NFT collector Brandon Riley purchased CryptoPunk #685 on March 13th for 77 ETH, as a long-term investment, anticipating the growth of the NFT market following the bull run of cryptocurrencies. Riley planned to use the CryptoPunk as collateral to obtain a loan.
Riley stated: “I wasn’t flipping this token on a platform like OpenSea. It was supposed to be my ‘forever punk.’ The number is completely opposite of my Ape. I was closing it out because I needed some liquidity from it.”
Previously, Riley owned an NFT token, BAYC #586, and he needed the loan to purchase other NFTs.
During the unfamiliar process of wrapping the NFT, Riley accidentally sent the asset to the burn address, permanently removing the NFT from circulation. This irreversible loss is worth $135,000. Despite the loss, Brandon Riley has gained notoriety in the crypto community.
Why did they need to wrap the CryptoPunk NFT in the first place?
Since CryptoPunks preceded the ERC-721 standard (and all third-party NFT marketplaces), CryptoPunks are individual contracts that do not conform to any standards. It’s almost an ERC20 token.
Therefore, to use it as collateral in the NFTFI project (similar to DeFi but with NFTs), the token needed to be converted to the ERC-721 standard, and wrapping allowed for this conversion (such as on wrappedpunks.com).
The token was purchased with borrowed funds
If it seems like only people with significant capital acquire these tokens, that’s not always the case. This particular token was purchased with borrowed funds, and the loan was in fiat currency.
