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The History of NFTs

by jcp

By: CryptoVantage Staff
www.cryptovantage.com

Non-fungible tokens (NFTs) are perhaps the most special kind of token in the cryptocurrency space. While cryptocurrencies are focused on making all of the tokens on their networks indistinguishable from each other (in other words fungible), NFT creators are focused on making sure each of their issued tokens are special and unique. Indeed, the idea is that these tokens will gain value for their uniqueness rather than acting as a currency.

An NFT can represent anything from a digital trading card to a tweet. And while it’s still an open question as to whether this is a revolution in how digital media can be monetized or just another passing fad, it’s clear that the NFT market has reached unprecedented levels in 2021. But how did this all begin? Let’s take a look at the complete history of non-fungible tokens.

NFT Beginnings on Bitcoin

While most people associate NFTs with Ethereum these days, the reality is this phenomenon started on the Bitcoin blockchain. In the early days of Bitcoin, a concept known as “colored coins” gained some notoriety as a way of issuing other types of assets on top of the blockchain. The idea was these colored coins, which were basically just satoshis used to represent something else, could be used to allow Bitcoin users to issue everything from stock in a company to in-game items for video games. Many Bitcoin users, such as eventual Ethereum creator Vitalik Buterin, were fascinated by this concept of issuing alternative assets on top of the Bitcoin blockchain. However, the various early colored coins proposals for Bitcoin did not end up gain much traction. The most notable colored coin of all time may have been the initial coin offering (ICO) associated with the Mycelium Bitcoin wallet. This was issued on the Colu colored coins protocol.

The excitement around colored coins on Bitcoin eventually led to additional protocols built on top of the base Bitcoin blockchain that also had their own native tokens such as Counterparty and Mastercoin. Counterparty particularly led to the development of a few NFT collectible sets that are more similar to what is seen on Ethereum today. Spells of Genesis and Rare Pepes were two NFT collectible games that were particularly successful on Counterparty.

However, it should be noted that Bitcoin was never really intended to act as a database for these alternative tokens, and many Bitcoin users did not like the idea of clogging up precious block space with tokens that represented ownership over frog pictures, as this would make simple Bitcoin transactions more expensive.

NFTs Shift to Ethereum

Of course, the aforementioned Buterin would go on to launch Ethereum in 2014. It would be on this platform that NFTs would see a resurgence in 2017 with the releases of Cryptopunks and Cryptokitties. These were basically alternatives to the Spells of Genesis and Rare Pepe NFTs that had previously been launched on Counterparty. Perhaps most notably, Cryptopunks did not follow the ERC-721 standard when it was launched, as it did not yet exist. Instead, Cryptopunks were originally launched as ERC-20 tokens, which are more closely associated with the initial coin offerings (ICOs) that were popular at the time.

That said, the Wrapped Cryptopunks project has since made this NFT collectible set compatible with the ERC-721 standard. Cryptokitties were launched later in 2017 than Cryptopunks, and this blockchain-based game was the first major use case of the ERC-721 standard. Those who were around at the time will remember that Cryptokitties became so popular that they started to clog up the Ethereum blockchain and cause a sharp increase in the costs of using the network.

The developers behind Cryptokitties were eventually able to turn their success into a $15 million funding round from some of the biggest names in Silicon Valley. Later, the ERC-721 standard was integrated into popular Ethereum wallets like Metamask and NFT marketplaces like OpenSea began to emerge.

NFTs Start to Move Beyond Ethereum

Much like NFTs moved from Bitcoin to Ethereum, there is now another transition occurring as we enter a multi-chain universe.

While many of the most popular NFT projects of today are found on Ethereum, there are also a large number of NFT apps using alternative blockchains for a variety of reasons.

For example, NBA Top Shot, which is the most successful NFT collectible game of all time based on sales, uses the Flow blockchain, which was developed by the team behind Cryptokitties. More recently, the most popular NFT collectible set has been Axie Infinity, and those tokens are issued on the Ronin blockchain. WAX is another blockchain platform that has gained popularity in the realm of NFTs. Binance Smart Chain is also getting to the act, as NFTs from Andy Warhol and Salvador Dali were part of the Binance NFT Marketplace launch.

Additionally, the NFT boom has brought renewed interest around the concept to Bitcoin, as multiple NFT platforms have been released or are currently under development on the Liquid and RSK layer-two networks. While there has been a lot of excitement around NFTs lately, it’s important to remember that there’s no guarantee that this is a new technology that will change the world. Remember to consider that this phenomenon could eventually end up looking like the Beanie Babies fad before you put all of your money into NFTs.

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