The first one-off NFT was created in 2014 by Kevin McCoy and Anil Dash live at the Seven on Seven conferences at the New Museum in New York. It was a digital certificate of ownership for the octagon-shaped animation titled 'Quantum.' This can be considered a real innovation as the term NFT (non-fungible token) itself was not coined until 2017. Could anyone then have assumed that a few years later the popular 'Doge' meme (or more precisely: simply a digital image of a Shiba Inu) would be sold this way for 4 million dollars and it would not be even a tenth of the value of the most expensive digital work of art, sold as NFT in March 2021? If you don't understand how blockchain works, what can be distributed as a token, and how artists can benefit from it, be sure to read this article to the end.
NFT technology has gotten loud in recent months when single tokens began to reach astronomical prices. There were also amazing stories that trended like crazy in the headlines of websites and social media. After many years of living in hiding, people from the cult internet memes revealed their identity by proposing to sell digital deeds to pictures for thousands of dollars. Later it turned out that, in the same way, you can monetize your... first tweet! Artists also became interested. Music and paintings also began to be sold in the form of tokens. At first glance, it seems like pure madness. But since people are willing to pay for original artwork instead of hanging reproductions in their homes, or buy original CDs instead of downloading mp3 files, apparently the same mechanism accompanies all those who decide to buy something unique - only this time in digital form.
Before we move on to the relatively short history of NFT and the list of the most expensive tokens that have been sold so far (yes, we know that this is what everyone is most interested in), it is worth explaining what this technology really is. You know, from a developer point of view, but in a way that everyone can understand…
A non-fungible token (NFT) is a unit of data that is part of blockchain technology. NFT certifies an asset (this can be either a digital asset or a token version of a real asset) to be unique and therefore not interchangeable. The token can represent photos, videos, audio, and other types of digital files. It is worth noting that access to the original file is usually not reserved only to the NFT buyer. Most often, copies of digital goods are widely available (e.g. meme, tweets,s or songs). NFTs that are tracked on blockchains are proof of ownership to the owners but do not involve copyright. With time, however, it may turn out that innovative solutions will also appear in this field, e.g. in the case of works from various fields of art that have not been presented anywhere before. Selling a new single at auction and giving one person the ability to decide what happens to the song seems like a real (but somewhat scary) vision. You can come up with many utopian scenarios, but marketers working in the music industry face completely new realities of the market, such as crazy ideas on how to use NFT technology to promote artists.
But let's go back to the definition of NFT, as there are a few more elements to explain here. Let's start with the question of interchangeability. Bitcoin is convertible 1:1 - for 1 bitcoin you can buy another 1 bitcoin. In the same way, we exchange $100 for 2 bills of $50, which together will be worth $100. This is how payment works and there is nothing strange about it. The NFT is something else, however. It's a bit like a plane ticket that is assigned to a specific passenger, it contains a unique code and cannot be used when someone else wants to take this specific plane. The NFT does not function as a currency unit, but due to its uniqueness, it can be used to verify anything that may have value in the proof of ownership. Memes and tweets are the most talked about, but NFT is a solution that has really many practical applications. Here are some examples of areas where this potential can be realized:
The NFT can be created and issued under a variety of standards. The most important is 'ERC-721,' but you will read about how it became famous in a moment. The newer version of this standard is 'ERC-1155.' Thanks to it, it is possible to include both a convertible and non-convertible token in one contract, which gives NFT completely new possibilities. Standardization offers advantages in the field of easy token transfer between different applications. So much for theory. It's time for a bit of history and examples of the use of this technology. So let's go back to 'ERC-721' because it is this standard that has been popularized in the world by NFT. As befits something that was 'born on the Internet,' everything started with cats...
The tokens based on the 'ERC-721' standard became famous thanks to the CryptoKitties application created by Dapper Labs, which gained popularity at the end of 2017. It is an Ethereum-based game where players can collect virtual cats. This is one of the first games based on blockchain technology. We can buy digital cats in it, which players breed. Each animal has a unique genetic code that is passed on to subsequent generations. In this way, it was possible to create specimens that stand out from other pets. It turned out that the rarest and hardest-to-get cats started to reach astronomical prices. A record holder named Dragon was bought for the equivalent of $172,000. If anyone is interested in a new pet, the kitten is now up for sale. The price is 600 ETH, which in dollar terms today exceeds $1.1 million.
A little earlier, but in the same year, the CryptoPunks project debuted in New York's Larva Labs. It was an experiment to test the value of NFT in the art market. At CryptoKitties, gamification and entertainment mattered. It was a bit different here. From the very beginning, the creators of this project wanted to test the potential of modern blockchain technology as a guarantee of the uniqueness of a work of art. CryptoPunks are small characters in pixel art aesthetics. They are part of a complex image divided into 10,000 small avatars of the title punks. Each of them is a unique NFT on the Ethereum blockchain. The pictures include 3,840 women, 6,039 men, as well as several monkeys, aliens, and zombies. By combining different attributes in images, no two are alike. Interestingly, in the first phase of the project, CryptoPunks were distributed for free - the buyer only had to pay the Ethereum transaction fee. It took several years for NFT to become popular on the art market and it cannot be denied that it was the Larva Labs project that contributed to the development of the phenomenon. The two lucky ones who took a chance in 2017 and joined the project became millionaires. CryptoPunk #4100 sold in March for 4200 ETH, which was then worth around $7.58 million. It was followed by CryptoPunk #7804. It was paid the same in ETH, but the cryptocurrency exchange rate was slightly less favorable then and the conversion came out to 'only' $7.57 million.
Weirdest and most expensive: the iconic NFTs
2021 is an absolute record year for the NFT. The successes of kittens and punks have gained notoriety, and having the chance to pioneer in some field, many people decided to take a chance and look for profits in it. Tweets and memes began to be distributed in the form of tokens. Random internet heroes finally got a chance to cash in on their image. There is also a lot of talk about the potential of NFT in the music industry, which today is facing major changes and the displacement of traditional music distribution through streaming services. For example, Kings of Leon used the technology to promote their latest album. Megadeth sold a token with a short GIF with the band's logo and mascot for $20,000. NFT also works wherever people have earned money on collectibles so far. The NBA offers digital counterparts of trading cards with the best LeBron James throws. FC Barcelona defender Gerard Piqué has, in turn, invested $4.3 million in the Sorare platform, which specializes in the sale of digital soccer collectibles. The footballer has also been the company's strategic adviser. Even if we assume that the NFT is a bubble that will burst one day, the coming months will surely bring more than one revelation regarding new projects, investments and sales records.
When it comes to various types of lists and rankings of the most interesting NFT products, there are actually two keys - the most expensive and the weirdest. You already know kitties, punks, and some other interesting stories. It's time for other strong players. We have selected a few of these and some of them for you. Because it is thanks to these stories that the NFT is still loud…
Let's start with the all-time record holder. Christie's auction house sold the NFT collage 'Everydays: The First 5,000 Days' by Mike Winkelmann (using the pseudonym Beeple) for $69.3 million. The buyer was the Metapurse fund from Singapore, established by a person hiding under the pseudonym Metakovan and co-run by a person named Twobadour. Since 2016, they have been investing in NFT tokens. Until 2019, the fund invested mainly in rights to virtual real estate but started buying rights to works of art. It's worth noting that Christie's consented to the digital collage being paid for with the ETH cryptocurrency. The editor of the Artnet website managed to talk to a person hiding under the pseudonym Twobadour. If your eyes grew wider while listening to the NFT, be sure to read this interview. It's worth listening to what someone who paid nearly $70 million for a digital photo collage has to say:
'(…) Skill is transferable and technology becomes obsolete. The only thing you can’t hack is time, and this piece represents 13 years of time. We believe that makes this an iconic, once-in-a-lifetime kind of piece, and that’s why we went after it. (…) This is going to be a billion-dollar piece someday. This has the potential to be the work of art of this generation. We are very happy to be part of history and we’re still digesting the fact that we are part of history.'
The entire conversation with the buyer of 'Everydays: The First 5,000 Days' is available at artnet.com.
One tweet of Elon Musk about cryptocurrencies is enough for Bitcoin or Dogecoin to increase by several percent. It turns out that his life partner was also involved in a project related to blockchain technology. Although Grimes is known primarily for her artistic activities in the music field, she recently teamed up with her brother Mac Boucher on the multimedia project 'WarNymph'. A total of 10 NFT tokens corresponding to images and animations were sold for $5.8 million. Some of them were previously available online, others were completely unique. The singer plans to donate part of the income from the sale of NFT tokens to the Carbon 180 organization, which deals with the reduction of carbon dioxide emissions. The title WarNymph, which appears in the works of Grimes, is to be the heroine of the next installments of the series. New works depicting the mythical universe called Oth3rkin will also be available in the form of NFT tokens. Ten works put up for auction a few months ago were sold out within 20 minutes. We'll see how it will be this time. However, the release date of the next works by Grimes is unknown.
NFT offers completely new opportunities when it comes to selling unusual items. A digital token signed by the author allows you to sell content such as ... a tweet. However, in the case of Jack Dorsey, Twitter's co-founder and CEO, it is a unique tweet that gave rise to one of the most popular social media platforms in the world. The message 'just setting up my twttr' was the first tweet ever! Dorsey wrote it on March 21, 2006. The NFT was bought by Sina Estavi who is CEO of Bridge Oracle. $2.9 million was paid for the token.
We have already mentioned Dogecoins, but did you know that the official face of cryptocurrency is the same Doge we know from popular memes? Its owner also decided to take an interest in NFT. The Shiba Inu dog from the iconic photo is called Kabosu. When its owner, Atsuko Sato, published his photo on her blog a few years ago, she probably did not think that Kobosu would become a pop culture icon. So huge that the NFT Doge meme was auctioned for $4 million! Part of the amount will be transferred to the accounts of charitable organizations. The authenticity of the token was confirmed by the internet meme database Know Your Meme, whose editor-in-chief commented on the event as follows:
'We're so happy to be a part of this milestone in internet history. If any meme deserved to be the new meme NFT record holder, it's Doge.'
There are many memes on the Internet, which, apart from the fact that they amuse us to tears, can make us reflect on the genesis of the photos, which are processed in hundreds of thousands of ways. It must be difficult when your photo accidentally becomes an iconic graphic and over the years your image is duplicated without control, and you just have to live with it. In the case of Zoe Roth, who became the heroine of a meme called 'Disaster Girl,' she managed to monetize this case years later. Her father took the photo in 2005, and after it appeared on sites such as JPG Magazine, Buzzfeed, and Digg in 2008, it became a meme. Zoe is 21 today and has just sold a meme with her image for $473,000 as a non-fungible token, which is a digital ownership certificate. Interestingly, Zoe will receive 10% of profits from future sales of NFT. More random heroes of the Internet will surely follow in Zoe's footsteps. Already today, people whose images we know from memes such as 'Bad Luck Brian,' 'Overly Attached Girlfriend' or 'Success Kid' have sold their NFT. They didn't make as much on auctions as Zoe, but if they took care of their percentage of subsequent sales, they could still become millionaires!
Earlier this year, the NFT was undoubtedly on a roll. We can laugh at buying tweets, gifs, and videos, but as NonFungible (a website that tracks the NFT market) reports, in Q1 2021 the value of tokens sold was $2 billion, compared to $338 million a year earlier. But nothing lasts forever. In recent weeks, however, it has been said that the bubble has finally burst. Between the beginning of May and mid-June, the NFT value dropped by... 95%! The pioneers of the industry are recording severe drops. CryptoPunks fell from a weekly average of $99,720 in early May to $50,840 at the start of June. SuperRare has fallen on average from a record of $31,778 to $5,342 in a similar timespan. When looking for the cause of this situation, experts pay attention to various factors. Gauthier Zuppinger, COO at Nonfungible, says the volatility may have been triggered by the arrival of new crypto collectible items called MeeBits. The product was invented by the creators of CryptoPunks. The value of MeeBits experienced a sudden increase and decrease in sales which could have affected the entire NFT market. Geoff Osler, the co-founder of the NFT app S!NG, has a slightly different theory. In an interview with CNBC, he said that 'digital collectibles craze was likely driven by pent-up demand from wealth accumulated from rising cryptocurrency prices, and that the market now seems to be calming in tandem with a drop in crypto markets.' However, there are no radical voices saying that the NFT is ending as soon as it emerged in the world. Some experts believe the long-term value of non-exchangeable tokens is important. With the development of technology, more and more elements of our lives are transferred to virtual reality and money is no exception. Cryptocurrencies also had their better and worse moments, but today nobody has any doubts that this is not a temporary fashion. Interesting data was presented by NonFungible, which claims that a post-boom in the NFT market is approaching. In May and June, 45,000 new wallets were created to which non-fungible tokens were added. Users who joined the game at the beginning of the year, when there was a loud buzz around the NFT, also did not lose interest in the topic after making the first transactions, remaining active in the following months. Experts also point out that the NFT ecosystem still has a good new user retention rate. It remains at 25%. All this allows us to be optimistic about the future. We will probably wait a bit for someone to break the records set by the artist hiding under the pseudonym Beeple, but it is certainly worth watching how NFT will develop in the coming months and how it will change the contemporary culture in the coming years.