A Brief History of Non-Fungible Tokens (NFTs)

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Two things happened in 2020.

Digital assets reached new all-time highs. Bitcoin got much of the spotlight. 

At the same time, a new sub-sector emerged. DeFi caught the imagination of traders. Popular as it may be, mainstream cryptocurrencies are fungible.

This property means these alternative currencies can find widespread adoption even replacing cash. Crypto supporters say the current monetary systems are pliable, under the control of central banks, and can be manipulated. 

Amid the expansion of DeFi, a new innovation sprung, enabling new opportunities: NFTs.

What are NFTs?

Non-Fungible Tokens (NFTs) are unique and immutable.

As the name suggests, they are not fungible like cash, and can’t be replaced. 

It is because of this specific property that NFTs have been finding increasing uses. The uses are not only in decentralized finance and core areas like insurance but also in the creation of unique assets that are digitally scarce and verifiable on the blockchain.

While the launch of NFT marketplaces continues to thrust them into the mainstream, the concept and applications aren’t new.

A Brief History of NFTs

The first NFT can be traced back to 2012 following the introduction of colored coins, also known as Bitcoin 2X. These were built on top of the Bitcoin network. As it is, Bitcoin doesn’t support smart contracts.

Back in 2012, users were still learning about crypto and possible use cases. Bitcoin 2X’s colored coins were dominated in BTC and could be as small as one Satoshi (that is, the smallest value of BTC). 

Despite being the first, colored coins only worked best in a permissioned environment. Still, this concept opened up doors enabling further experimentation.

The next attempt to create another NFT on-top of the Bitcoin network can be attributed to the work of Counterparty in 2014. It was a peer-to-peer financial platform and a market place relying on the limited Bitcoin network designed primarily to be a transactional layer. While it allowed trading of game cards and memes, it was until 2015 when the first game, Spells of Genesis in 2015. After its ICO and launch, the BitCrystals token was created as an in-game currency and NFT. More games were launched throughout 2015 and 2016 before users shifted to Ethereum.

Leveraging on Ethereum’s smart contracting and extended capabilities, the first NFT project called Peperium was released. It had a token called RARE, used for creating Memes and paying listing fees. But it was until the creation of CryptoPunks, another NFT project that was more of a hybrid of the two token standards in Ethereum, was launched in 2017. 

Following the success of CryptoPunks, the ERC-721 was invented in 2017 setting the foundation for the launch of even more NFT projects. The ERC-721 standard is a technical standard in Ethereum for NFTs, allowing the tracking of individual tokens inside a block.

With clarity, there was a boom, first with CryptoKitties in Jan 2018 before the Cambrian explosion throughout 2019 and 2020, where several marketplaces like SuperRare, Rarible, and OpenSea enabled the trading of digital art on the blockchain.In late January, Mark Cuban, the owner of the Dallas Mavericks sold his set of NFTs dubbed The Rollup 2021 on Rarible for over $10k. He’s also behind NBA Top Shot that has reached over $43 million in sales, pushing NFT to mainstream adoption. Another NFT collectible, Hashmask, was recently auctioned for over $814k on OpenSea. 

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