The First NFT Tokens
The first NFT’s were Physical Bitcoins, circa 2011. Modern Non-Fungible Tokens came around somewhat recently, and most are still trying to figure them out.
NFT’s are best characterized as ‘unique’ tokens that are not equivalent to each other. For a real-world example, new 1oz gold coins would be considered fungible as they are all essentially the same, whereas a collection of 1oz gold coins from different years and countries, in different levels of wear and with individual histories, would be non-fungible. An NFT has ‘individual’ attributes; like a house, used car, or a unique piece of art.
NFT’s present us with many interesting use cases from digital art markets to rare items in virtual games, event ticketing and the development of the concept of digital property.
I present the story of the first NFT’s, circa 2011 onwards.
It started in 2011, with a man named Mike Caldwell from Utah. This computer scientist and Bitcoin contributor had a problem; he struggled to explain Bitcoin to his non-technical. Back then, all the discourse was technical, all the people involved were technical, and the concept of ‘Bitcoin’ was a hopelessly complex subject for the average Joe to approach.
That’s when Mike had an idea. He would print off a private key to a bitcoin on a small piece of paper, place it within the pit of a washer, and seal it from both sides with round, tamper-proof stickers. These ‘coins’ would then contain 1 BTC each and could be handed out to acquaintances or as tips;
“Here is one bitcoin; I am giving it to you. Now you control it, and no one else can access it. If you give it away, you cannot get it back. If you throw it in the ocean, it is lost forever.”
Mike realized that a cheap metal washer was not helping Bitcoin’s image as the new digital currency, so he went back to the drawing board. He found a company that created brass tokens for arcades and amusement parks, and contracted them to mint thousands of ‘CASASCIUS’ coins, with one side featuring a prominent Bitcoin ‘B’ along with ‘2011’, a denomination of ‘1 BITCOIN’, and the motto ‘VIRES IN NUMERIS’; Latin for Strength in Numbers. The other side was left plank, albeit a small round ‘pit’ for the private key which was then covered by a uniquely designed holographic tamper-evident sticker. The ‘first bits’ of the corresponding public key was then printed on the sticker, making it possible to verify the amount of Bitcoin within each coin.
Physical Bitcoins were born; the first NFT’s.
These coins certainly fit the definition of a Non-Fungible Token; they are certainly Tokens in both the digital and physical sense, they are non-fungible as they each have different ‘addresses’ and the corresponding physical item can have significant variations in condition and provenance after circulating ‘in the wild’ for a few years.
And thus, a hobby, or perhaps a subculture was born. Demand grew, and Caldwell expanded his physical offerings to 5 BTC, 10 BTC, and 25 BTC coins. Then came the gold-plated bars with denominations of 100 BTC, 500 BTC, and 1,000 BTC. This was followed by the crown jewels, 1oz gold coins with 1,000 BTC sealed within. With BTC above $10,000, these are the most valuable coins in the world.
As BTC’s value rose in 2013, it was time to move the other way. 0.5 BTC and 0.1 BTC coins were minted in silver, and new editions of silver 1BTC coins were released. That’s when the ‘nastygram’ arrived. The US Securities and Exchange Commission alleged that sale of the coins amounted to illegal money transmitting, forcing Caldwell to close shop.
What happened next was most interesting. The value of Casascius Physical Bitcoins shot up, as they were now limited edition ‘relics’ of the earliest days of digital currency. Sites including Uberbills and ___ pulled mike’s reported public addresses and began tracking all the minted coins to keep tabs on how many of each type and series had been ‘peeled’ or redeemed. The less ‘sealed’ coins of a type remained, the higher their value. It became normal to pay 2 BTC for a 1 BTC sealed coin, and certain rare types went for over 20 BTC for a 1 BTC coin even as bitcoin topped $1,000. As the physical condition of the coins had a significant effect on prices, collectors began sending them to ANACS to be professionally graded. Those with especially high grades could be sold for significantly more than coins even one grade lower. When rumors of ‘grade creep’ suggested that the company was giving higher grades more easily than before, markets adjusted to value those coins that had been graded years earlier at a premium.
This surge of interest inspired others to create their own ‘physical bitcoins’, ‘physical litecoins’, and more. By 2015, over 50 manufacturers had minted perhaps 500 different coins, many of which featured their own private keys and public addresses.
This is where I announced my 286-page ‘Encyclopedia of Physical Bitcoins and Crypto-Currencies’ in 2015. This book served as a collector’s guide with images, production numbers, measurements, and close-up photos of hundreds of coins. What’s more, its descriptions and analysis of each coin's history and symbolism tell the ideological and cultural history of the blockchain industry. The imagery and themes of each coin reflect the philosophy and ideas about blockchain of not only the creator but the buyers as well.
This book stoked the flames of a most interesting collector’s market with many interesting variables. One of these was trust, as all owners of coins had to trust the creators not to have kept copies of the private keys before sealing them. This type of trust would understandably turn most away from such items, but it is important to remember that they were created as mere educational items and then collectibles. The coins made by Mr. Caldwell are almost universally trusted by collectors who still count on them to store thousands of bitcoins. Not all ‘crypto mints’ enjoy the same trust, and for good reason; coins from at least two manufacturers have been ‘maliciously compromised’, whereas a third accidentally sold coins whose private keys were unreadable and promptly recalled them with full refunds at his own expense.
Between 2011 and 2013, Mr. Caldwell sealed 90,683.9 BTC into metal coins. Today, 45,715.9 BTC remains within 21,294 ‘un-redeemed’ Casascius coins. So far, there have been no known counterfeits nor have any coins turned up empty upon ‘redemption’. Still, the market has changed in that buyers pay premiums for coins whose provenance can be traced as far as possible. A 25 BTC coin that shows up today with no ‘paper trail’ before 2019 would be somewhat suspect, whereas one that can be reliably tracked to a trusted individual in 2013 will bear high legitimacy. I have even facilitated bulk orders of 50+ coins that have included me flying across the world to inspect, pick up, and deliver a handful of coins worth more than most houses.
To celebrate the release of the 2nd edition of The Encyclopedia, I created the first NFT about NFT’s, before the idea of an NFT even existed. This involved collecting autograph stickers and sample holograms from about 25 ‘crypto mints’ and affixing them to the relevant pages of 20 limited edition hardcover books. These books were in effect signed by the authors, ~25 of the books’ subjects, and numbered 1–20. What’s more, each book contained a separate tamper-evident sticker with a private key underneath, giving each book itself an address on the blockchain. Admittedly I was just screwing around, not imagining I was doing anything revolutionary per se. These NFT-NFT’s proved popular; my last two copies went for $10,000 each.
Today, I’m 3/4 through writing a new book about the history of Bitcoin and Blockchain, and all the wild stories that these technologies have spawned. Following the NFT market today on sites like SuperRare and on various blockchain dApp games, it is funny to look back at what were and continue to be the proto-NFT’s, still held today in the safety deposit boxes of the OG’s of the cryptosphere.
To learn more about Physical Bitcoins, you can explore a collection of them (and buy my books!) at www.cryptonumist.com I also encourage you to follow me on Medium and Twitter @Elias_Ahonen to keep up to date on my coming book, podcasts, and other projects. My PM’s are always open!
