cn0GK2E3f0
— Nansen🧭 (@nansen_ai) October 29, 2021
Twitter came to a grinding halt last night. It was the only thing people were talking about, both within DeFi Twitter and outside of it. A couple of glaring issues arise from this though. With most blue-chip or popular collections having Twitter sales bots, an epidemic is about to start with people taking out flash loans to promote their NFTs. Larvalabs has said they are adding filters to their notifications, but expect plenty of these stories until this becomes the industry norm.
Some recent large bids were done the same way. The ether is offered and removed in a single transaction. So, while technically briefly valid, the bid can never be accepted. We’ll add filtering to avoid generating notifications for these kinds of transactions in the future. 2/2
— CryptoPunks (@cryptopunksnfts) October 29, 2021
Remember, always, always do your research. Don’t believe everything you read on Twitter, even if they have a checkmark beside their name. Sometimes, as evident with last night’s happening, they might not be doing their research themselves.
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