The Evolution of NFT, part one
2021 was the year that non-fungible tokens (NFT) became publicly known. This interest arose due to the loud news about the sale of NFT’s for a lot of money. For example, in March 2021, a JPG file, which is a digital collage of 5,000 Beeple paintings, was sold for $ 69.3 million in ETH! In the first half of 2021, NFT sales reached $ 2.5 billion.
As the name “non-fungible token” suggests, NFT is a special kind of cryptographic token that cannot be replaced with a similar token. If we are talking about cryptocurrencies, for example BTC, one BTC can be replaced with another, and NFT tokens are always unique. For this reason, non-fungible tokens are very useful for confirming the uniqueness of a digital object. Another common use for NFT’s is securing ownership of works of art, digital assets, or even real estate. Similar to cryptocurrencies and DeFi, NFT technology uses blockchain to maintain a database of all transactions.
Despite the fact that NFT technology is younger than 10 years old, it has already gone through several stages of its development. Today we are starting a series of articles that take a closer look at these steps.
How did it all start?
Opinions about when NFT first appeared are controversial, but we can certainly say that non-fungible tokens existed even before the use of Ethereum smart contracts and ERC20, ERC721 and ERC1155 tokens. As is usually the case in such situations, the idea arose before the term. Most researchers point to the so-called “Colored Coins” as the progenitor of NFT. Some consider the first NFT work of 2014 by American artist Kevin McCoy “Quantum” (which, by the way, recently sold for 1.4 million dollars). However, it may seem that the history of non-fungible tokens began even earlier.
Namecoin
Back in 2010–2011, experiments were carried out with the Bitcoin blockchain and its scripting language.
At that time, the BitDns project arose, which aimed to apply Bitcoin technology to the domain name service. Ultimately, the project turned into an altchain with its own altcoin, which was named Namecoin. The first idea to do something unique or rare using the blockchain was to use .bit domains. The .bit domain zone has not stood the test of time due to the fact that this decentralized domain zone quickly became very popular with evil-doers, but the idea of unique data on the blockchain has been further spread.
Colored coins
Further, the already mentioned Colored Coins gained popularity. At its core, Colored Coins is an add-on to the Bitcoin protocol. This was an early attempt to create assets such as digital images, in-game items, tickets, coupons, or even promotions on the Bitcoin blockchain. However, Bitcoin’s scripting language was not suited to these tasks.
Although the technical implementation of Colored Coins proved to be a failure, this project gave people an idea of what potential the blockchain could have if unique tokens were properly implemented there.
Counterparty
It became obvious that new protocols needed to be created in order for the idea of colored coins to be put into practice. The protocols like ChromaWay, Colu, Mastercoin, OpenAssets appeared, but Counterparty, which was launched in 2014, became really successful.
Several relatively recognizable projects have been created using this protocol. This protocol is very interesting for the developers of collectible card games. In 2015, the game “Spells of Genesis” was released, which is a hybrid of an arcade and a collectible card game. In August 2016, maps of the popular card game “Force of Will” were also released on Counterparty.
The interest in NFT technology from the developers of digital collectible card games was not surprising. The digital CCGs (like Hearthstone) that existed at that time were completely centralized, and if a gaming company wants to close your account or ceases to support its servers, the entire collection disappears into nowhere. Thus, in order for full-fledged trade between players to be possible, a mechanism is needed that could, in a decentralized manner, secure ownership of certain objects.
There were projects of a different kind on the Сounterparty. For example, the so-called “Rare Pepes” with a memetic frog. They were implemented using this protocol, although it was already, to a large extent, a “fun” project.
Switching to Ethereum
In August 2015, Ethereum was launched, which by 2017 had gained widespread popularity thanks to smart contracts. The Ethereum infrastructure turned out to be much better suited for NFT technology, and soon almost the entire industry related to non-fungible tokens switched to this blockchain. The ERC721 and ERC1155 standards have become the technology base for the next generation of NFTs, and alternatives have only recently emerged.
In our next publication, we will talk about what the arrival of Ethereum meant for NFT technology, about Crypto Punks, Crypto Kitties, and gradually we will reach the NFT hype of 2021.
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