Experienced Trader Loses $129K CryptoPunk to Complex Transactions
by FARUK IMAMOVIC | VIEW 487
NFTs have been making headlines for the past few months due to their skyrocketing value and investment potential, but a recent story serves as a cautionary tale for NFT traders and investors. An NFT trader, Brandon Riley, has learned the hard way that the complexities and irreversible nature of NFT transactions can lead to devastating consequences.
The NFT Loss
Brandon Riley, an experienced NFT trader and investor, bought CryptoPunk #685 two weeks ago with the intention of placing it on the NFTfi.com platform for a potential return of 7% per year. In an attempt to make the NFT compatible with NFTfi.com, Riley attempted to wrap the NFT as an ERC-721 token using a tutorial he found online.
However, in a mistake that proved to be costly, Riley sent CryptoPunk #685 to the wrong burn address. Burn addresses, as defined by Riley, are "digital wallets that do not have a private key and are one-way, meaning they can only receive assets such as cryptocurrencies and NFTs." Once an NFT is burned, it is irreversibly destroyed and cannot be traded or owned again.
In this case, CryptoPunk #685, worth approximately $129,000 in Ethereum at the time of purchase, is now gone forever.
Today I accidentally burned a @cryptopunksnfts trying to wrap punk 685.
I was so focused on following the instructions exactly, that I slipped up, destroying a third of of my net worth in a single transaction.
@yugalabs please sell me the @v1punks 685 as a consolation. ðð¼ pic.twitter.com/jHoTGvlc7j — Brandon Riley (@vitalitygrowth) March 25, 2023
The Complexities of NFT Transactions
CryptoPunks, of which CryptoPunk #685 was a part of, were created in 2017 and are considered a "blue chip" collection in the NFT world.
The market cap of CryptoPunks is over $1 billion, with the cheapest CryptoPunk worth over $109,000 according to NFT Price Floor. However, the fact that CryptoPunks were created before ERC-721 became the standard token for NFTs highlights the problems many in the digital asset industry face with the complex and irreversible nature of NFT transactions.
Since there are no financial intermediaries involved in NFT transactions, there is nothing Riley can do to recover his lost CryptoPunk. This serves as a reminder of the importance of double-checking and being extra cautious when dealing with NFTs, as the consequences of a mistake can be devastating.
The Statement of Attitude
While the loss of CryptoPunk #685 was a mistake, some NFT burns are intentional and made as a statement of attitude. Last month, Jason Williams burned BAYC #1626, worth $169,000 at the time, as a symbolic move from Ethereum to Bitcoin through Ordinal.
Once burned, the NFT cannot be replaced or accessed again, emphasizing the irreversible nature of NFT transactions.