Still relatively new to the market at less than a decade old, it’s fair to say that NFTs have had a decent run, with last year, in particular, bringing in the big bucks – the highest sale going to artist Mike Winkelmann, better known as Beeple, and raking in a cool $63 million in March 2021. So crazy did news of NFTs get last year, that this relatively unknown concept was at many points trending, with repeated reports of sales in the many-zeroed price bracket, ultimately sealing off 2021 as the Collins Dictionary’s Word of the Year – with the question on most people’s lips being, ‘hold up, what even are they?’
Now, the history of NFTs is a good one, with the guy who first created one, Kevin McCoy, minting (…bear with, we’ll touch on what this is in a sec) his first back in May 2014. Since then, NFTs – like their cryptocurrency cousins – have skyrocketed in adoption, with tech giants, artists, musicians, and celebrities such as Elon Musk jumping on the bandwagon to get a piece of what is – at least, at first (fourth and fiftieth) glance – a somewhat baffling concept. So, before we do what Embryo does best and delve deeper, exploring Mr McCoy and the release of Quantum (the OG NFT), let’s first answer some of the basics and simplify some of these acronyms. First things first…
What is an NFT?
In short, NFT stands for non-fungible token and is a digital asset that represents a real-world object. Fungible, meaning something that can be replaced by a copy (e.g., a £1 coin is worth exactly the same as another £1 coin, making it fungible) – NFTs being non-fungible, then, is what makes them unique, irreplaceable by an equivalent (as such doesn’t exist) and therein lies their appeal.
Each NFT is encoded with a digital signature that makes it impossible to exchange one NFT for another. Because of their uniqueness, NFTs have mostly been deployed by artists who have adopted this money-making digital artform. NFTs have also been pulled from other digital items that represent both tangible and intangible objects, including:
- Virtual avatars and other game assets
- Video reels
- Trading cards/collectibles
- And, believe it or not, memes and even a $2.9 million tweet.
NFTs occupy the digital space and are frequently bought and sold using cryptocurrency, such as Bitcoin or Ethereum (which, as with the £1 coin, for comparison, are examples of fungible tokens too, with one Bitcoin being worth at any one time the value of another Bitcoin, therefore replaceable). In the same way that cryptocurrencies can play a part in the buying and selling of NFTs, they are also supported by the same technology, or blockchain – a public ledger that is tamper-proof – and often this blockchain technology is Ethereum’s. NFTs are added to the blockchain via a process called minting, which basically means extracting and adding a digital file onto a blockchain where it will then retain a record of who owns it.
Kevin McCoy and the creation of the first NFT
At a hackathon (a marathon for hackers) back in 2014, digital artist Kevin McCoy and coder Anil Dash invented and presented the first-known non-fungible token, hosted on the Namecoin blockchain. The two pioneers envisioned a system that would enable digital artists to sell, track, and prove ownership of their art, which often gets shared across social media without credit to the original artist.
Their project, a digital artwork called ‘Quantum’, depicted a pixelated, pulsating octagon that changes colour in a hypnotic fashion. What might have seemed, at the time, like a somewhat kooky experiment into the realm of digital signatures and blockchain technology was reflected on by the artist, McCoy, who told Ocula Magazine:
‘I certainly thought it was a big idea at the time […] Seven years later the world has taken notice and that is gratifying. That said, we are still early in realising the full possibilities of this form.’
A big idea indeed. On 28 November 2021, the duo’s piece ‘Quantum’ sold at auction for a tidy sum of $1.4 million at the Sotheby auction house.
What does 2022 have in store for NFTs?
As with cryptocurrency a couple years prior, nobody was prepared for the rise, and at such pace, of NFTs in 2021. In recent years, the NFT market has seen exponential growth – a staggering £123 million being spent on these digital assets since November 2017 – and, fresh off the heels of 2021, is showing only increasing signs of development. From big brands and celebrities jumping all in, such as Marvel, with its digital comic book collectibles, and Nike’s purchase of a virtual shoe company that makes NFTs and, believe it or not, ‘sneakers for the metaverse’, it’s likely that the reign of NFTs is far from over.
It goes without saying, as with any investment, that customers must do their due diligence, research-wise, as regards the pros and cons of NFTs prior to thinking of buying. These digital assets, of course, will not be everyone’s cup of tea – and, simply, for some unlikely worth any expense at all. However, though not yet widely adopted on a regular folks level – like cryptocurrency is increasingly becoming thanks to user-friendly platforms like Binance and Coinbase – we say, on the topic of NFTs, definitely watch this space!
Looking to learn more about the recent digital trends that are set to have a major impact in 2022? Check out some of our latest blogs here or get in touch with the team where we’ll be happy to discuss all things digital marketing.