The concept of virtual property could have simplified copyright around the world, but it was first appropriated by speculators with the same type of pictures, and now they are trying to master brands.
In 2012, the head of the eToro financial platform, Yoni Asya, proposed creating coins on the bitcoin infrastructure that can be “colored” with certain attributes or information that do not depend on the nominal value of bitcoin.
Crypto enthusiast Meni Rosenfeld believed that “painted” coins can be used as, for example, a certificate of ownership of a thing or stock. In his opinion, in this way it would be possible to decentralized change of objects, currencies, land or real estate without the help of intermediaries.
The tinted coin remained a concept for two years until enthusiasts launched the Counterparty platform in 2014. The creators built an open source project on the bitcoin blockchain and allowed users to create their own currencies on it.
Games, memes and digital art
On May 3, 2014, the world’s first non-fungible token was created by digital artist Kevin McCoy, together with programmer Anil Dash. The coin was unique and indivisible, it could not be repeated or divided into parts, like bitcoin on satoshi.
McCoy linked his Quantum animated picture to NFT and sold it in June 2021 for $1.4 million at Sotheby’s.
In 2015, Ethereum developers introduced the ERC-20 standard, which allowed the creation of fungible coins and new currencies based on the ether blockchain.
Etheria became the first NFT project in October 2015, the developers offered to buy a part of the virtual card in the form of a token and arrange it to your liking. One hexagonal tile cost 1 ether, or less than a dollar.
In March 2021, users remembered the project: the price of some of the tiles began to reach 70 ethers, or about $130.7 thousands.
On the Counterparty platform, users began to produce game currencies and link them to virtual entertainment. In August 2016, Force of Will, the fourth most popular card game in North America, released its cards on the platform.
In September of the same year, users first linked digital assets with pictures of the Rare Pepes series – they depicted a frog character from memes. In 2017, the founder of the Portion trading platform, Jason Rosenstein, held an auction where the art tokens were sold during the first ‘rare digital art’ festival.
In March 2021, the “rarest of all” NFT Homer Pepe sold for 205 ETH, or about $ 320,000. In December, one of the rare CryptoPunk tokens # 4156 changed owners after a payment of 2500 ETH, or about $ 10.26 million.
In June 2017, John Watkinson and Matt Hall of Larva Labs created a collection of CryptoPunks images that were tied to non-fungible tokens on the Ether blockchain. In September, Ethereum developers, inspired by the Watkins and Hold project, introduced the ERC-721 standard, which worked with unique and indivisible coins by default.
In October 2017, the Canadian studio Dapper Labs was the first to develop the Cryptokitties game based on ERC-721, in which users bought, bred and sold virtual cats through token binding.
In the same month, the launch of the project was reported by CNBC and Fox News. TV channels called the sharp rise in popularity of the game the beginning of “cryptocurrency mania” and the release of digital assets into the mainstream.
From October to December 2017, users spent at least $ 1 million on the purchase of virtual cats, and some of the NFTs sold for $ 100,000.
In December 2017, Devin Finzer and Alex Atalla launched the OpenSea NFT trading platform. In November 2019, the project attracted $ 2.1 million in investments, in the same month in 2021, 97% of all NFT sales passed through the site.
In 2018, NFT attracted a wide audience, artists were given a way to sell NFT versions of their paintings, and collectors were able to compete for the price of digital art ownership. Users sold NFTs for a total of $ 41 million, in 2019 this value increased to $ 210 million and reached $ 340 million in 2020.
In 2018, artist and photographer Kevin Abosch sold an image of a rose for $ 1 million in the form of 10 tokens. In October 2020, 87-year-old comic book writer Jose Del Bohex gave cryptoartist Trevor Jones a pencil sketch of Batman. Jones recorded an animation that turned it into an oil painting and sold it as a token for $ 552,603.
In October 2018, developers from Sky Mavis launched the Axie Infinity online game, where players fight with NFT creatures and earn cryptocurrency. It, depending on the type, can be used to create new characters or control the game universe.
In October 2020, an average of 200 thousand players played on Axie Infinity every month; in December 2021, this value increased to 2.5 million.
What happened in 2021
In March 2021, Mark Beeple Winklemann sold a digital collage of 5,000 drawings, which he has published daily since 2007, for $ 69 million. This deal with NFT was the largest in history.
In addition to digital art, they began to sell messages on Twitter as NFT: co-founder of the company Jack Dorsey sold his first tweet on the social network for $ 2.9 million in March 2021.
In September, the Hermitage sold five tokens with its paintings for a total amount of over 32 million rubles. The most expensive of the works was Leonardo da Vinci’s Madonna Litta, for which the museum received more than $ 150,000. The collection also includes paintings by Jordone, Vincent Van Gogh, Kandinsky and Monet.
The collection includes “Madonna Litta” by Leonardo da Vinci, “Judith” by Giorgione, “Lilac Bush” by Vincent Van Gogh, “Composition VI” by Wassily Kandinsky and “Corner of the Garden at Montgeron” by Claude Monet.
In November, the 14-year-old artist received $ 1 million for a collection of tokens depicting cartoon belugas. In the same month, the Miramax film studio filed a lawsuit against Tarantino: he promised to auction seven NFTs with parts of the Pulp Fiction script with their comments, and the studio considered it is a violation of their rights to the film.
Vice reported that some users make money from artists’ works without their consent – they take images, introduce themselves as their owners, issue tokens with them and sell them. When creating an NFT, users are not checked for content rights, only marketplaces can do this.
To protect their work, some artists warn on social media that they don’t work with NFT. In August, Reuters released an article linking the sharp rise in the market to attempts to cash in on speculation. Users bought NFTs in order to put them up for sale at a higher price later.
Reuters found that one of the accounts sold the monkey image for 39 ETH on the OpenSea marketplace, while buying it a week ago for 22.5 ETH – and this was just one of many examples.
In January 2021, the total sales volume on the largest platform for trading tokens OpenSea amounted to just over $ 8 million, in March this value increased to $ 148 million, and in August – to $ 1.9 billion. In December, the total sales of non-fungible tokens rose to $ 12 billion.
As noted by The Business Times, the inability to use traditional valuation methods makes it difficult to choose the right price for NFT assets, as it was already with cryptocurrencies. Even if an investor buys a token for a high price, it is far from a fact that he will be able to sell it at a higher price later.
The value of an NFT changes easily as users “over-speculate” in order to quickly make a profit. With the growth of the NFT market, scammers became interested: in some cases, they stole user accounts with their tokens through fake sites or posing as support for trading platforms.
Sometimes entire projects are used to deceive: in October, investors invested $ 2.7 million in a collection of Evolved Apes cards: the creators promised to launch a game based on them with the “fight of monkeys for survival” and disappeared with the money.
On December 21, scammers stole $ 1.3 million worth of cryptocurrency from the Monkey Kingdom NFT platform: they hacked the administrator’s Discord account and published a phishing link for users.
On November 30, Artnet News reporters described how they attended the NFT.NYC token conference and tried to understand why people are attracted to NFT. Crypto enthusiasts called them “the most significant artistic achievement since the Renaissance” and a way to “create wealth” for their families.
The idea of the benefits of tokens was supported by digital artist Marian Mogaddam: according to her, it was only with NFT that her field of activity received a financial assessment corresponding to the cultural contribution. She stated that with NFT she had found the open and upbeat “community” that she had been looking for all her life.
Photographer and one of the authors of the ERC-721 standard William Entriken also spoke at the conference. He stated that in 2021, artists will stop dying poor thanks to NFT.
A more critical assessment of Artnet News was given by Richard Chen, general partner of analytical firm 1Confirmation. According to him, there is a power law in the token market – 32 best artists have already received more than half of the crypto market, and the rest of the authors follow them with smaller amounts in a long “tail”.
How NFT is used today
Memes, digital art, and speculation in secondary sales have shaped the NFT market, which has increasingly come to be referred to as the “big bubble.” As the head of the investment fund Pressman Capital Dmitry Machikhin notes, the whole point of such hype markets is the unpredictability of ups and downs.
The original idea proposed primarily using tokens for a decentralized exchange of values without the help of third parties. Thus, the authors of the concept wanted to get rid of intermediaries and confirm ownership rights through the blockchain.
According to Statista, the peak in NFT sales in 2021 was in September, when the market spent $ 625.6 million to buy tokens from users and $ 148.5 million on new collections. In December, these values fell to $ 82.1 million and $ 54.8 million, respectively. At the same time, NFTs have become more commonly used for property purchases in virtual worlds.
On November 29, Animoca Brands launched the alpha version of The Sandbox, in which users were invited to create games, communicate and acquire territory and earn NFT on the blockchain platform.
Square Enix, B Cryptos and True Global Ventures have invested in the development of the project. The tokens certified the ownership of the territory, part of which was received as partners by rapper Snoop Dogg, producer and DJ Richie Hawtin, Deadmau5 and The Smurfs.
As the Cointelegraph notes, in the first week of December, the demand for the purchase of virtual land in the metaverse of The Sandbox platform turned out to be greater than that of all art objects: about a quarter of the $ 300 million of the total NFT purchases in 7 days were spent on it.
On December 19, Nike acquired the startup Rtfkt, which created virtual shoe models with tokens that could be exchanged for real ones. In the same month, Adidas partnered with Bored Ape and other token creators to unveil the Into the Metaverse NFT clothing collection that can be worn on your avatar in The Sandbox.
On December 22, basketball player Stephen Curry sold 2,974 NFTs with a digital copy of his sneakers, in which he set a three-point record this month. Buyers will be able to wear them on their avatars in Gala Games, The Sandbox and Decentraland.
As Pavel Prigolovko, director of strategy at TON Labs, noted in May, in 2021 the main problem of the digital art market is the lack of a legal framework. The purchase of tokens does not mean that the user acquires the object tied to it – he receives only a coin without any guarantees.
According to Prigolovko, the future of NFT will be clothing, accessories and characters for virtual worlds, such tokens can be moved between different games.
According to business development and communications specialist 1inch Network, the metaverse could be one of the future trends in the cryptocurrency world. Multiplayer games will help guide them in that direction: from CryptoKitties, interest in NFT will shift to Fortnite, PUBG and Overwatch.
According to Mashable, in 2022, users will see more tokens associated with the real world – it will be possible to buy virtual shoes and get a real pair of the same in the store or some kind of service. However, according to Axios, there will still be speculators in the games who will be able to trade items of uncertain value.