4 Things You Need to Know about the History of NFTs
Non-fungible tokens (NFTs) have exploded in popularity. The market for ownership of the unique digital items reached $22 billion in 2021, up from just $100 million in 2020. The NFT Everydays: The First 5000 Days, a digital collage created by artist Mike Winkelmann under the pseudonym Beeple, sold for $69.3 million in March 2021.
Despite the boom in interest in 2021, the concept of NFTs actually dates back to 2012. The following is a look at four key points in the history of digital assets.
Origins on the Bitcoin Blockchain
Meni Rosenfeld is credited with laying the groundwork for NFTs with his concept of Colored Coins. The mathematician introduced the idea in a December 2012 paper as a means of authenticating ownership of real-world assets such as cars and real estate through the Bitcoin blockchain. Rosenfeld, along with authors Yoni Assia, Vitalik Buterin, and Lior Hakim, further explored this idea the following year in the paper "Colored Coins - BitcoinX." While the Colored Coins concept never came to fruition, it prompted others to experiment with the idea of NFTs.
Quantum: The First Known NFT
Digital artist Kevin McCoy minted the first-ever NFT on May 3, 2014. The one-of-a-kind artwork, known as Quantum, is an entrancing pixelated octagon filled with a variety of shapes. It sold for more than $1.4 million in a November 2021 Sotheby’s auction.
Growth on Ethereum
Bitcoin 2.0, also known as the Counterparty platform, provided a market for NFTs as it allowed users to create unique digital assets. Spells of Genesis later pioneered the use of video game assets as NFTs. However, the Ethereum blockchain, which went live in July 2015, pioneered additional opportunities for creators and was home to early success projects like CryptoPunks and CryptoKitties. Activity for the latter, a virtual game in which players can breed and trade virtual cats, facilitated a sixfold increase in pending transactions and clogged the Ethereum blockchain upon its release in December 2017.
Going Mainstream in 2021
In 2021 there was a massive shift in the NFT industry as athletes, celebrities, and major brands including Nike and Adidas began issuing their own NFTs. Coca-Cola, meanwhile, generated more than $575,000 through the sale of NFTs such as a custom jacket for use in the metaverse world of Decentraland.
George Monaghan, a data analyst at the research firm GlobalData, is one of many experts who believe these unregulated and expensive NFTs are risky assets. He expects the NFT market to eventually become more stable and risk averse, but not in the immediate future.