The History of Non-Fungible Tokens (NFTs)

A non-fungible token is only a one-of-a-kind digital asset. Bitcoin is fungible, which means that all bitcoins are identical and entirely interchangeable. A work of art is an example of a non-fungible token. I can have two identical works of digital art, yet each one is completely distinct. The next sample displays two NFTs from the crypto-artist Josie. Her two pieces, "Choose" version #4 and "Choose" edition #5, may appear identical, yet they are completely unique to the blockchain.

Now that we have explained what NFTs are, we can dive into the extensive history of these assets.

One could argue that Colored Coins are the very first NFTs to exist. Colored Coins are made of small denominations of a bitcoin and can be as small as a single satoshi, the smallest unit of a bitcoin. Colored Coins can be used to represent a multitude of assets and have multiple use cases, including:

PropertyCouponsAbility to issue your own cryptocurrencyIssue shares of a companySubscriptionsAccess tokensDigital collectibles

Colored Coins showed a significant advancement in Bitcoin's capabilities; nevertheless, their disadvantage was that they could only represent specific values if everyone agreed on their worth. Colored Coins were only as strong as their weakest member since Bitcoin's programming language was never intended to allow this sort of activity inside its network. For example, three persons agree that 100 Colored Coins equal 100 firm shares. If even one member determines that Colored Coins no longer represent firm shares, the whole system collapses.

Despite Colored Coins' shortcomings, the system operated best in a permissioned environment, which suggests that in certain cases, a database is preferable. Colored Coins, on the other hand, paved the way for future research and the development of NFTs. Implementation needed a more flexible blockchain that could handle real-world assets, but the enormous potential of distributed ledgers was evident.

The introduction of Colored Coins sparked a wave of interest in blockchain-based asset issuance. However, many individuals were aware that Bitcoin was not designed to support these additional functionalities in its present form. Founded in 2014 by Robert Dermody, Adam Krellenstein, and Evan Wagner, Counterparty is a decentralized, open-source Internet protocol built on top of the Bitcoin blockchain. Counterparty featured a decentralized exchange, a crypto coin called XCP, and asset creation. Trading card games and meme trading were among the many ventures and assets it possessed.

The developers of Spells of Genesis were not only pioneers in using Counterparty to issue in-game assets into a blockchain, but they were also among the first to initiate an ICO. ICOs were first known as "crowdfunding" because of how early they were introduced. BitCrystals, the in-game currency in Spells of Genesis, was created as a way to raise money for development.

Counterparty and Force of Will partnered together in August 2016 to provide their cards on the Counterparty platform. Toy sales in North America rated Force of Will in fourth place, just ahead of Pokemon, Yu-Gi-Oh!, and Magic: The Gathering. Force of Will was a huge mainstream firm with no previous blockchain or cryptocurrency expertise, thus this incident was significant. The benefit of placing such assets on a blockchain was signified by their inclusion in the ecosystem.

A few years ago, memes began making their way into the blockchain. The "rare pepes" started to be traded on the Counterparty platform in October of 2016. Memes based on this frog figure are called pepes.

Fans of these memes are quite passionate about them. The Rare Pepe Meme Directory is a form of meme trade.

Pepe meme "experts" have been added to the Uncommon Pepe Meme Directory in order to ensure that the memes are indeed rare. This example, despite its oddity, proves that customers are looking for distinctive digital goods.

Memes began to be exchanged on Ethereum in the early part of 2017. Peperium was launched in March 2017 as a "decentralized meme marketplace and trading card game (TCG) that enables anybody to generate memes that live forever on IPFS and Ethereum." Peperium, like Counterparty, had a RARE token, which was used for meme production and to pay listing costs, same like Counterparty's token.

As the trading of rare pepes on Ethereum picked up, two “creative technologists” decided to create their own NFT project with a slight twist. John Watkinson and Matt Hall realized they could create unique characters generated on the Ethereum blockchain. Characters would be limited to 10,000 and no two characters would be the same. They called their project Cryptopunks, as a reference to the Cypherpunks who experimented with precursors to Bitcoin in the 1990s.

Watkinson and Hall choose to give out Cryptopunks to everyone having an Ethereum wallet. All 10,000 Cryptopunks were quickly claimed, spawning a lively secondary market. Interestingly, Cryptopunks were not totally ERC20 because to its constraints, but neither were they entirely ERC721 either. Cryptopunks are therefore an ERC721/ERC20 hybrid.

NFTs have become widespread because to the success of CryptoKitty. Virtual cats may be adopted, raised, and traded in CryptoKitties, a blockchain-based virtual game. It's time to put cats on the internet!

Almost every news outlet covered this fantastic effort, from CoinDesk to CNN. Possibly because the game was slowing down and clogged the Ethereum network or because individuals were earning massive money exchanging them.

Axiom Zen, a Vancouver-based firm, introduced CryptoKitties in October 2017 in an unusual way. During the ETH Waterloo Hackathon, the world's biggest hackathon for Ethereum, the team unveiled the alpha version of their product. It was a great opportunity to present the game to a large group of developers. During the hackathon, the CryptoKitties team won first place, and the game rapidly became a sensation.

The NFT ecosystem grew rapidly in 2018 and 2019. The space already has over 100 projects and more are planned. OpenSea and SuperRare are leading the way in NFT markets. Compared to other crypto exchanges, the trading volumes are minor, but they are rising quickly and have gone far. As Web3 wallets like Metamask develop, it is becoming simpler to enter the NFT ecosystem. Dapper Labs just released a Dapper wallet that does not need gas. Websites like nonfungible.com and nftcryptonews.com (shameless plug) now give NFT market measurements, gaming guidelines, and general information. 

From what I've seen so far, many projects have taken off! The most important thing is to do our own research!