Growing blockchain adoption paved the way for more innovations in the crypto space today. The emergence of a new trend after another was an indication of its rapid growth. Non-fungible token (NFT) is one of the newest trends that has been getting a lot of attention from crypto investors. But what are non-fungible tokens or NFTs? According to Wikipedia, NFT is a unit of data stored in a ledger that certifies a digital asset is unique or non-interchangeable. It is used to represent a photo, videos, audio, and other types of digital files. These items are bought and sold online with cryptocurrency and generally encoded with the same underlying software as cryptocurrencies. The NFT market value has already reached $250 million in 2020. But during the first quarter of 2021, its value increased by more than eight times to a whopping $2 billion.
Though NFTs have gained traction in 2021, these assets are not actually new. Their existence can be dated way back to 2012 with the introduction of colored coins built on the Bitcoin network. Colored coins are made of small denominations of a bitcoin. One example of which is satoshi, the smallest unit of bitcoin. These coins can be used to represent a multitude of assets and have multiple use cases like property, coupons, subscriptions, issue shares of a company, access tokens, and digital collectibles. From colored coins, let us travel back to the history of the early projects that have eventually led to the rising trend of NFT today.
A Brief History of NFTs
In 2013, Robert Dermody, Adam Krellenstein, and Evan Wagner founded Counterparty. It is a peer-to-peer financial platform and distributed, open-source Internet protocol built on top of the Bitcoin blockchain and network. It is one of the most well-known Bitcoin 2.0 platforms later known as non-fungible tokens. The protocol allowed its users to create currencies and decentralized asset exchange. It had numerous projects and assets, including a trading card game and meme trading like Rare Pepe Directory.
The Cryptopunks is one of the first NFTs on the Ethereum blockchain released in 2017 and was inspired by the Rare Pepe Directory. It was developed by Canadian software developers Matt Hall and John Watkinson of American studio Larva Labs. Each one of the 10,000 Cryptopunks was generated using a computer making them unique with no two characters being exactly alike. It was distributed in the form of an airdrop where anyone with an Ethereum can get a Cryptopunk for free.
Following Cryptopunks is Cryptokitties which launched in October of 2017. It is a blockchain game built on Ethereum and created by the Canadian studio Dapper Labs. It allows users on the platform to purchase, collect, breed, and sell virtual cats. These cute virtual cats cannot be replicated and cannot be transferred without the user’s permission even by the game developers. Currently, there are 50,000 Gen 0 Kitties but the number can go beyond since there is no limit to the number of other Kitties that can be bred.
In 2018, a CryptoKitty named Dragon was sold for a whopping 600 ETH or $172,000. With its rising popularity and value, the number of players has also soared to almost 1.5 million. The craze over CryptoKitties enabled Axiom Zen to raise $12 million in funding from Andreessen Horowitz and Union Square Ventures.
Though the fascination over Cryptokitties has already subsided, it paved the way for the NFT trend we know today.
The Hottest Trend in Crypto
The art industry is now the biggest taker of the NFT trend in the world of crypto. Digital artwork by crypto artist Beeple “EVERYDAYS: THE FIRST 5000 DAYS” was sold at a whopping $69.3M at Christie’s auction. The digital artwork is now one of the most expensive artworks ever sold to date.
But NFT also opened an opportunity even to street artists like Muralist Pascal Boyart. His works were inspired by French artist Eugene Delacroix who painted “Liberty Leading the People” and “The Death of Sardanapalus.” In a report by Coindesk, the artist once had difficulty monetizing his street art but with NFTs, he can now sell his artworks directly to his fans. His “Contemplations of the Red Jester” was sold for 75 ETH or $112,000 at the time.
Technoking Elon Musk, Twitter founder and CEO Jack Dorsey, and other well-known personalities are now also into NTFs. But why are people so drawn to NFTs? Rodriguez-Fraile, a mathematician based in Miami stated that investors now commented on the matter.
“People have long used art to store value. Crypto extends easily into digital art. This is just a more modern approach to investing in art and using it like someone would use gold or bitcoin.”
According to a report by the Insider, John Crain, founder, and CEO of SuperRare stated that people are motivated to buy NFTs because it provides a unique connection to the creator that does not exist with any other art form.
Though the mania still continues, some experts have warned investors that NFT is a “bubble” that is about to burst. With BTC (bitcoin) price plunging by almost 50% from its peak price of $64K in April, the NFT craze has also sizzled down. The average price of NFTs is down by over 60 percent in April. A decline in trading volume was also seen. Mark Cuban of Dallas Mavericks has also felt that the NFT has already simmered down.
“Crazy NFT prices ‘will settle down’ over time”
But he further added:
“but the tech is here to stay”
Noelle Acheson, CoinDesk’s research managing director in an interview with the Business Insider stated:
‘The NFT craze is not so much about prices and quick profit as it is about a new model of creative monetization.’ If artists and other content creators continue to mint NFTs, and consumers see value in them, it stands to reason the market is in for longer term growth.”
The growing number of real-life uses of NFTs can be instrumental for its survival. BTC (bitcoin), the most dominant cryptocurrency we have today was once viewed as a “bubble” but its massive adoption has pushed its entry into the mainstream. Today, it is now considered the fastest and most convenient means of payment worldwide. This could also be true with NFTs.
In recent news, prices of NFTs continue to soar despite the recent downward trend of the crypto market. This only proves that the blockchain product would continue as further adoption continues. It also opens another lucrative investment for investors while cryptocurrencies are still down.