Non-fungible token

• 1. Origins And Early Projects

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  In May 2014, Kevin McCoy and Anil Dash stood before an audience at the New Museum in New York City. They presented a video clip created by McCoy's wife Jennifer on a screen. This moment marked the creation of Quantum, the first known non-fungible token. The pair registered the video on the Namecoin blockchain and sold it to Dash for four dollars during their live presentation. They called this technology monetized graphics. It explicitly linked a tradable blockchain marker to a work of art via on-chain metadata.

  Three years later, Etheria launched in October 2015. This project demonstrated itself at DEVCON 1 in London just three months after Ethereum began operations. Most of its 457 hexagonal tiles remained unsold for over five years until the 13th of March 2021. A buying frenzy then occurred within 24 hours. All tiles from both current and prior versions sold for a total sum that reached millions of dollars. Each tile had been hardcoded to one ether at launch.

  Rare Pepes emerged in 2016 as a semi-fungible NFT project centered around the Pepe the Frog meme. Artists contributed works into a curated directory using Counterparty, a protocol created in 2014. Curio Cards arrived in May 2017 as Ethereum's first art NFT project using the fungible ERC-20 standard. These cards featured satirized corporate logos alongside other image types. CryptoPunks followed in June 2017 with 10,000 pixelated characters. This generative art project became one of the most commercially successful NFT initiatives ever.

  CryptoKitties launched in November 2017 as a widely acclaimed blockchain game on Ethereum. It pioneered what is considered the first bona fide non-fungible token standard known as ERC-721. The game used an early version of this standard that differed from the formally published version released in 2028. Some kitties sold for over $100,000 each while raising $12.5 million in investment. The game overwhelmed Ethereum's processing power during its peak popularity.

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• 2. Market Boom And Collapse

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  NFT trading volume surged from US$82 million in 2020 to US$17 billion in 2021. Daily sales figures climbed rapidly during these years before crashing hard. A May 2022 estimate showed sales had dropped by over 90% compared to 2021 levels. The Wall Street Journal reported in May 2022 that the market was collapsing. Active wallets fell 88% from November 2021 while daily sales declined 92% from September 2021.

  OpenSea emerged as an NFT marketplace in 2017 to capitalize on the new standard. Its market cap grew to $1.4 billion in 2021 during the ongoing boom. ArtReview ranked ERC-721 at number one spot in 2021 calling it the most powerful art entity in the world. Artist Beeple sold Everydays: The First 5000 Days at Christie's for $69 million. This became the first instance of a legacy arthouse dealing in NFTs.

  By mid-April 2021, demand subsided causing prices to fall significantly. Mike Winkelmann called NFTs an irrational exuberance bubble in March 2021. Financial theorist William J. Bernstein compared the market to 17th-century tulip mania. Rising interest rates impacted risky bets across financial markets including these speculative assets. A September 2023 report claimed 95% of NFT collections had zero monetary value and 79% remained unsold.

  In December 2022, programmer Casey Rodarmor introduced ordinals to add NFTs to Bitcoin. Popularity increased bitcoin payment fees by February 2023. Donald Trump announced an NFT line featuring his image for $99 each on the 15th of December 2022. Reports indicated he made between $100,001 and $1 million from this scheme.

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• 3. Legal Ownership And Copyright

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  An NFT solely represents proof of ownership of a blockchain record without implying intellectual property rights. Someone may sell an NFT representing their work but buyers do not necessarily receive copyright. The seller remains free to create additional copies unless explicitly prohibited. Legal scholar Rebecca Tushnet stated purchasers acquire whatever the art world thinks they have acquired. They definitely do not own the copyright unless it is explicitly transferred.

  Certain projects like Bored Apes assign intellectual property rights directly to owners. CryptoPunks initially prohibited commercial use of associated digital artwork before allowing such use later. The extralegal nature of trading results in informal exchanges with no legal basis for enforcement. Blockchain records alone do not align with established frameworks for property under traditional law.

  The numerus clausus principle limits types of property rights recognized by law. Tokenization mechanisms required specific legal recognition to function as enforceable representations. In the United States, Article 12 introduced in 2022 classifies NFTs as controllable electronic records. This reform enables tokenization when underlying debtors agree to honor controllers. For digital art without such agreements, disconnect persists between ownership and control over files.

  A 2022 study from the US Treasury found evidence of money laundering risk in high-value art markets including emerging digital sectors. Two people were charged in March 2022 for executing a million-dollar scheme through wire fraud. The European Commission announced plans to draw up regulations combating money laundering by 2024.

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• 4. Environmental Impact And Energy Use

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  NFT purchases enabled by high energy usage generate greenhouse gas emissions on some blockchains. Proof-of-work protocols consume large amounts of electricity to regulate and verify transactions. Ethereum used this protocol until switching to proof of stake in 2022. That switch cut energy usage by 99.99 percent according to reports.

  Estimating carbon footprints requires assumptions about transaction setup and miner behavior. Questions arise regarding whether estimates should incorporate ongoing network demand or just marginal impact. Some artists chose not to sell certain works to limit emission contributions. Other markets offered options to buy carbon offsets though benefits remain questioned.

  Off-chain transactions serve as another approach to reducing electricity consumption during minting. Conceptual debates continue about how much responsibility lies with individual buyers versus entire networks. An analogy compares NFT carbon footprint to that of an additional passenger on an airline flight. Despite these concerns, direct environmental impacts depend heavily on specific blockchain choices made by creators and platforms.

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• 5. Fraud Scams And Plagiarism

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  Cases exist where artists had work sold without permission including Qing Han whose identity was assumed after her death in 2020. A seller posing as Banksy successfully sold an NFT for $336,000 before refunding money following media attention. Voiceverse stole content from 15.ai in January 2022 generating voice lines using unauthorized text-to-speech technology. The developer responded with a viral tweet expressing outrage at the theft.

  Wash trading creates fictitious sales through multiple wallets controlled by one individual. Looksrare generated large sums daily in early 2022 largely through wash trades. Sleepminting allows fraudsters to mint NFTs in artist wallets without awareness then transfer them back. A white hat hacker exploited this method against Beeple's wallet creating fraudulent tokens.

  Mason Rothschild faced court orders in February 2023 paying $133,000 damages to Hermès over digital depictions of Birkin handbags. OpenSea created takedown teams responding to complaints but critics say responses remain slow. Insider trading occurred when an employee bought specific NFTs before launch with prior knowledge of promotion plans. The BBC reported this case highlighting lack of legal recourse for such abuses.

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• 6. Diverse Applications And Industries

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  Digital art remains common use case with high-profile auctions receiving public attention. Pak's Merge became most expensive NFT while Everydays ranked second at Christie's auction house in 2021. Mars House sold for 288 Ether equivalent to US$524,558 in May 2021. Some collections like Bored Apes and CryptoPunks represent generative art assembled from simple components.

  Games utilize NFTs as in-game assets though reception varies among developers. Ubisoft embraced technology launching Quartz initiative despite heavy criticism including 96% dislike ratio on YouTube videos. Valve Corporation banned applications using blockchain technology on Steam platform in October 2021. Mojang Studios announced NFTs would not be permitted in Minecraft due to conflicting values.

  Music industry adopted NFTs with Shakira releasing La Caldera collection featuring animated art and audio pieces. Kings of Leon promoted their album When You See Yourself through an NFT released the 3rd of March 2021. Muse became first band to qualify UK charts via NFT sales of Will of the People album. Electronic musician 3lau sold 33 NFTs totaling millions commemorating three-year anniversary of Ultraviolet album.

  Political activism found voice through Destruction of Nazi Monument Symbolizing Contemporary Lithuania video filmed by Professor Stanislovas Tomas the 8th of April 2019. Academic institutions auctioned patents including CRISPR gene editing rights at UC Berkeley raising funds for research. George Church published 20 NFTs with his likeness instead of DNA data in June 2022 supporting genetic research efforts.

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