When Beeple’s Everydays: the First 5000 Days NFT sold at Christie’s for a then-record $69 million in 2021, it introduced a new genre of art and investment on the global stage.
Contrary to popular belief, NFTs have been around for much longer than that, and while 2021 may have been designated as “the year of the NFT,” that year certainly wasn’t their inception.
A deeper familiarity with the background of NFTs and the events that have contributed to their recent rise in popularity helps grasp the nature of NFTs and define them with precision.
Let’s read on to learn about when did NFTs start and their history!
NFT is short for non-fungible token, a unique cryptographic asset based on blockchain technology. Despite their seeming complexity, NFTs can be viewed as a means to distribute any type of media via a blockchain, from artwork, a game character, an event ticket, to a domain name.
While cryptocurrencies like Bitcoin and Ether are “fungible”, which means that they are “replaceable by another identical item” (Oxford Languages), each NFT is unique and cannot be exchanged at equivalency. For example, a BNB token is always identical and has the same exchange value as another BNB token. Meanwhile, a Bored Ape NFT is a unique token and no two Bored Apes are exactly alike.
Thanks to NFTs’ blockchain nature and unique data, they have made verifying and validating ownership in the digital world, which is supposed to be extremely difficult, easier, and more secure. The concept is that NFTs may verify the legitimacy of any associated asset by referencing online certificates of authenticity that are publicly stored on the blockchain. Thus, NFTs link artists with audiences through their decentralized digital identity and streamline transactions by eliminating middlemen.
When and who created the first NFT is still up for debate.
Some may consider Colored Coins, created on the Bitcoin blockchain in 2012, the first NFT project. The project introduced the concept of “colored coin”, which is a crypto asset that has been encoded with unique information to make it stand out from other assets and link it to a real-world purchase or asset. Although further development of Colored Coin was never pursued due to various technical challenges, it did lay the groundwork for the creation of NFTs.
Others may consider Kevin McCoy’s “Quantum” NFT minted on the Namecoin blockchain on May 2nd, 2014, the candidate for the “first NFT title.” Kevin McCoy, an artist, and Anil Dash, a digital entrepreneur were working together during a hackathon. They were looking for a solution to artists’ ownership over digital artwork problems. McCoy and Dash managed to record a looping art video made by McCoy’s wife on the Namecoin blockchain. Because the NFT concept did not yet exist, they call this solution “monetized graphics.”
“Colored coin” launched on the Bitcoin network in 2012-2013 inspired NFTs. Initially, Colored coins were meant to represent assets like digital collectibles, company shares, coupons, etc. They were considered cutting-edge innovations that offered untapped potential for future applications.
Counterparty is a decentralized, open-source, peer-to-peer financial platform created in 2014 by Robert Dermody, Adam Krellenstein, and Evan Wagner. It is based on the Bitcoin blockchain. Since the Counterparty enabled the generation of assets and featured a decentralized exchange, it also enabled the generation of user-generated, tradable currencies.
The first blockchain-based game, dubbed “Spells of Genesis” (or “SoG” for short) was developed not long after the Quantum experiment.
In April 2015, SoG was the first to implement in-game assets that combined trading card game mechanics with arcade-style point-and-click gameplay.
To win in SoG, players must carefully acquire and combine cards to build the most powerful deck. The most exciting feature is “blockchainizing” a card, transforming it into a valuable, tradable NFT.
The SoG developers were forerunners in two respects: they were among the first to issue in-game assets into a blockchain using Counterparty, and they were also among the first to make an Initial Coin Offering.
In August 2016, the trading card game Force of Will released their cards on the Counterparty platform. When compared to the sales of other popular card games in North America, Force of Will ranked fourth, after Pokemon, Yu-Gi-Oh, and Magic. Their participation, despite prior ignorance of blockchain technology, demonstrated the worth of recording these assets in a decentralized ledger.
In 2016, a slew of Rare Pepes was released on the Counterparty platform, marking the beginning of the age of the meme-NFTs. A rare Pepe or RarePepe is a form of internet meme centered on Matt Furie’s “Pepe the Frog.” Between 2016 and 2018, a total of 1,774 official cards were released for the project in 36 series, each of which was recreated by artists from all around the world. In August of 2021, one Rare Pepe was sold for 149.99 ETH, which was nearly $500,000 at that time.
With the introduction of the ERC-721 standard on the Ethereum GitHub in 2017, the term “NFT” gained more traction in the industry.
CryptoKitties, the NFT game where users can breed, sell, and trade cute digital cats, was introduced on the Ethereum blockchain in 2017 by Axiom Zen (Dapper Labs’ parent company). Shortly after its launch, Cryptokitties’ huge transaction volume jammed Ethereum’s network and nearly brought it to a standstill. Because of this, a new blockchain called Flow was developed to accommodate extremely high user numbers.
Since Matt Hall and John Watkinson’s creation of CryptoPunks in 2017, the concept of NFT art has been given a fresh wind. They posted nine thousand pixelated avatars’ NFTs online for anyone to take. The remaining 1,000 was kept as profit. Few people initially claimed their NFTs. This shifted when CryptoPunks were featured in an article on Mashable. All nine thousand CryptoPunks were taken in less than a day. And then an odd thing happened: the initial claimants started selling their CryptoPunks on the secondary market. Through the year’s end, one CryptoPunk NFT brought in $170,000.
NFT Marketplaces, which allows users to freely mint and exchange NFTs has contributed to revolutionize NFTs and bring NFTs to the masses of crypto users.
While there are a plethora of sites offering NFT exchanges, only a select few truly stand out. To be specific, OpenSea significantly altered the NFT industry’s landscape.
It all started when creators Devin Finzer and Alex Atallah became interested in the CryptoKitties phenomenon in 2017. OpenSea was initially marketed as “the first open marketplace for any non-fungible asset on the Ethereum blockchain” after its creators discussed the idea with other crypto enthusiasts.
SuperRare was developed by John Crain in 2018. Before NFTs, most art sales in the traditional art world were made through galleries, who typically took a 50% fee from each transaction. The revolutionary component, made feasible by blockchain technology, is that SuperRare would pay artists a 10% royalty on each future sale of their digital art NFT, keeping only 15%. There has never been anything like royalty sales in the art industry before.
By the year 2020, SuperRare’s price had climbed into the six figures.
Awareness of NFTs increases gradually from 2018 to 2020, with widespread use beginning in the first half of that year. Between 2018 and 2020, the market capitalization of NFTs (or non-fungible tokens) increases by a factor of roughly ten, from $40.96M to $338.04M U.S. dollars.
2021 is dubbed “the year of NFTs” because of the exponential growth seen in the three fields of NFT art, Metaverse, and NFT gaming.
The works of NFT artists have been given significant financial value and widespread exposure, propelling them into the mainstream of the art world. An artist named Pak managed to get above the seven-digit mark in the year 2021 with the artwork “The Pixel”. And to round off the zenith of NFTs in digital art, there’s Beeple’s Everyday – The First 5000 Days. It sold for $69M (U.S. Dollars). That’s not everything. Pak has now surpassed this milestone in history by signing the most expensive NFT ever at $91M.
With the development of NFT technology came increased discussion of its potential use in multiple blockchain metaverses, a phrase made prominent by Facebook’s 2021 rebranding as Meta. Decentraland was the first business to treat the gaming and NFT industry as its own ecosystem. Decentraland is an Ethereum-based game where players may use MANA tokens to purchase virtual land, acquire and trade assets, vote on the game’s governance, create their own NFTs, and much more.
Celebrities like Snoop Dogg and Paris Hilton have “moved into” The Sandbox, a popular NFT-based metaverse where they can create virtual houses, have virtual rooftop parties, and launch virtual record labels. Both Square Enix and Atari have put money into The Sandbox so they may make The Walking Dead-themed theme parks in virtual reality.
In the overall development of NFTs, NFT gaming was the most explosive trend of 2021, helping to popularize NFTs and usher in a whole new demographic of NFT adopters. The burst of Axie Infinity was the impetus for this movement’s meteoric rise in the year. A new report by NonFungible claimed that in 2021, NFTs worth almost $3.5 billion were traded in the game Axie Infinity. This accounted for over two-thirds of all NFTs traded in the whole blockchain gaming sector in the same year. NBA Top Shot, a marketplace for sports highlights, came in second with $827 million, and Loot, a platform for online multiplayer games, came in third with $242 million.
There have been several spinoff fads from the “play-to-earn” model popularized by the proliferation of NFT games, including the “move-to-earn,” “sleep-to-earn,” and “shop-to-earn” movements. These movements have brought NFTs’ practical applications closer to people’s everyday lives, and they’re widely seen as pointing toward the future of NFTs’ steady advancement.
It’s the universal law that what goes up will have to go down. After reaching its highest point in 2021, the NFT market is now in late 2022 and is entering a temporary downtrend season following the overall cryptocurrency market’s situation.
On Aug 28, 2022, OpenSea, the largest NFT marketplace, has seen a 99% decrease in daily transactions since its record high of $405.75 million on May 1, 2022. Significant decreases in OpenSea users and transactions occurred simultaneously with the large losses in daily and monthly volumes. This seems to indicate that the value and appeal of blockchain-based collectibles have declined during the past several months.
The decline of NFTs is also reflected in the floor price of blue-chip NFT collectibles. On May 1, the floor price of Bored Ape Yacht Club was 153.7 ETH, and on August 28, it had fallen by 53% to 72.5 ETH. When compared to its all-time high of 83.72 ETH in July, the floor price of CryptoPunks, another top NFT collection, fell about 20%. Because blue-chip NFTs are priced in ETH, the native currency of the Ethereum network, their value is strongly influenced by the coin’s price movements. A bearish ETH market may be a major factor in the dismal NFT figures. Remarkably, the price of one ether (ETH) has dropped from $4,950 in November 2021 to under $1,500 in August 2022.
Even though the NFT market is in a brief downturn, NFT technology’s long-term development is an unavoidable trend of the blockchain’s future. As the new area becomes more applicable and mainstream, its exhilarating past will give way to unbounded potential.
How will new ecosystems improve NFTs’ user friendliness and adoption rate?
Will the income from NFT royalties be sufficient for artists and musicians to cut out the middleman?
How will the innovative concept of fractional ownership change the way ordinary folk put their money to work?
Will NFT be used as proof of real estate ownership in the real world, not just in the metaverse?
Predicting the future can be difficult, but when it comes to NFTs, it’s reasonable to say we haven’t even begun to imagine the full scope of what will emerge in the next decades.
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