Welcome to Crypto History, a series by Cointelegraph that takes you on a journey through the most important events in the world of cryptocurrency. Powered by Phemex, this timeline provides a chance for members of the crypto community to explore and reflect on the significant moments that have shaped the industry into what it is today.
In the ever-changing landscape of the digital age, where trends come and go in an instant, one phenomenon has captured the spotlight like no other: nonfungible tokens (NFTs). The years 2020 and 2021 witnessed an unprecedented surge in growth and adoption of these digital assets, revolutionizing our perception of ownership, art, and the internet itself. In fact, the NFT market saw a staggering $25 billion in trading volume in 2021 alone, a stark contrast to its almost non-existent presence just a few years ago.
While the concept of blockchain technology had been around for more than a decade, it was the emergence of NFTs that truly captured the imagination of creators and collectors alike. NFTs represent unique digital assets stored on a blockchain, guaranteeing their scarcity and authenticity. This groundbreaking innovation paved the way for the tokenization of digital art, music, videos, and even tweets, transforming intangible creations into valuable commodities.
The origins of NFTs can be traced back to at least 2012 when the Colored Coins protocol was introduced on the Bitcoin blockchain. This protocol allowed users to create custom tokens representing digital or physical assets. However, it wasn’t until later, with the advent of Ethereum smart contracts and the ERC-271 token standard in 2017, that nonfungible tokens specifically designed for digital assets became a reality.
One of the earliest and most notable examples of NFTs gaining widespread attention was the launch of CryptoKitties in 2017. Developed by Canadian studio Axiom Zen, CryptoKitties is a blockchain-based virtual game that enables players to buy, collect, breed, and sell virtual cats. Following the success of CryptoKitties, numerous other projects began exploring the potential of NFTs for various purposes, including digital art, virtual real estate, in-game items, and more. Platforms like Decentraland and NBA Top Shot gained traction during this period, showcasing the diverse applications of NFTs beyond gaming.
However, it was between 2020 and 2021 that NFTs truly entered the mainstream consciousness.
NFTs reached new heights of recognition in 2021 as high-profile sales made headlines, with digital artworks selling for millions of dollars and celebrities launching their own NFT collections. One notable example was the announcement by award-winning writer and director Quentin Tarantino on November 2, 2021, that he would auction off seven uncut scenes from “Pulp Fiction” as NFTs, built on the Secret Network.
Other sales also captured the public’s imagination, such as the $69 million sale of Beeple’s digital artwork “Everyday: The First 5,000 Days” at Christie’s auction house in March 2021. Newly created digital artworks by artists like Pak and Grimes fetched millions of dollars in auctions and private sales. During this time, iconic collections like Bored Ape Yacht Club and CryptoPunks were also born.
For instance, a single CryptoPunk NFT (#7804) sold for over $7.5 million at auction, marking one of the highest prices ever paid for a single CryptoPunk. In October 2021, a rare triple Bored Ape set, consisting of three apes sold as a bundle, fetched over $24 million at a Sotheby’s auction. Simultaneously, the number of NFT marketplaces expanded rapidly, with platforms like OpenSea, Rarible, Foundation, and Nifty Gateway gaining popularity. OpenSea emerged as one of the largest NFT marketplaces, with monthly trading volumes surpassing $1 billion by mid-2021, a figure that has since been surpassed by Blur and OKX NFT.
However, this surge in popularity also brought about criticism, particularly regarding environmental concerns due to the energy-intensive nature of blockchain transactions, as well as questions about the intrinsic value of digital assets. In fact, during the crypto winter of 2022-2023, the trading volume of NFTs plummeted by a staggering 99% from its peak in 2021.
Legal disputes also arose over the ownership and authenticity of digital assets, highlighting the need for clear regulations and guidelines. Some platforms implemented verification mechanisms to authenticate the originality of NFTs and protect creators’ rights, while others struggled with defining ownership in decentralized ecosystems. Following the widespread publicity of the “Pulp Fiction” NFTs, Miramax sued the Hollywood director in a copyright lawsuit, which was eventually settled in September 2022. Yuga Labs, the current owner of both the Bored Ape Yacht Club and CryptoPunks series, also faced similar legal battles over its digital collections.
However, all hope was not lost. With the ongoing crypto bull market, the trading volume of NFTs has made a recovery. New NFT projects, especially in Hong Kong, are gaining popularity, with collections being quickly snapped up after release. New protocols, like ParaSpace (now Parallel Finance), are developing innovative tools for the growing NFT lending market. Meanwhile, new Ethereum token standards, such as ERC-404, aim to fractionalize NFTs and make them more accessible to a wider audience.
Overall, the world of NFTs continues to evolve, with ongoing experimentation in various industries and the emergence of new platforms tailored to different niches within the NFT ecosystem. Efforts are also underway to address environmental concerns and improve the sustainability of blockchain technology, as developers and enthusiasts strive to ensure the long-term viability of NFTs as a form of digital ownership and expression.
Related: A Beginner’s Guide to the Different Types of NFTs