From $100 per artwork to a hit of $69.3 million for his digital artwork ‘Everyday: the first 5000 days’, Mike Winkelmann aka Beeple created this masterpiece, sold it in March 2021, and rose to fame with the most expensive Non-Fungible Token all the time.
Nice for Mike, but what exactly is such an NFT and how did this digital art come to life? In this article, we tell you which first 5 projects were at the cradle of the current success of NFTs.
What is a Non-Fungible Token?
First things first: what is a Non-Fungible Token? A Non-Fungible Token, abbreviated NFT, is a non-exchangeable token. Each NFT represents something unique, and having that particular NFT in your hands means you own it too. A Non-Fungible Token is proof of authenticity. So far, that sounds rather cryptic, which is actually true of a lot of intangible crypto topics. That’s why we explain it with an example.
Imagine going to the supermarket and the carts are all in use. You do need a cart for your weekly shopping, and moreover, in this Corona time it is not allowed to enter the store without a cart, so you have to wait outside. You ask the next customer if you can take over his cart. You can, but he unlocked the cart with a fifty-cent coin. While digging in your wallet you discover your last fifty cents and with that, the cart change is a fact. Your fifty-cent coins are both equivalent and therefore interchangeable with each other. The same applies to your crypto coins. Your Bitcoin is equal to that of the neighbor and therefore exchangeable. This example illustrates the concept of ‘fungible’.
Mona Lisa vs. Nft’s
With non-fungible, we are talking, for example, about that one painting in the Musee du Louvre that attracts about 20,000 visitors a day: the Mona Lisa. Although there are thousands of replicas of this smiling lady, only one is the real Mona Lisa by Leonardo Da Vinci. The Mona Lisa is therefore not interchangeable with an equal painting because that does not exist. If you have an NFT in your hands, then you have something as unique in your possession as the Mona Lisa, and hopefully one with value for you too.
according to an ERC-721 protocol Ethereum Blockchain. This blockchain has different standards for all kinds of tokens. The most commonly used standard ERC20 turned out not to be suitable for creating unique tokens. The ERC-721 token standard has the function of registering ownership. The moment the token is traded, the change of ownership in the block is adjusted, this is not the case with ERC20. Hence the Non-Fungible Tokens are built according to the ERC-721 standard.
What is Non-Fungible Token (NFT) art?
The smart tokens make it possible to capture and trade all digital media, such as music, art and games, collectibles, and even tangible objects, such as real estate. You can become the owner of a digital product by purchasing an NFT, but the creator always retains the copyright. Coming back to multimillionaire Mike’s ‘Everydays: the first 5000 days’, the buyer can display the work and say it’s his, but he can’t copy it. In fact, someone pays a lot of money to get their hands on an original and brag that it’s theirs.
The great thing about Non-Fungible Tokens is that you can assign value to digital files. Just as 20,000 people daily marvel at the Mona Lisa, which is praised for the artist and the sfumato painting technique, so are digital files of value. Take, for example, the very first tweet on Twitter. There is only one person who ever wrote the very first tweet. That does have a certain historical value. And apparently, there are also plenty of people who would like to own the tweet “Just setting up my twttr” from founder Jack Dorsey. For 2.9 million, someone can now call themselves the owner of the very first tweet.
Your new source of income?
NFT is an important new source of income for digital artists. In addition to selling the ownership, you can encode in the token. Then you will receive a certain percentage of a future transaction, as soon as the ownership is traded. In this way, as an artist, you are provided with a continuous source of income from transactions. This is a major advantage over tangible art, where you arrange the sale once. Leonardo Da Vinci has never been able to profit so much from the income that the Mona Lisa generates on a daily basis.
Like cryptocurrency, investing in NFTs is a risky business. Bitcoin is a good example of this. The whole world is witnessing the huge ups and downs that the currency is going through. The same can be said for the “Everydays: the first 5000 days” artwork and the first tweet. Will that initial value still is the same or will nobody care about those two NFTs anymore? Time will tell.
The First 5 NFTs Projects
Someone has to be the first! But who first brought NFTs to the market is up for debate. The difference is in the use of the NFTs, leading some to date the origins to 2012, but the real purists argue that this was only in 2014. We summarize the history of the NFT market for you by highlighting the five first high-profile (almost) NFT projects.
1. 2012 The colored coins – colored bitcoin
Well, let’s start in 2012. This may not have been the real start of NFTs, but it was a very important one in the thinking and further development of Non-Fungible Tokens. In 2012, Yoni Assia made the first mention of a new kind of token. A token that would be unique and identifiable, making it unlike any other transaction within the Bitcoin world. This makes the function of the colored coins comparable to the NFT, as we know it today. The fundamental difference, however, is in the token’s script. Bitcoin’s scripting language caused the biggest limitation in the behavior of the predecessor of the Non-Fungible Token, namely that the colored coins could only represent a certain value if everyone agreed. Either way, the colored coin’s potential laid the foundations, only the implementation required a more malleable blockchain.
2. 2014 ‘Monetized Graphics’
Just a side step in the development of the NFT trajectory, because artistry is undergoing a major development due to the Non-Fungible Token. With the rise of the internet and the urge to prove yourself as an artist or gain fame online, McCoy and Dash realized the flip side of this. Many works are copied and stolen online without context or compensation. McCoy and Dash managed to encode a property in a hacked version of the blockchain for their first crypto art. This first-ever NFT-inspired artwork by McCoy and Dash, called ‘Quantum’, recently sold for $1.4 million. This is a pittance compared to Beeple‘s work, but the thinking behind their artwork was the same as the Non-Fungible Token now stands for: ‘monetizing an original digital work’.
3. 2014 Counterparty
Good, on with where we left off: the colored Bitcoins. The introduction of these colored coins opened up a new crypto world. The potential for asset spending on blockchains is driving global recognition and the creation of the peer-to-peer financial platform Counterparty. The founders Robert Dermody, Adam Krellenstein and Evan Wagner realized an open-source internet protocol and even a crypto token with the ticker XCP, but the foundation of this platform still lay in the Bitcoin blockchain. Despite this, the trading of assets via the blockchain boomed. Game producers like the makers of Spells of Genesis and Force of Will started trading their in-game assets and trading cards through Counterparty, and with great success!
Not a day goes by without a hilarious gif or meme flying over your app. A picture says more than 1000 words, right? For example, in 2016 the meme ‘Rare Pepes’, a frog, appeared as an asset on the blockchain. Strange enough that people are willing to pay money for the exchange of this frog, but there is a real fan base and even an expert group, who determines the rarity of this green figure. Rare Pepes’ great success on Counterparty’s platform continued on a newly launched marketplace called Peperium. Peperium was built on the new Ethereum Blockchain, which gained fame in 2017. The decentralized meme marketplace was developed specifically for meme creations and transactions. And just like Counterparty, Peperium also had a token with an associated ticker RARE.
4. 2017 Cryptopunks – Hybrid NFT
About five years after the introduction of the colored coins, the two artists John Watkinson and Matt Hall launched a high-profile project on the Ethereum Blockchain. The Ethereum wallet holders could claim one of the 10,000 unique characters for free and they were quickly forgiven. Although the behavior of these characters is very similar to Non-Fungible Tokens, these figures are still not built to the ERC-721 standard. The flaw still resides in the character substitutability, a strength of the ERC-721 protocol. This shortcoming does not detract from the success of Cryptopunks, as some characters, such as the monkey, sold millions of dollars in Ether digitally.
5. 2017 Cryptokitties
Remember the Tamagotchi? The wildly popular virtual pet that sparked a worldwide craze in the late 1990s? The same happened with the very first equivalent project, which was developed according to the new ERC-721 protocol: Cryptokitties. With this blockchain game, you can buy, collect, breed, and sell cats. By buying two different cats you can create a new cat, which hatches from an egg. Everything is possible in the virtual world, right? Every cat is unique, and by breeding new species, the game continues to evolve.
Publisher Axion Zen introduced the game during the world’s largest Ethereum hackathon, and with great success. Cryptokitties took first place in the hackathon and soon the kittens went viral. The game was such a huge success that the transaction speed on the Ethereum network slowed and people paid huge amounts to own a crypto kitty. In December 2017, the first cat named Genesis sold for over $100,000 in Ether.
After Cryptokitties paved the way for NFT, the NFT ecosystem has experienced tremendous growth. Hundreds of projects have been launched since then and participating in virtual games on the blockchain or acquiring digital art is gaining popularity.
The size of the NFT market tripled in 2020 and NFT transactions exceeded $2 trillion in the first quarter of 2021. It can therefore be very lucrative to also purchase a work of art, game attribute or other assets, or perhaps your own work of art. to be sold as a Non-Fungible Token.
How do you make an NFT artwork?
In 2021, more and more attention is being paid to the growing NFT market. NFT art is accessible to everyone. And the great thing about art is: that everyone’s tastes differ, so maybe you have gold in your hands with a super simple work of art.
You have to go through four steps to be able to trade an NFT artwork, in short here are the four steps, the more extensive explanation can be found in this article.
- Wallet: you need a wallet to store and trade your NFTs and cryptocurrencies.
- Cryptocurrency: you need a few coins, usually Ethereum, to use a blockchain. These costs are better known as gas fees.
- Producing art: make your artwork digital and save it in a file format that is compatible with the platform.
- Platform: choose a platform on which you want to create and sell your NFTs.
As you can see, this doesn’t sound very complicated. So grab that glass of wine, do that workout, or pour yourself another cup of coffee to get inspired. Who knows, you might be the next Mike Winkelmann!
You can see that the number of NFT projects has spread out considerably over the past few years. Every now and then a project was launched, which may or may not be a success. The whole world had yet to get used to this art form and it is still elusive for many. Over the past few years, or even months, attention to this topic has grown exponentially and we hope it will soon become fully mainstream.