— Ch. 1 · Origins And Early Projects —
Non-fungible token.
~7 min read · Ch. 1 of 6
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.
Market Boom And Collapse
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.