LarvaLabs Disowns The CryptoPunks V1

The final decision with V1 CryptoPunks is controversial to say the least.

Larva Labs, the creators of the ever-popular CryptoPunks NFT project, came under fire. The team faced backlash for the way they handled a situation regarding an NFT project called V1 CryptoPunks, which was born from the original CryptoPunks smart contract.

In a move that was condemned by many members of the NFT community, a Larva Labs’ cofounder sold off his stock of V1 Punks. Then, days after selling, the team attempted to blacklist the budding project.

Admittedly, the community at large seems to be partially split on whether or not what Larva Labs did was actually wrong. Some argued that the company wasn’t worthy of criticism, as the team clearly stated that they didn’t approve of the project and intended to sell. Others found fault with the company because the team only condemned the project and stated that they were selling two days after the cofounder had already sold.

What caused the distress in the community?

To understand why this event triggered such a firestorm and prompted Larva Labs to publicly apologize — and also to ensure a similar situation never happens — we need to take a deeper dive into what the company did and flesh out the nuances regarding why members of the NFT community found the situation problematic.

However, in the company’s official Discord channel, they are threatening legal action. They also admitted that they sold a bunch of CryptoPunks V1 because they thought that by “selling some of the tokens we would signal our distaste for it.” According to LarvaLabs, they’ve been using the 210 ETH that they received to buy V2 CryptoPunks. And they matched that amount and made a donation to the Rainforest Foundation. 

Experts are saying…

…“they dumped on people and now they’re trying to make what they dumped as worthless as possible.” Real people paid those 210 ETH. Why do they have to suffer? However, they might end up with the upper hand. LarvaLabs can use all the legal tricks that they want, but they can’t destroy the CryptoPunks V1 contract. 

Crypto influencer Cobie explained the situation.

As this pseudonymous Twitter user puts it, “my understanding is the contract code is permanent – you can only update a contract post-deployment by calling the self-destruct function if there is one. A function which neither of the two Crytopunk contracts has!”

Not only that, there’s another way to destroy a contract, and here’s where the big reveal comes. “Because of ETH’s extortionate storage costs, most use external forms of storage (punks are off-chain art!). In layman’s, contracts essentially include a link to a specific reference point, which contains the image. LarvaLabs cannot do that with v1 punks because, both their v1 and v2 contracts point to the same file!”

About the Project

Derivative projects are nothing new in the NFT space. When a popular collection (i.e. CryptoPunks, Bored Apes, Loot) experiences a spike in popularity, developers — both those who are bad and good-intentioned — hit the ground running on projects that pay homage to, or sometimes just blatantly rip off, the original. This can definitely be a problem. Unsavory project leads will mint a “cash grab project” based on a popular collection, and then turn around and pull the rug out from under their collectors’ feet.

Unfortunately, it’s not a new issue in the NFT space. But Larva Labs knows this, and the majority of the NFT community knows this. As a result, when scams are identified, they are more often than not brought to light quickly. However, Larva Labs has recently faced backlash for allegedly attacking valid projects that aren’t actually trying to scam people.

Larva Labs has also failed to clarify what rights users have to the V2 Punks.

When the CryptoPunks NFTs launched more than four years ago, Larva Labs’ didn’t provide a content license or provide terms on their website that outlined how buyers could use the CryptoPunks’ artwork or characters. Edward Lee, a Professor of Law and Co-Director of the Program in Intellectual Property Law at the Chicago-Kent College of Law, published a research paper in December of 2021 noting that, to this day, the company website still hasn’t officially adopted the terms. Although the Larva Labs reportedly discussed terms on Discord, Lee ultimately stated that there was no public adoption of terms and that “such an omission is glaring.”

These twin issues set the stage for growing resentment in the NFT community, which leads us to the latest backlash.

Why was Larva Labs condemned?

Days before the product studio publicly announced their distaste for the project, Larva Labs cofounder John Watkinson offloaded a sizeable supply of V1 Punks onto buyers via a pseudonymous wallet named “Blocktagon.”

Let’s break down exactly why some members of the NFT community took issue with this.

Watkinson sold V1 CryptoPunks and made money off the sales. Then, only days later, Watkinson’s company denounced the very NFTs he had just sold and made money off of. This denouncement, of course, had the potential to cause the price of V1 Punks to plummet, creating a financial loss for everyone who bought them from Watkinson. Watkinson, meanwhile, kept all the money from his sales and would incur no losses from the drop in price, which, again, is a drop that his own company caused.

Although Larva Labs still ultimately decided to take legal action against V1 Punks, it quickly became apparent, even to the company itself, that Watkinson’s actions were unethical — prompting a swift response and apology from the company via Discord.

According to Larva Labs the company behind the collection the V.1 ones are not official crypto punks though.

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