The History of NFTs: 10 Moments That Shaped the Digital Collectibles Market

KEY TAKEAWAYS

The rise of non-fungible tokens (NFTs) in 2021 revolutionized the digital collectibles market, with record-breaking sales of NFT art and game assets. From the success of CryptoKitties and CryptoPunks to NBA Top Shot's entry into the sports industry, NFTs attracted artists, collectors, and investors with their unique ownership verification and trading capabilities. However, the market also experienced significant volatility, and investors need to be cautious about the fluctuations in NFT and cryptocurrency values.

Non-fungible tokens (NFTs) exploded in popularity in 2021, the year that saw record sales of NFT art and firsts in the music and auction industries.

The ability to verify ownership of a digital or even physical asset linked to an NFT that can be easily traded in online marketplaces has attracted the attention of artists, collectors, and investors alike.

This article delves into 10 key moments that have shaped the digital collectibles market and highlight the possibilities of this still-emerging blockchain functionality.

CryptoKitties Sparks NFT Craze (2017)

While NFTs have been around since 2014, the launch of CryptoKitties in November 2017 by Canadian gaming studio Dapper Labs was a turning point that brought the tokens to a larger market.

CryptoKitties is an online game built on the Ethereum blockchain that allows users to buy, breed, and trade virtual cats. Their characteristics determine their rarity and, in turn, their trading value – which is a functionality of NFTs that artists and game developers have embraced. There are 100 founder cats and 50,000 Gen 0 cats, from which all other CryptoKitties have been bred, so they tend to be the most valuable to collectors.

It was the first blockchain game to go viral, and in 2018 resulted in the most expensive sale of a virtual pet at 600 ETH, which at the time was worth $170,000. Subsequent sales for 200-300 ETH would have valued the cat avatars at more than $1 million when the value of the ether (ETH) token was at its height.

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CryptoKitties marked the beginning of the digital collectibles revolution. The game’s popularity also drove the number of transactions on Ethereum to record highs, causing congestion that slowed the network – an issue that the blockchain has been grappling with ever since as adoption has increased.

CryptoPunks Pioneers Profile Picture (PFP) Collections (2017)

Along with CryptoKitties, CryptoPunks, which also launched in 2017, is one of the most iconic NFT projects. CryptoPunks paved the way for the subsequent explosion of popular profile picture (PFP) NFT collections. Created by Larva Labs, the CryptoPunks collection features 10,000 unique, hand-drawn 24×24 pixel characters. Each CryptoPunk has its own distinct attributes, such as hairstyle, accessories, and traits.

CryptoPunks have gained widespread recognition in popular culture, finding their way into media and art exhibitions. Some have even sold to high-profile individuals. Their distinctive pixelated art style has inspired the proliferation of PFP NFT projects, helping to drive the adoption and acceptance of NFTs as a form of digital collectible.

In February 2022, CryptoPunk #5822 was sold to Deepak Thapliyal, the CEO of blockchain-based company Chain, for a record 8,000 ETH, which valued it at the time at $23.7 million.

NBA Top Shot Takes Off (2020)

NBA Top Shot is an NFT platform operated in partnership with the U.S. National Basketball Association (NBA). The platform, which launched in 2020, allows fans to own and trade video highlights from basketball games as digital tokens. Holders can use their NFTs to complete timed challenges, arrange showcases, and join game experiences.

The officially licensed collectibles brought NFTs into the sports industry and expanded their appeal beyond the art world. At the peak of its popularity in February 2021, NBA Top Shot generated more than $224 million in monthly sales.

Beeple’s $69 Million Artwork Sale (2021)

One of the most pivotal moments in NFT history came in March 2021. Digital artist Mike Winkelmann, also known as Beeple, sold his digital artwork “Everydays – The First 5000 Days” for a staggering $69 million in a Christie’s auction. It was the first sale of digital artwork run by a major auction house.

This groundbreaking sale showed the potential value that could be attached to digital content and propelled NFTs into mainstream media headlines.

Kings of Leon Releases NFT Album (2021)

In March 2021, the U.S. rock band Kings of Leon became the first major band to release an album as an NFT. The “When You See Yourself” album was sold as limited-edition digital collectibles, allowing fans to own a unique piece of music history.

The “NFT Yourself” collection offered three types of tokens:

  • A special album package
  • A package offering concert perks such as front-row seats for life
  • An exclusive audiovisual art package

The smart contracts were developed by YellowHeart, with the aim of bringing blockchain technology into the music industry to create value and direct relationships between artists and fans. As part of the launch, YellowHeart minted 18 “golden tickets” containing unique art, of which six were auctioned, and the other 12 were placed in a vault.

The release marked a milestone in the music industry’s adoption of NFTs.

Twitter CEO Jack Dorsey’s First Tweet Sold as an NFT (2021)

In March 2021, Twitter co-founder Jack Dorsey sold an image of his first tweet from 2006 as an NFT for $2.9 million. The NFT was sold via auction for over 1,630 ETH to Sina Estavi, CEO of Malaysian cryptocurrency firm Bridge Oracle. Dorsey converted the proceeds to bitcoin (BTC) to donate to charity.

The sale highlighted the potential for NFTs to monetize many forms of digital content and hold substantial value.

Virtual Real Estate Takes Center Stage (2021)

The potential for NFTs goes beyond art and collectibles into virtual or even physical real estate. Virtual worlds such as Decentraland and The Sandbox are leading the way in allowing users to buy, sell, and develop virtual land and properties using NFTs to represent their ownership.

This has opened up new possibilities for metaverse games and other environments operating virtual economies and experiences.

In November 2021, a subsidiary of cryptocurrency investment firm Tokens.com, the Metaverse Group, bought a parcel of land in Decentraland for $2.4 million. The company uses the site in Decentraland’s Fashion Street area to host fashion shows, shopping experiences, and other events and sell clothing for avatars.

Also, in November 2021, Barbados became the first sovereign nation to announce plans to open a virtual embassy in a metaverse, acquiring plots in Decentraland.

In May 2022, U.S.-based Curzio Research, which publishes independent financial analysis, announced a deal with 4k metaverse developer TCG World to acquire 19 virtual commercial real estate properties valued at a combined $5 million. It remains one of the largest virtual real estate purchases to date.

Curzio said it would build its Asian headquarters inside TCG World, near WallStreetBets, providing access for VIP members to meet with other investors, attend live events, seminars, and conferences, and listen to exclusive episodes of its podcast.

Integration of NFTs in Gaming (2021)

Blockchain-based games that incorporate NFTs took off in 2021, with sales reaching $5.17 billion for the year, according to a nonfungible.com report.

NFT games enable players to own, mint, use, and trade in-game assets represented by the tokens. These can range from virtual pets and other avatars to weapons, tools, and skills.   

Games like Axie Infinity, Alien Worlds, Gods Unchained, and Splinterlands allow players to earn cryptocurrency rewards for mining NFTs, battling other players, and completing quests.

In 2021, skyrocketing prices for gaming tokens like AXS enabled players in developing countries such as the Philippines and Vietnam to earn real-world income to cover their living expenses.

The development of play-to-earn (P2E) games also led to the emergence of move-to-earn (M2E) apps, which reward users with cryptocurrencies for recording their physical activity, such as walking, running, and playing sports.

Pak’s $91 Million Merge Sale (2021)

In December 2021, a unique NFT collection surpassed Beeple’s record for an NFT art sale. The Merge, created by digital artist Murat Pak, commemorated the Ethereum blockchain’s transition from a proof-of-work (PoW) consensus mechanism to proof-of-stake (PoS).

Rather than a single artwork or series of artworks, The Merge was sold as units of mass, each represented by an NFT. The tokens were sold on December 2-4 on the Nifty Gateway NFT marketplace with a starting price of $575 per unit. The price increased by $25 in six-hour intervals, so buyers towards the end of the sale paid $750 per token.

Unlike other NFT art collections, in which the visuals tend to be hosted off the blockchain and linked to the NFT, The Merge’s visuals are generated completely on the blockchain from smart contract formulas. The smart contract uses a mechanism that prevents a single wallet from holding multiple NFTs from the collection.

Instead, the tokens merge to mint a new NFT. This means that the number of Merge NFTs in circulation decreases each time a holder buys another unit from the collection, increasing their rarity over time.

Over the 48-hour sale, 29,983 unique wallet addresses bought a total of 312,686 tokens for a total value of $91.8 million. That made The Merge the most expensive artwork ever sold by a living artist publicly.

This is considered controversial, as The Merge was sold as a collection rather than a single piece. But it could technically become a single work if all the NFTs were merged in one wallet.

Development of NFT 2.0 Standards (2022)

NFT and cryptocurrency prices plummeted in 2022, and much of the hype around NFTs appeared to subside along with their lofty valuations. However, developers have continued to work on innovative NFT protocols to introduce new functionality to the technology.

RMRK, which had been developing a new NFT standard in the Polkadot/Kusama blockchain ecosystem, 2022 shifted to an Ethereum Virtual Machine (EVM) implementation. This makes it compatible with Ethereum-based chains, which accounted for around 60% of NFT activity.   

On the Solana blockchain, developer platform Coral launched an alpha version of its Backpack Wallet in October 2022, facilitating the use of executable NFTs (xNFTs). An executable NFT is a programmable form of token that can operate as a Web3 decentralized application (dApp) from within the Backpack operating system.

App developers can now create dynamic protocol-agnostic applications in cryptocurrency wallets with NFTs that have functionality beyond static tokens.  

The Bottom Line

The emergence of NFTs has transformed the way that digital assets are valued and traded. From the early days of CryptoKitties to multi-million dollar artwork sales and the integration of NFTs into various industries, blockchain-based tokens have come a long way. And the development of new NFT standards with enhanced functionality demonstrates that there is still potential for new applications to enter mainstream adoption. 

As blockchain and token technology continues to advance and more industries adopt NFTs, the future of digital ownership and collectibles looks set to evolve in new directions.

At the same time, these 10 key moments that have shaped the market highlight the extreme volatility in NFT and cryptocurrency values as prices have plummeted from the lofty heights of 2021. Investors must take note of this market instability to protect their assets. 

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Nicole Willing
Technology Journalist

Nicole is a professional journalist with 20 years of experience in writing and editing. Her expertise spans both the tech and financial industries. She has developed expertise in covering commodity, equity, and cryptocurrency markets, as well as the latest trends across the technology sector, from semiconductors to electric vehicles. She holds a degree in Journalism from City University, London. Having embraced the digital nomad lifestyle, she can usually be found on the beach brushing sand out of her keyboard in between snorkeling trips.