The Two CryptoPunks, V1 and V2: Can V1 and V2 CryptoPunks Coexist or Will Copyright Tear Them Apart?

Abstract

A legal dispute is brewing between Larva Labs, the creator of the CryptoPunks NFTs, and a group of owners of the so-called V1 CryptoPunks or V1 Punks, who received the NFTs in 2017 when Larva first launched them. However, the V1 Punks had a big error in the code for the smart contract. To fix the coding error, Larva sent out a new smart contract for the CryptoPunks NFTs, but the old smart contract remained. That created an anomalous situation: the CryptoPunks had two versions, the original V1 that was abandoned and the corrected V2 that survived and became famous.

Recently, some of the owners of the V1 Punks revived the old smart contracts, wrapped them in a new ERC-721 smart contract, and started selling them on OpenSea and other marketplaces. The wrapped version of V1 Punks fixed the coding error, but, since the images of the V1 Punks were identical to the V2 CryptoPunks from Larva's corrected smart contract, V1 Punks eventually drew the ire of Larva. Larva filed a DMCA notice with OpenSea alleging that V1 Punks infringed Larva's copyright. As outlined under the DMCA, OpenSea then removed the V1 Punks from its marketplace. Then, V1 Punks owners filed their counter notification. And it is expected that Larva will file an action to seek a court order to restrain the V1 Punks NFTs from being sold on OpenSea.

This Essay summarizes how the history of this saga unfolded. It also proposes a solution to the predicament: a trade-in program that Larva Labs can offer to V1 Punks owners. For each V1 Punk traded in, Larva can give the owner two NFTs of a new, special edition NFT collection that comes with special perks for the metaverse. Instead of litigation, both sides can choose collaboration.

Keywords: NFTs, blockchain, web3, metaverse, CryptoPunks, Larva Labs, copyright, licenses, DMCA, V1 Punks, V1 CryptoPunks

JEL Classification: K10, K30, L82, M11, M20