WIRED

By Sandra Upson

On June 11, 2017, in the late afternoon, Erick Calderon was in the back room of the tile-importing warehouse he owns, printing product stickers. The printer was slow, so he padded across the blue-carpeted floor, past his cryptocurrency-mining rig, to his computer. He opened up Reddit and glanced at the latest posts. His eyes landed on one from a user named mega­matt2000: “CryptoPunks: An experiment in digital collectibles on Ethereum.” Calderon clicked and found himself staring at a grid of 10,000 tiny, pixelated faces.

The site offered a simple description of the collectibles. “Most are punky-looking guys and girls,” the text read, “but there are a few rarer types mixed in: apes, zombies, and even the odd alien.” Calderon started clicking on Punks. Every face led him to a new page listing its attributes, including what accessories it wore and how many other Punks had them. A Punk with a police cap (a relatively rare trait), a cigarette (a common one), and an eye patch (less so) gave off a Village People vibe. A woman with a bright red mohawk (rare!) and matching lipstick (so-so) looked ready to kick you in the shins. The Punks with “wild hair” somewhat resembled Calderon himself, with his mop of unruly dark curls. He had happened on a two-day-old project by a small tech consultancy called Larva Labs. He clicked and clicked—and kept clicking.

Calderon, who runs his tile business in his hometown of Houston, is also an artist who uses algorithms. So when he saw the 10,000 CryptoPunks, he immediately understood the project: This was generative art, a style that dates back to at least the 1960s and mainframe computers. Early practitioners used large, shared machines at research labs to write simple programs that produced geometric drawings, often executed on paper by pen plotters. The artists wrote randomness into their algorithms to push past the limits of their own creativity.

The Punks didn’t look like those earlier works. They were charismatic. But they too were composed by a piece of software using algorithmic dice rolls. Made up of a tiny number of pixels—four for an eye, roughly the same number for a mouth—the faces make efficient use of their screen space. Calderon was struck by their larger-than-life magnetism, with some seeming to smirk and others shooting a side-eye. “Pure genius,” he remembers thinking. Text on the Larva Labs website invited people to claim a Punk as their own, for free. All you needed was a crypto­currency wallet on the Ethereum blockchain with enough money in it to cover a roughly 11-cent transaction fee.

Calderon knew his way around that blockchain. He had recently, on a lark, taught himself how to write an Ethereum smart contract. Typically, such programs let you subject money to certain rules. His first attempt was a gift for his best friend’s new baby: He created a smart contract for her, transferred 10 ether (then about $130) into it, and wrote a few lines of code that would prevent her from gaining access for close to 550 million seconds—the length of time until she turned 18. The experience had been eye-opening. “The fact that I, as a fairly novice developer, could make money smart—my mind exploded,” he says. He started wondering whether smart contracts could add complexity to other kinds of assets.

As Calderon dug deeper into the Crypto­Punks site, he says, he almost started to panic. “Oh my God, this is it,” he realized. “All my little thoughts I’d been thinking, they’re doing it, and it’s live now!” This project wasn’t anything akin to putting a countdown timer on a safety deposit box, like the gift he had made. It was more like opening a bazaar in cyberspace. A piece of software had generated digital works of art, and the accompanying smart contract provided the infrastructure for people to buy and sell them. The Crypto­Punks were non-fungible tokens—unique digital assets—on the blockchain long before NFT became a household term.

Calderon was eager to claim some Punks, and he had a little ether in his wallet. He rushed home and scrambled to set up his laptop on his kitchen island. His wife tried to ask him questions, but he barely heard her. “Can’t talk right now!” he said as he waited for the wallet to load.

The rarest Punks—the aliens and apes—had already disappeared, their backgrounds changed from blue to green. Calderon decided to go after the zombies, of which there were only 88 in the whole set. Whenever he saw a Punk with bloodshot eyes and putrid green skin, he made note of its corresponding number and executed the smart contract command to claim it. By the time he ran out of ether, he had grabbed 34 zombies, a Punk that reminded him of his wife, and another that he thought resembled a friend. “I felt a little foolish,” he says, “but it felt right.”

The initial buzz carried over to the secondhand market. Collectors began meeting on the Discord platform to boast and gawk and talk about sales. They honed their collections using marketplace commands in the Larva Labs smart contract, such as offerPunkForSale() and buyPunk(). Prices rose quickly, from $3 to $100 to $300. On July 1—when the CryptoPunks project was all of three weeks old—an alien sold for $2,680. That September, Jonathan Mann, a musician who has written a song every day for a decade and now sells them as NFTs, wrote about the Punks. One line went, “A crypto fever dream, tell me, what does it mean?”

Two months later, a Canadian venture firm called Axiom Zen used elements of the CryptoPunks smart contract to launch its own line of NFTs, the CryptoKitties. Collectors could breed colorful, bug-eyed cats to produce new creatures, which could in turn be sold and bred. With its gamelike nature and its promise of profit, CryptoKitties drove the fever up and up. Within days, the price of rare Crypto­Kitties soared to more than $100,000.

Fever dreams are a classic symptom of capitalism, familiar to anyone who has hit it big or lost it all in the past 400 years. At their core is a belief in the value of an asset. For this crypto dream to work, people have to take it on faith that when you link a digital file to a blockchain, you’re able to make an infinitely copyable object unique. It’s still a niche conviction, but people seem to come to it in waves, like congregants to a summertime tent revival. The lulls in between are known as crypto winters. If you’re strong and lucky, you get through winter and ride the next wave to a payout.

In the spring of 2020, Calderon sold off five zombies for about $15,000 each. He and his wife used the money to build a second home made of shipping containers on land they owned in the arty enclave of Marfa, Texas. He nicknamed it the Zombie House. Later that year, as prices skyrocketed again, he launched an NFT sales platform of his own.

But the Punks’ power has gone well beyond funding one family’s desert retreat. They have created whole new communities. They have infiltrated fine art auction houses; in one wild moment in June, an auctioneer at Sotheby’s banged his gavel at $11.75 million for an alien wearing a surgical mask. The total value of Crypt­oPunk sales—all the money people have spent on Punks to date—has surpassed $1.5 billion. They have driven both Jay-Z and Snoop to adopt look-alike Punks as their Twitter avatars. They have thrown into question the nature and value of art. But can they answer the question in Mann’s song? Can they explain how a group of people came to believe that a bunch of images and a rough-edged technology could be worth such staggering sums?

John Watkinson and  Matt Hall, the two-man team at Larva Labs, stumbled on the idea for Crypto­Punks while talking about their childhoods. They didn’t know each other as kids, but they might as well have: They both grew up in Ontario, both collected hockey cards and Magic: The Gathering cards. They both got hooked on computers early—Hall after discovering a friend’s Atari and Watkinson after playing games on a friend’s Commodore 64. “I just loved that this was the ultimate creative tool,” Watkinson says.

Both were also lanky, T-shirt-and-jeans-wearing computer science majors at the University of Toronto. They became friendly while working on a class project, but they didn’t start hanging out until after graduation. One day they ran into each other on the street and ended up talking about their shared love of creative programming. “It was almost like asking each other out on a date,” Watkinson remembers. “Like, do you like to work on weird projects with computers?” They started meeting every Tuesday night at Hall’s apartment to code for fun.

When it came time to find a cool tech job in Toronto, they both felt stuck. “I thought I was going to be at a job at an insurance company, writing insurance software,” Hall says. In 1999, the friends independently decided to move to New York to search for something better. When they realized they had drafted the same plan, they figured they should just become roommates. They both bounced from job to job but kept up their habit of coding together at night and on weekends. A few years later, as smartphones were emerging, they found a niche developing apps for an early handset, the T-Mobile Sidekick, and committed to their creative partnership full-time. They gave themselves the name Larva Labs. In 2011 they coded an app for Google called Androidify, which let people customize the company’s green Android mascot into a personal avatar by selecting its skin tone, clothing, and accessories. The app was a surprise hit, and for a while fans of Google’s operating system used the avatars as their profile pictures on Twitter. Through that app and others, Watkinson and Hall developed a nostalgic look, rooted in the limited graphics of the computers they grew up with—simple, cartoonish shapes with clean lines and bright colors that seem to belong nowhere more than on a screen.

Despite their successes, though, the duo felt like they weren’t living up to their potential as a team. At one point they tried to launch a legal-documents startup, but they failed to raise the needed money. They worried they were swerving from project to project without real direction.

One day in the spring of 2017, the two men were talking about Watkinson’s nieces; the girls had started collecting different kinds of toys with an enthusiasm that reminded them of their own youthful hobbies. Watkinson wondered what it would take for someone to feel as excited about collecting digital trading cards. The main problem, of course, was that because any digital good can exist in limitless, identical copies, no single instance of it is special. To be collectible, the two knew, an object had to be scarce. The toy company Ty started selling Beanie Babies in 1993, but the collecting craze didn’t begin until the maker stopped producing some of its original designs.

So how do you make a digital object seem hard to get? Hall, who had been reading about Bitcoin, thought a blockchain, with its time-ordered record of transactions, might be useful. People put a certain price on bitcoins because everyone agrees on how many of them exist. “That’s digital rarity,” he figured.

Hall poked around online and discovered that another developer, Joe Looney, had used the Bitcoin blockchain to trade digital images of Pepe, the cartoon frog co-opted by the Trumpist right. That project relied on an extra technological layer Hall didn’t understand, and he couldn’t figure out how to procure a Pepe.

He kept researching and soon decided that Ethereum was a better starting point. In a 2013 white paper, the cryptocurrency’s founder, Vitalik Buterin, had pitched a blockchain that, unlike Bitcoin’s, came with its own fully functional programming language. The language could be used to write small programs—smart contracts—that would allow people to do more than just exchange money. People could record property ownership, offer insurance, start a decentralized corporation—or trade digital assets.

Hall and Watkinson started to learn one of the Ethereum programming languages, Solidity, and dug into writing their own smart contract. They discovered they could create things called tokens to represent any digital asset. When a person bought some, the smart contract would store the balance and link it to the buyer’s identifying address.

For Hall and Watkinson, though, the idea was only a partial solution. The Ethereum tokens were all interchangeable, but for a set of digital collectibles they needed to track the identity of individual tokens. After a bit of tinkering, they discovered they could get the blockchain to associate a person’s address with a token’s identifying number. With that small insight, the two had found a way to make fungible tokens non-fungible.

Watkinson had been working on designing a set of digital cards that were compelling enough to be worth collecting. He made some basic heads, along with accessories to layer over them, and then worked away at a piece of software—the “generator” in the generative art—that could compose thousands of unique but plausible faces. Loosely inspired by his experience with Androidify, Watkinson played around with the characters’ looks, adding hair styles, pipes, hats. He zeroed in on a punky look, which he felt resonated with crypto enthusiasts’ defiant bent. “I liked that it was very counterculture and sort of funky and kind of flying in the face of the establishment,” Watkinson says.

When the generator was nearly finished, Watkinson joined Hall in figuring out how to write the basics of a marketplace into their smart contract, so that people could buy and sell Punks.

The biggest issue was getting their wares onto the Ethereum blockchain. If they uploaded each face individually, the transaction fees would be far too high. This was a problem. If the images weren’t themselves on the blockchain, would anyone believe they owned a CryptoPunk? Watkinson and Hall decided to go with an imperfect solution: a hash. They fed a composite image of all the Punks—the grid of 10,000 faces—into a hashing algorithm called SHA-256, which cranked out a 64-digit signature. Hall tucked the number into their smart contract. If anyone tried to tamper with the master image (by, say, transforming the pyrite of a stringy-haired goatee guy into the gold of an alien), a skeptic could ­double-check the image by running it through that algorithm. Only the original image, with every pixel precisely intact, would generate the signature.

In their smart contract, they reserved the first 1,000 Punks for themselves. Hall published the contract to the blockchain and posted a link to their website on Twitter and Reddit.

They were met, mostly, with silence. In the first five days, a handful of people, Calderon among them, found the project and snapped up the rarest Punks. “We were feeling sort of silly,” Watkinson says, when only a few dozen of them had been claimed. Then, on June 16, the tech site Mashable published a post with an eye-catching headline: “This Ethereum-­Based Project Could Change How We Think About Digital Art.”

Within 24 hours, all the Punks were gone; one man who saw the post amassed 758 of them.

Within days, collectors started to buy and sell—but right away, they ran into trouble. When someone tried to buy a Punk, a horrific bug in the smart contract caused the payment to travel not from the buyer to the seller—but to go straight back to the buyer. The lucky buyer ended up with both the Punk and the money being offered, and the seller got nothing. Roughly a dozen people were burned, and Hall felt terrible. “That was a complete disaster,” Watkinson says. “It’s like, well, our marketplace is toast.” They posted urgent updates on their website and Twitter telling people to stop trading. Then they wrote a new smart contract in which they undid all the trades, and, several days later, they rolled it out.

Now that the marketplace was working, Larva Labs created the Discord channel where collectors such as Calderon reveled in the Punks’ details, dreamed up personalities for their purchases, and brainstormed other projects involving digital collectibles. Watkinson and Hall’s passion project had kicked off a buzzing community, and they were thrilled. They figured their work was basically done.

The firsts time that Anne Bracegirdle heard Watkinson speak about the Crypto­Punks, at a blockchain art meetup in downtown Manhattan in early 2018, she became determined to meet the pair. Bracegirdle was a photography specialist at Christie’s at the time. In her nearly 10 years at the auction house, she had seen how hard it was to verify the provenance of a work. And assuring potential buyers of the rarity of a photograph was a challenge when, for example, a living photographer could on a whim decide to issue more prints. The Punks and the blockchain presented an exciting solution to both problems.

Right away, Bracegirdle saw a parallel in Hall and Watkinson’s work: “It immediately became clear to me they were like Andy Warhol,” she says. Hall and Watkinson were “critiquing and exploring the way we consume now,” she says, just as Warhol did with his Campbell’s Soup Cans. Bracegirdle invited the two to a blockchain-themed event she was planning to hold at Christie’s in London. Just like that, they were catapulted into the rarefied world of fine art.

That July, Watkinson and Hall flew to London. At the auction house, they paused to take pictures of themselves under a Christie’s sign. About 350 people in pressed shirts and jackets gathered in the building. Contemporary works from an upcoming auction were installed throughout. On one wall was Yellow Lambo, a 10-foot-long yellow neon sign composed of 42 digits, the smart contract address for a cryptocurrency of the same name. The work was by Kevin Abosch, an artist who once sold a picture of a potato for $1 million.

Three hours in, Hall, wearing a dark blazer over his usual T-shirt, climbed onto the stage for a panel on crypto art. The moderator, a generative art buff named Jason Bailey, turned to him with a deceptively simple question: What do people own when they buy a CryptoPunk?

Bailey was alluding to the issue of whether the image itself was on the blockchain. Hall replied that his answer had a way of making people mad. “You own something on the blockchain—you own a record that you own it,” he said. “You own the right to sell it in the future.” He didn’t explicitly say, however, that Larva Labs retained the copyright, so it wasn’t even obvious if owners could reproduce their Punks. Their project was so new and complicated that the details got thorny fast.

After the panel, a curator named Georg Bak cornered Hall and Watkinson to ask if he could exhibit their work in a gallery in Zurich. “Guys, what you did is art history,” he remembers saying. “I have to show it.” Bak was organizing a blockchain-themed art show that included Abosch and Ai Weiwei; he thought Larva Labs belonged there too. For Hall and Watkinson, the whole trip had been surreal, so why not throw in a gallery show in Switzerland? They said yes.

“I’m not sure they were aware they were artists,” Bak says now.

After almost a week in London, Hall and Watkinson flew home to New York and faced, with some queasiness, the question of what to exhibit. Bak didn’t give them much direction, but they worked in a shared office space alongside designers and artists. The duo peppered their neighbors with questions. They settled on producing prints of some of the Punks they owned, which they would sell with an envelope containing an Ethereum passphrase—the access code for the wallet in which the digital Punk resides. They then designed a custom seal featuring a CryptoPunk, and practiced melting sticks of red wax over a candle. With their officemates’ help, they produced prints of 12 of their Punks, rolled them up into a mailer tube, built a big protective box for the envelopes and their fragile seals, and shipped it off to Switzerland.

At the converted-loft gallery in Zurich, art handlers framed the prints and hung nine of them side by side on a raw concrete wall. Then they tucked three into storage.

Watkinson flew in for the show, and Bak invited him to talk about the CryptoPunks at a dinner for crypto finance people. As soon as the event ended, Bak was bombarded with interest from buyers. By the time the exhibit opened, he had sold most of the Punks. On the day of the opening, Bak says, “one guy was running to the gallery, just straight away came to me and says he wants to buy one.” Bak dug the last print out of storage for him. A few days later, Watkinson flew home, and he and Hall painstakingly printed and shipped 12 more CryptoPunks. Those sold out too.

Navigating the art world, facing questions about what—and where—the art was, got Hall and Watkinson thinking: Could they make the link between an artwork and the blockchain stronger and more straightforward? In the fall of 2018, the two went to a digital art show at the Whitney Museum of American Art in New York, where they saw one of the American artist Sol LeWitt’s many wall drawings. For the series, LeWitt left a set of instructions—often with ample room for interpretation—for assistants, who in turn execute them on a wall. Watkinson and Hall started wondering what it might look like if a blockchain issued drawing instructions to a computer.

Just as they got going on the project, though, invitations to cool art world events petered out, and interest in the Crypto­Punks slowed to a crawl. Crypto winter had set in. But Bak was organizing another show and urging them to produce new work, so they pushed through.