To recap, Cryptopunks is a legendary NFT collection based on the Ethereum blockchain. It consists of 10 thousand unique characters, which are distinguished by certain attributes. The combination of the latter determines the rarity of the token, which affects its price.

The collection itself was launched in June 2017 by Larva Labs, and since then it has continued to be the most popular representative of the industry. In particular, over the past 24 hours, two cryptopunks have ranked among the most expensive NFT deals, with their sale price being the equivalent of $157,000 and $109,000.

Non-exchangeable tokens in general remain a popular asset in the current market conditions. In a day, the volume of transactions with them exceeds the equivalent of $16 million. Etherium and Solana continue to be the most popular networks for trading.

That said, there are plenty of examples of careless interactions with one’s own crypto-assets with unfortunate consequences right now. In particular, in mid-March, an anonymous trader accidentally exchanged $2 million in USDC steiblocoin for 5 cents in USDT.

The transaction was carried out amid a panic due to the fall of USDC, which in turn was triggered by the closure of Silicon Valley Bank, which held some assets of the token-issuing company represented by Circle.

In short, the trader did not check the details of the transaction and agreed to the poor exchange option offered by the KyberSwap platform. As a result, an irrelevant liquidity pool with only a few dollars in it was used for the trade. In fact, that’s why millions of dollars turned into pennies.

How crypto-assets are lost

According to Cointelegraph sources, Riley acquired CryptoPunk #685 for 77 ETH on 13 March. He announced this, among other things, on his Twitter, which now allows the digital asset to be tracked.

Brandon himself is a fairly experienced investor and knows that leaving NFT lying idle in his wallet is a counterproductive strategy. Instead, you can make the token “work” – for example, by borrowing against it by turning NFT into a so-called wrapped or wrapped version of the asset.


As a reminder, wrapped versions of cryptocurrencies are individual tokens that are their equivalents in other blockchains. For example, WBTC is a wrapped bitcoin that runs on the Etherium network. Because of this, a BTC holder can store his or her own bitcoins, but also use versions of them in the decentralised finance industry, based on the Ethereum blockchain and other networks. This opens up new opportunities for capital, although there are also risks involved.

Popular NFTs can now be used as collateral, taking out loans against them. In fact, this is exactly what the former owner of Cryptopunk wanted to do. However, irreparable problems arose during the procedure.


Transforming the usual CryptoPunk collection into WrappedPunk is possible thanks to a smart contract of the same name, which Riley has used. The smart contract itself was launched back in September 2020 with a website as the interface. In addition, the process of creating the wrapped version of the tokens is quite specific, which is exactly what the website warns visitors about.

To create a WrappedPunk you need to interact directly with the Etherium blockchain, meaning that all user actions cannot be undone. The site has instructions for users, which consist of three parts: creating an additional empty proxy wallet, transferring the token, and releasing a wrapped version of it. WrappedPunk can then be placed on OpenSea, i.e. the trading platform for transactions.

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Riley’s mistake was to move CryptoPunk #685 not to his proxy wallet, but to a token burning address. Although the user stated on Twitter that he followed the instructions clearly, it is likely that the cause of the loss was a combination of inattention and inexperience – the token burning address is easily recognizable by the fact that it consists of zeros.


Burn addresses are a fairly popular phenomenon among cryptocurrency projects. It essentially allows an asset to be destroyed by sending it to an address that no one else has access to. In this way, developers reduce the supply of crypto-assets, which is usually good for the value if the demand is stable.

For example, in January 2023, representatives of the already familiar WOO Network project destroyed 24 percent of all WOO tokens. The latter were held by the company's investment arm and the decentralized autonomous organization WOO DAO, but due to certain market conditions, the latter were eliminated. Burning the coins in the process led to a sharp 20 per cent increase in the value of the WOO token.


Common sense should have been the guiding principle here, rather than any instructions. However, the WrappedPunks website clearly states that users must send tokens to their proxy address, which must be different from the burn address.

The situation is also exacerbated by the fact that Riley bought CryptoPunk #685 already with borrowed funds. That is, he lost the token a couple of weeks after the purchase and on top of that he incurred debt in the form of a need to cover the loan. At least his situation should be a good lesson for all other crypto investors.


Such a situation is extremely frustrating, because it was almost a childish mistake that led to the destruction of the expensive NFT. However, there is no getting away from that, and the prospect of such losses is the price to pay for true decentralization of assets that no one controls. The only thing left to recommend here is to be more careful and cautious when dealing with your own coins and tokens. If possible, it is better to test a transaction with a small amount of tokens or less expensive assets before moving on to the main assets. This will avoid large losses and allow you to gain experience.


Find more useful and interesting information about cryptocurrencies and NFT in our cryptochat. There we will discuss other important news that affect digital asset rates in one way or another.

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