From Colored Coins to CryptoKitties: The Evolution of NFTs
Is it time to buy blue-chip NFTs? | Credit: Shutterstock
Key Takeaways
- NFTs have evolved from the concept of digital currencies and tokens, with the introduction of blockchain technology.
- The development of NFTs was facilitated by the emergence of crypto collectibles like CryptoPunks and CryptoKitties, which demonstrated the distinctiveness and ownership potential of digital assets.
- By enabling the creation and sale of unique digital assets with proof of authenticity, the ERC-721 standard’s release in 2018 marked a turning point for nonfungible tokens.
- NFTs are now used in a variety of industries, including gaming, music, sports, real estate, and others, going beyond the realm of the arts.
Non-fungible tokens (NFTs) have emerged as a pioneering sector revolutionizing the trading of digital assets, particularly digital artworks. These unique digital assets make it possible to create and share original digital content like songs, tweets, and artwork. However, the concept of NFTs did not emerge overnight.
Instead, NFTs evolved gradually, expanding on the ideas underlying earlier digital money and tokens. This article will examine the evolution of NFTs, from their early stages to their present status as a developing phenomenon in the world of digital art and collectibles.
The origins of digital tokens
Although they have been a notion for many years, digital currencies and tokens didn’t fully take off until the development of blockchain technology. The first and best-known cryptocurrency, Bitcoin, was introduced in 2009 and gained popularity as a decentralized digital currency very quickly. However, Bitcoin’s potential for producing and transferring other types of digital content is limited because it was not intended to be used for anything besides transactions.
The idea of “colored coins” was first presented in 2012 as a means of enhancing the functioning of digital currencies. Users might “color” a small amount of Bitcoin to symbolize a digital asset, like a stock or a bond, by using colored coins. Although colored coins were not extensively used and had limited usefulness, they paved the way for later, more sophisticated digital tokens.
The Emergence of Crypto Collectibles
The 10,000 distinct 8-bit characters known as CryptoPunks were released to the public in 2017 by Larva Labs. CryptoPunks were a new type of digital art that could be purchased, sold, and exchanged just like traditional art because each one was distinctive and could be held by a single person. Other digital collectibles, including CryptoKitties, were made possible by the success of CryptoPunks.
On the Ethereum blockchain, users could breed and sell exclusive digital cats using CryptoKitties , which was released in November 2017. The game gained popularity quickly, resulting in an increase in traffic that clogged the Ethereum network and drove up transaction costs. This incident revealed the Ethereum network’s scalability problems and prompted the creation of additional standards for digital tokens, including the ERC-721 standard used for NFTs.
The Evolution of NFTs
The release of the ERC-721 standard in 2018 marked a crucial turning point in the advancement of nonfungible tokens. With the help of this new standard, it was feasible to build unique digital assets that were not reproducible or duplicable. Digital artists quickly gained favor in the art world by using NFTs to create and sell one-of-a-kind pieces that collectors could own and display with confirmation of authenticity.
Trevor Jones, an artist, sold a digital painting titled “Bitcoin Angel ” for 10.5 ETH (about $23,000 at the time), making it one of the first notable NFT art sales. Since then, demand for NFT art has skyrocketed, with works by artists like Beeple fetching as much as $69 million at a March 2021 Christie’s auction.
NFTs, however, are utilized outside of the art sector as well. They can be used in a variety of industries, including gaming, music, sports, and real estate. To illustrate the potential of NFTs in the gaming industry, a virtual plot of land in the blockchain-based game Decentraland was sold for over $50,000 in 2019.
NFTs are also transforming how musicians publish their music and make money from it. Musicians may create unique digital assets that act as ownership tokens for their music, which fans can then buy and sell. As a result, there is an increase in fan involvement and new revenue opportunities for artists.
The growing popularity of NFTs is also extending to sports organizations and players, who use it to produce one-of-a-kind digital artifacts like unique digital ‘game-worn’ jerseys associated with a matchor highlight clips. Fans may purchase and sell these souvenirs, giving them a new opportunity to interact with their favorite players and teams.
Moreover, the real estate industry is using NFTs to create unique digital representations of real properties. The capacity to buy and sell these digital representations similarly to conventional real estate enables this new degree of accessibility and liquidity in the real estate market.
NFTs on the Bitcoin blockchain
Bitcoin, the first and largest cryptocurrency, has been a topic of numerous discussions in the digital asset space for several years. While NFTs have gained a lot of attention recently, the development of Bitcoin-based NFTs has been ongoing for nearly a decade.
Counterparty, a peer-to-peer financial network, unveiled the Rare Pepe NFT collection in 2014. The Rare Pepe NFTs immediately became well-liked by cryptocurrency collectors and enthusiasts. Stacks (formerly known as Blockstack) introduced an NFT platform later in 2017 that allowed programmers to design and control NFTs on the Bitcoin network.
A technical procedure called inscription makes it possible to add NFTs to the Bitcoin network. Writing or inscribing the content’s data onto the Bitcoin transaction’s witness is known as inscription. The witness was introduced in the Segregated Witness (SegWit) upgrade to the Bitcoin network in 2017. This improvement allowed for more data to be contained in a block by separating the digital signature from the transaction data.
Many people are interested in the future of Bitcoin-based NFTs, given the growth of NFTs in the larger crypto sector. The Bitcoin community is aggressively attempting to bring NFTs to the blockchain, despite Ethereum being the most well-liked blockchain for NFTs due to its smart contract capabilities.
The Future of NFTs
The history of NFTs has been fascinating, from the earliest colored coins to the present NFT mania. NFTs have changed how we perceive ownership and authenticity in the digital world, creating new opportunities for musicians, artists, gamers, sports fans, and others.
NFTs have a lot of potential, despite being a relatively young technology. We may anticipate seeing even more cutting-edge use cases develop as more industries adopt NFTs, opening up fresh opportunities for creativity and money generation in the digital sphere. NFTs are unquestionably something to watch out for if you’re an artist, gamer, musician, or just a fan of digital culture.
Also read: Introduction to Cryptocurrencies: What They Are and How They Work
