Ahh NFTs, an exciting relatively new form of art has recently grabbed your attention, and rightfully so. These highly valuable digital works of art have sold at high end auction houses like Christies for as much as $69 million.
To put that into perspective, that’s enough to buy 184 average homes in the United States, even in this vastly inflated market!
But, there are several good reasons for the seemingly exorbitant pricing of these art works. Not only are they scarce, traceable, and verifiable, they come with utility. Leonardo de Vinci never thought the Mona Lisa could be used as a video game character, but today, that’s precisely what can happen; some of the world’s most renowned artists are creating art with utility!
What Is an NFT?
Before we get into the history of NFTs, it’s important that you understand just what these digital artworks are. NFT is an acronym meaning Non Fungible Token. I know, the name’s not so artsy, but you’ll understand why soon enough.
Let’s break the acronym down:
- Non Fungible. The term Non Fungible essentially means that not only is the product unique, it’s so unique that it can’t be replaced with something else. Think about it this way, the Mona Lisa, one of the most expensive paintings, was counterfeited and passed off as the original for years. In fact, the counterfeit’s fame was the reason it garnered more than $3 million at Christies Auction. Non fungible assets simply can’t be counterfeited or replaced with another asset… Well, that is, other than currency (digital or otherwise). Even in the crypto world, fungible assets exist. For example, even Bitcoin itself is fungible because one Bitcoin can ultimately be replaced with another.
- Token. The term token points to the fact that NFTs are, at a very high level, tokenized. These tokens live on the blockchain just like other valuable tokens like Bitcoin, Ethereum, and Dogecoin. Of course, living on the blockchain means that everything that happens with the piece of art, and everything about it, including its ownership, is secured through the blockchain itself.
Who Created the First NFT?
So, who was it that decided that instead of giving Bitcoin and Ethereum homes on the blockchain, they would make it the home for art?
Kevin McCoy, that’s who… and he’s a genius!
McCoy started the NFT frenzy back on May 3, 2014 when he created the first ever NFT, Quantum. The artist created a highly pixelated picture of an octagon with denoting shapes like circles and arcs, all of which were the same color as the center and appear to be moving toward or away from the center in a pulsating motion.
That piece of art’s most recent sale raked in a whopping $1.4 million.
Going Back Further Than Quantum
Sure, Quantum was the first NFT to ever hit the scene, but the foundation of what we know to be NFTs today got its start a couple years earlier with colored coins. You see, ever since the blockchain was created, digital masterminds have been working to bring its utility to new heights.
After all, there’s a whole world of possibilities to consider when a highly secure tracking system like the blockchain comes into play, and that’s exactly what colored coins did.
Initially issued on the Bitcoin blockchain in 2012 and 2013, colored coins were essentially tracking tags that were attached to real-world items. For example, if Whole Foods wanted to make sure that a product they sold as organic was truly organic, colored coins could do that.
These tracking coins could be coupled with a shipment of corn, providing a secure way to tell not only where that corn had come from, but where it had been on its journey to the shelves at Whole Foods Market.
Not to mention, these colored coins could be used to prove ownership of any asset, whether it be stocks and bonds or cars and boats. Essentially, the need for verifiable proof of ownership and end-to-end tracking of goods led innovators to create a solution through the blockchain, which ultimately became the foundation of NFTs.
So, What Happened Between Colored Coins and NFTs?
As you could imagine, there was another rung on the stepping stool of the evolution of NFTs. In 2014 a peer-to-peer financial platform known as Counterparty was created. Its founders, Robert Dermody, Adam Krellenstein, and Evan Wagner created a way for users to create their own assets and add them to a decentralized exchange, essentially making it so the average Joe could create his own cryptocurrency.
Soon, meme trading started to take place on the platform without any concerns over counterfeited work. After all, being on the blockchain, ownership and validity as the original was easily proven.
NFTs have become an overwhelmingly popular commodity, but they didn’t start out that way. So, what happened with NFT’s throughout history? Well, you already know about Quantum and colored coins, but how’d we jump from these very early beginnings to million-dollar NFTs?
2015: Spells of Genesis
In 2015, Counterparty partnered with the creators of Spells of Genesis, a team known for creating top-of-the-line games. Through their partnership, the idea of in-game assets being verifiable through the blockchain was born.
In fact, through the partnership the first in-game cryptocurrency, BitCrystals, was born. BitCrystals prove an important utility of the blockchain that helped pave the way for NFTs today.
2016: Trading Cards
Trading cards are an overwhelmingly popular commodity in the United States. Games like Pokemon, Magic, Yu-Gi-Oh, and Force of Will have raked in billions of dollars in physical sales, but it wasn’t until Counterparty teamed up with Force of Will that these style trading cards became available in digital form through the crypto-ecosystem.
The entrance of Force of Will to the blockchain was a big step for the blockchain itself and NFTs. After all, it pointed to the value of trading such assets on a verified blockchain in comparison to trading the physical cards alone, which could be easily lost, stolen, and counterfeited.
2016: Rare Pepes
Another pivotal point in the evolution of NFTs happened in 2016 with the introduction of Rare Pepes. With the rise of memes on social media, it only made sense that they would make their way to the blockchain, and they did with Rare Pepes.
Blockchain-preneuers began adding assets to a unique digital image of a cartoon frog, which quickly became one of the most popular memes in history. While Rare Pepes were first hosted on the Counterparty blockchain, that all changed when the Ethereum blockchain became a prominent staple in the cryptocurrency world as Rare Pepes began to trade on the Ethereum blockchain.
Soon the Rare Pepe Wallet was created by the character’s founders Jason Rosenstein and Louis Parker. With this development, art creators around the world were finally able to create digital art, add it to the blockchain, and sell it through a blockchain-enabled marketplace.
2017: Cryptopunks & Cryptokitties
Rare Pepes became such an overwhelmingly popular digital commodity that it only made sense that competitors would come into play, and so, Cryptopunks was born.
John Watkinson and Matt Hall, the masterminds behind Larva Labs, introduced Cryptopunks to the world in 2017. When creating these characters, the creators made two very important promises:
- Unique. First and foremost, each Cryptopunk would be unique with no two characters being the same. Their uniqueness is important because if more than one character looked exactly the same, there wouldn’t be any added value to owning something that someone else could own as well.
- Only 10,000 Ever Made. The creators also announced that there would only be 10,000 Cryptopunks ever made. That’s another key factor. One of the reasons cryptocurrency is so popular is that it has a finite supply. Even Bitcoin will eventually stop being minted. Think of it this way, there are only so many copies of your favorite celebrity’s signature, and that finite supply creates value since value is ultimately nothing more than a supply and demand equation.
With the limited supply and uniqueness of characters, the value was inherently built into the Cryptopunks platform. However, prior to the pixelated characters, most everything ran on the ERC720 token standard. While this standard was great for verifiability, it didn’t work well for creating unique tokens. Thus, the ERC721 token standard was born, and Cryptopunks was like a hybrid between the ERC720 and ERC721 token standards, offering up both verifiability and the ability to create unique tokens, which was a must for the idea of these punks to work. After all, the ERC721 token standard made it possible to track the ownership of individualized tokens from a single smart contract.
Cryptokitties came shortly after Cryptopunks. These NFTs brought utility to the system through the ERC721 token by offering a game in which CryptoKitties could be adopted, bred, and traded or sold.
Over the past three years, NFTs have exploded into a global phenomenon with cryptocurrency adopters latching onto the concept like a newborn to his mommy.
Then, another major pivotal point on Valentines Day of 2018 when digital artist Kevin Abosch partnered with GIFTO to launch a charitable auction. At this auction, an NFT known as the Forever Rose sold for a whopping $1 million, making history as the first ever six-figure valued NFT.
Today, NFTs are seemingly everywhere. There are countless exchanges offering unique benefits to creators and collectors alike. The concept has further disrupted the art community by greatly reducing the fees involved in transferring ownership. Prior to NFTs, valuable art transfers could cost as much as 40% of the purchase price, thanks to auction and other fees. Today, NFTs offer a way to transfer art for pennies on the dollar.
Who Can Create NFTs Today?
While in the early days of NFTs, you would have to have detailed technical know-how to create this style of art, making it a limited option for only the tech savvy artist. Today, anyone can do it.
NFTs can be created from images, whether they’re digitally rendered images using visual software or pictures taken on your cell phone. In fact, one of the most valuable NFTs ever sold, known as Disaster Girl, is a picture of a young girl with a smirk on her face and a home burning to ashes behind her. That artwork sold for half a million dollars recently.
All you need to do to create an NFT is have legal ownership of an image and mint it to the blockchain.
NFTs are an exciting, relatively new form of art. While they have exploded in popularity as of late, that explosion is just in its infancy, especially considering the utility of these unique digital assets.
If you haven’t started yet, now is the time to get involved in the space. After all, in any industry, those that get involved early tend to become the APES in the long run!