It was a million-dollar disaster for one NFT collector. Earlier this week, Brandon Riley, a seasoned investor, made a massive slip up, accidentally sending CryptoPunk #685 — an NFT priced at 77 Ethereum (ETH) or approximately $129,000 at the time — to a burn address. The burn address, which is a digital wallet without a private key, is only able to receive assets such as cryptocurrencies and NFTs, and these assets will then remain in circulation forever. This means that Riley’s CryptoPunk is permanently gone and can’t be traded or owned by anyone ever again.
Riley was attempting to wrap the NFT to take a loan against it on Twitter and then post it to NFTfi.com so he could get a yield of approximately 7% per year. However, in a misclick, he sent it to a burn address instead.
Oblivious to what he had done, Riley craved for some sort of reprieve and asked Yuga Labs, the company that purchased the IP for the CryptoPunks collection from Larva Labs, for the v1 version of CryptoPunk #685. As it’s been pointed out, the original CryptoPunks smart contract had an error that caused Ethereum to be allocated to the buyer instead of the seller when a purchase was made, and they needed to be updated to the v2 contract.
The gone-in-a-flash tragedy has the digital assets industry discouraged — transactions in the cryptocurrency market are complex and, more importantly, irreversible. Due to the lack of financial intermediaries, there’s nothing Brando can do to get his CryptoPunk back, but it’s a bittersweet lesson to learn about self-custody.
On the other hand, NFTs aren’t only accidentally burned, but also intentionally. Last month, Jason Williams burned BAYC #1626 — worth $169,000 at the time — to symbolically shift the asset’s underlying network from Ethereum to Bitcoin.
The CryptoPunks community is also trying to band together to stop the scourge of fake NFTs — wash trading, where someone creates NFTs that only exist virtually, increases the price of their asset and profits off of it.
According to a report by CoinGecko, wash trading increased by 126% in February, and the six most traded NFT marketplaces are Magic Eden, OpenSea, Blur, X2Y2, CryptoPunks and LooksRare. The issue of wash trading is mainly rooted in the lack of regulations — and NFT influencer CryptoNovo’s recent brush with thieves impostorizing him is the perfect example.
It didn’t take long for the fraudsters to make away with his green-beanie-wearing CryptoPunk #3706, which was sold for 75 ETH — then worth $94,751 — and the other signature NFTs from his portfolio. Someone also impersonated CryptoNovo on Discord to scam more people.
This unfortunate incident sheds light yet again on the nature of the digital assets industry and its lack of overall regulation. As for Brandon Riley, he’s an unfortunate reminder of the paramount importance of double-checking the address one is sending their assets to. The beauty and danger of self-custody practices can go hand in hand, and it’s a good practice to take extra safety precautions when dealing with one’s digital asset investments.