How did NFTs come into existence and who started it all?
Well, it depends on who you ask.
Some trace its beginnings to Colored Coins way back in 2012, even before the term NFT was – well – coined. Colored Coins represented small denominations of bitcoin, with the goal of adding metadata to transactions.
However, this turned out to be nothing more than a failed experiment.
Others say that the first NFT ever created was “Quantum” by Kevin McCoy in May 2014.
Just last year, this one-of-a-kind digital animated art piece of a pulsating octagon was sold for a whopping $1.4 million!
If you had been watching the crypto scene over the past half-decade or so, then you might have also heard of a little something called CryptoKitties.
Born out of the interweb obsession with these cute feline pals, CryptoKitties was one of the first successful pioneers of NFTs back in 2017.
In this game, players can buy and breed limited-edition virtual cats, unlocking rare traits and earning rewards.
From there, similar games were developed with features enabling players to win in-game prizes and collectibles, and at the same time on these unique digital assets.
Some recent well-known examples of these include NBA Top Shot and Axie Infinity.
Money kept rollin’ into NFTs in the years that followed, turning several digital artists into millionaires overnight.
One such example is Mike Winkelmann (more popularly known as Beeple) whose NFT for Everydays: The First 5000 Days collage sold for a record-breaking $69 million in 2021.
The NFT market also expanded beyond the gaming scene into music, digital art, the metaverse, and virtual real estate.
You can even buy NFT avatars that can be used as profile pictures on Instagram or TikTok.
If you’re wondering why anyone in their right mind would even pay big money to get a .jpeg image to use as a profile photo, well, consider it as the ultimate digital flex.
It’s a similar concept to the real world where those who wish to show they have the means and access to exclusive products can do so with brands like Rolex, Lamborghini, and Louis Vuitton.
In the crypto world, those who wish to flex their wealth can do the same with NFTs as a few exclusive crypto brands have emerged.
Popular PFP (profile picture) NFT art projects like CryptoPunk and Bored Ape Yacht Club are limited edition NFT collections and memberships, and they don’t come cheap.
In 2017, a bundle of CryptoPunks was sold for a total of nearly $17 million!
And in 2022, the average starting price for a Bored Ape Yacht Club NFT can be well over $100K!
You’re probably thinking “I can just right-click one of these NFT avatar images to use on my profile. I don’t need to spend a boatload to do that!”
This is very true but right-clicking won’t give you the ability to prove authenticity and ownership of the image, which is where most of the extrinsic value comes from.
Again, it’s the reason why the real Mona Lisa is worth over $800M vs. a copy that can be found on Amazon.com for $52.
So, it’s no wonder that top-tier NFT brands like the CryptoPunks have found their way into the digital wallets of celebrity holders such as Jay-Z, Snoop Dogg, Steve Aoki, Jason Derulo, and Serena Williams.
And it’s likely that celebrity clout further cemented those NFT brands into positional goods, skyrocketing the value even further.
At the rate the industry is booming, it seems that anyone could assign a tokenized digital certificate on a rock and call it an NFT. And true enough, clip art NFTs of jpeg rock images known as EtherRocks have gone on sale for a little over a million dollars in August 2021.
Of course, not all NFTs are worth owning and it can be quite a challenge to dig through the absurd amount of “NFT trash” out there to actually find some treasure.
Besides that, the industry is no stranger to your good ol’ scams.
Just like your typical Monet and Rembrandt masterpieces are prone to fakes and forgery, NFTs are also rife with counterfeits.
Even OpenSea, the most well-known NFT marketplace in the world, warns that over 80% of listings were plagiarized or fake collections.
Also, much like the ICO world, “rug pulls” are also pretty common in the NFT industry.
This happens when a legit-looking NFT project with exciting features and promising returns is hyped up, only to have the fraudsters (and invested funds) suddenly vanish into thin air.
And of course, who could forget the typical pump-and-dump scheme? In this case, scammers or “influencers” buy an NFT collection and deliberately overhype it across social media to create FOMO (Fear of Missing Out) among their followers.
When the price is high enough, initial holders liquidate their large positions and leave the rest of the schmucks to deal with the rock-bottom prices of their NFTs.