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The crypto market moves in waves. Bitcoin remains the undisputed blockchain industry leader, but as the major banks and investment funds accumulate BTC, retail investors always try to find “the next big thing” that would be able to repeat the unparalleled success of the original cryptocurrency.
First it was altcoins, then it was ICOs (which was another name for altcoins), in 2020 it was DeFi (which was yet another name for altcoins). NFTs can already be declared the most popular crypto trend of 2021. But unlike the previous fads, NFTs are not just rebranded altcoins – they have a unique use case, and they might stay here for longer.
What are NFTs?
One of the reasons for the rapid rise of the popularity of NFTs is that it’s very easy for everyone to immediately get what they’re all about. Imagine collectibles like baseball cards, or works of art like paintings, only stored in the form of tokens on a blockchain. That’s what NFTs essentially are: digital collectibles kept on a decentralized ledger.
The word NFT is an abbreviation of “Non-Fungible Token”. Typical cryptocurrency tokens, like the thousands of altcoins launched on the Ethereum network, are all fungible. This simply means that 1 XYZ token in your wallet is worth exactly the same as 1 XYZ in anyone else’s wallet. It’s the same with traditional currencies like euro or dollar: 1 USD in your bank account has the same value as 1 USD in somebody’s pocket.
The word “non-fungible” means that all NFTs are unique, and each of them has a different, individual value. Simply put, NFTs are collectibles very similar in nature to traditional baseball trading cards. A common card can be worthless, but a very rare card can be worth millions.
The History of NFTs
NFTs are by no means a new thing. The first NFT project called CryptoPunks was launched in 2017. Originally, 10,000-pixel art characters named CryptoPunks were created, and anyone with an Ethereum wallet could claim one for themselves for free – back then, NFTs weren’t considered a business opportunity but a silly novelty only intended to make crypto a little bit more popular.
The first NFT project which gained wider recognition was CryptoKitties. CryptoKitties weren’t really that much different from CryptoPunks – the only difference was that instead of collecting pixel art “punks”, the users collected digital pets.
For a few years, projects like CryptoKitties were only enjoyed by a small number of Ethereum enthusiasts. NFTs weren’t really considered an investment back then. They were just fun collectibles that utilized the new, exciting blockchain technology.
The NFT Revolution
The situation changed in 2020, with the advent of DeFi (decentralized finance) solutions. DeFi developers reinvented Non-Fungible Tokens, and soon started to find new applications for what was once considered a mere novelty.
The NFT projects of today are much more advanced than the original CryptoPunks and CryptoKitties. Thanks to smart contracts technology, almost anything can be tokenized and stored on the blockchain, and NFTs that are created now can be very complex.
A good example is the NFT virtual painting of the Ethereum founder Vitalik Buterin entitled “EthBoy”, which sold for 260 ETH (almost $500,000 with today’s prices). EthBoy is much more than just an image stored on the blockchain – it is a fully interactive work of art that changes its appearance every day based on external data such as the ETH price and Ethereum gas fees.
The Future of NFTs
The groundbreaking moment in the history of NFTs happened when Twitter founder Jack Dorsey sold the NFT of the first tweet he ever made for $2.9 million. Suddenly, everyone realized that there’s money to be made with Non-Fungible Tokens, and celebrities like Lil Pump, Lindsay Lohan and Paris Hilton started selling their own NFTs. Even Elon Musk tweeted about selling an NFT, but he eventually turned down all the offers.
Perhaps even more important than individual celebrities selling NFTs is the fact that many reputed companies are now launching their licensed NFT projects. The two best examples are NBA Top Shot and Sorare, which allow people to trade virtual baseball and football cards respectively.
The NFTs are getting more advanced and complex. Currently, many companies are working on utilizing NFTs to create blockchain-based video games, which could make Non-Fungible Tokens even more popular. Unlike the ICO craze of 2018, the NFT phenomenon is built on unique technologic fundamentals. Who knows, maybe in the future owning an NFT project will become as common as owning a website?