Going back two years earlier, only a handful number of persons knew what NFTs are, talk more of the captivating Metaverse. While the concept has existed for years, the high returns people were making from cryptocurrencies and the amazing innovations of DeFi saw any talk related to NFTs swept under the carpet.
Although, the NFT market has been showing several signs of growth before eventually blowing up in 2021 after the $69 million sales of Beeple's "Everyday: The First 5000 days." Years of underground work and developments prepared the way for the amazing growth of NFTs in 2021. In this article, we explored the not so popular early years of NFTs in the Web3 space.
What are NFTs?
NFTs, short for non-fungible tokens, are non-interchangeable digital tokens used to denote ownership of specific assets - both digital and physical - on a blockchain ledger. Unlike fiat currencies or cryptocurrencies that can be used one for another interchangeably, each NFT is unique and doesn't hold equal value with another one.
NFTs can be used to represent almost any asset from paintings, images, videos, concert tickets, real estate, deeds, etc. Think of them as digital certificates that can be viewed and tracked on a blockchain ledger. No one can delete, claim, or transfer an NFT without the consent of the owner as the immutability of blockchain systems prevent such. The underlying blockchain networks that NFTs rely on to function is the reason for their innovative use cases and popularity in the Web3 ecosystem.
The History of NFTs
Early development of NFTs can be traced back to the concept of Coloured Coins introduced by Meni Rosenfeld in 2012. It was meant to be a way of representing and managing real-world assets on the Bitcoin blockchain by placing a mark on bitcoin tokens which denotes their use case. Although the concept failed as the Bitcoin blockchain wasn't built with such features in mind, it laid the foundation for several innovations that followed.
In 2014, Kevin McCoy minted the first-ever NFT, Quantum, using the Namecoin network which is a fork of the Bitcoin blockchain. Quantum is the image of an animated octagon filled with different shapes that pulse hypnotically. Following the NFT boom in 2021, Quantum sold in November 2021 for over $1.4 million in a Sotheby auction.
Many NFT experiments were later carried out on the Bitcoin blockchain but they never hit the ground. One notable project was Counterparty which allowed for the creation of digital assets, hosting the first meme NFT, Rare Pepes, on its platform. Then came the Ethereum blockchain and its new token standard which introduced a type of smart contract that allowed for creating and managing NFTs.
This changed the game for NFTs, prompting the launch of the popular generative art project, Cryptopunks, by Canadian software developers Matt Hall and John Watkinson. Cryptopunks was limited to 10,000 copies and has since been selling for insane prices.
Another major groundbreaking project that revealed the potential of NFTs was the CryptoKitties game developed by Axiom Zen. The game which was focused on breeding and trading virtual cats, garnered players across the globe as people were making huge profits from just trading their virtual cats. The in-game activity of CryptoKitties was so high at a time that it congested the entire Ethereum blockchain. This set the tone for the play-to-earn model, as many blockchain-based games started development.
A lot of these games were unnoticed by the wider crypto community until the popularity of NFTs in 2021 which saw Axie Infinity and Decentraland amongst many other games gaining popularity. In 2021, many other NFT concepts started launching in the crypto space as digital jpegs were selling for millions of dollars. Some of the notable projects include Bored Ape Yacht Club, The Sandbox, Loot, CoolCats, etc.
However, the explosion in NFTs isn't just confined to the walls of crypto as it has sent ripples across the global content creation market, especially that of digital arts. Realization of the potentials NFTs bring to the world - the virtual one especially - by the broader market has shifted the focus from just being a "means of selling jpegs for millions" to possibly the most trusted and efficient way of proving ownership of almost everything both virtual and physical. From digital arts, certificates, real estate, fashion, tickets, NBA cards etc. everything is being tokenized and going on-chain.
While crypto solutions have always had their fair share of criticism from many, the concept of NFT is hardly talked down by anyone. The main criticism related to NFTs so far is only the crazy amount digital arts sell for which is just one of its use cases. NFTs exclusion from these targeted arrows at crypto assets is owing to the fact that the concept itself is as extraordinary as the internet and blockchain it runs on. Moreso, the biggest uprising from the NFT boom is the beginning of a new type of digital environment powered by virtual/augmented reality - The Metaverse.
The clever combination of NFTs and virtual reality have revealed a new business model with the potential to reinvent current marketplaces of the internet.
In our upcoming Web3 report, we covered the momentous growth of the NFT market as well as major events and innovations that followed during its breakthrough year. Subscribe to our newsletter to stay connected.