How did NFTs come into existence and who started it all?
Ever wondered how we went from trading baseball cards to spending millions on digital rocks?
Let’s hop in our time machine and explore the wild ride of NFTs, from their humble beginnings to today’s digital landscape.
The Birth of a Digital Revolution
So who started this whole NFT thing anyway? Well, it depends on who you ask!
Some trace its beginnings to Colored Coins way back in 2012, even before the term NFT was – well – coined. Colored Coins represented small denominations of bitcoin, with the goal of adding metadata to transactions.
>However, this turned out to be nothing more than a failed experiment.
Cool idea, but it didn’t quite stick. (Ironically, a decade later in 2023, Bitcoin finally got proper NFTs through Ordinals, which let people inscribe data onto satoshis – making what Colored Coins attempted a reality on the Bitcoin blockchain.)
Others say that the first NFT ever created was “Quantum” by Kevin McCoy in May 2014 as the true OG NFT. McCoy minted this hypnotic octagon animation on Namecoin (a Bitcoin offshoot), creating what many consider the first true NFT artwork.
Fast-forward to June 2021, and that historic piece sold at Sotheby’s for a jaw-dropping $1.47 million! It even got tangled in a legal battle over what counts as the “first NFT,” which McCoy won in 2023.
From Crypto Cats to Digital Millions
If you were paying attention to crypto in 2017, then you might have also heard of a little something called CryptoKitties, the virtual cats that nearly broke Ethereum.
Born out of the interweb obsession with these cute feline pals, CryptoKitties was one of the first successful pioneers of NFTs back in 2017.
This game let players buy, collect, and breed limited-edition digital felines, each one a unique NFT with its own “digital DNA.” Players scrambled to unlock rare traits and hopefully sell a valuable kitty for big money.
CryptoKitties became so popular in late 2017 that breeding transactions literally congested the entire Ethereum network. Imagine that – cute digital cats bringing a major blockchain to its knees!
Some virtual pets sold for over $100,000 during peak cat-mania, giving us an early taste of the NFT frenzy to come.
From there, similar games were developed with features enabling players to win in-game prizes and collectibles, and at the same time on these unique digital assets.
Around the same time, the NFT ecosystem started expanding. Axie Infinity launched in 2018, letting players battle and breed cute monster NFTs in a Pokémon-inspired universe.
By 2021, Axie exploded as the poster child of “play-to-earn” gaming. Some players, especially in the Philippines, actually made a living by earning and selling Axie tokens!
At its peak, the game boasted over 2.7 million daily users and more than $4 billion in marketplace transactions.
Another game-changer was NBA Top Shot, which launched in late 2020 and introduced sports fans to NFTs through collectible basketball highlight clips.
By February 2021, Top Shot was on fire – one month saw over $224 million in sales from 80,000+ buyers. They essentially turned video highlights into digital trading cards, and basketball fans couldn’t get enough!
The Great NFT Gold Rush
Money kept pouring into NFTs, turning several digital artists into overnight millionaires.
The poster child? Digital artist Beeple (Mike Winkelmann), whose NFT artwork Everydays: The First 5000 Days – a collage of 5,000 digital images created over many years – sold for a mind-blowing $69 million in March 2021.
This Christie’s auction house sale stunned the world and firmly planted NFTs on the mainstream map.
That same year, artist Pak sold an NFT collection called The Merge for an eye-popping $91.8 million (though split among many buyers). By 2021,
NFTs had expanded way beyond games and art: we saw musicians releasing NFT albums, virtual real estate in metaverse platforms being sold as NFTs, and brands experimenting with NFT merchandise.
Even Twitter founder Jack Dorsey sold an NFT of his first tweet for over $2.9 million. It seemed like every corner of culture wanted a piece of the NFT action!
The Digital Flex: NFT Profile Pictures
Remember when your social media profile picture was just, well, a picture? NFTs changed that too!
NFTs changed that too! You could buy NFT avatars to use as profile pics – the ultimate digital status symbol.
Twitter even rolled out a special hexagonal frame feature in 2022 to verify NFT profile pictures (so everyone knew you actually owned that Bored Ape you were flaunting).
Instagram and Facebook briefly experimented with NFT displays in 2022 as well, though Meta pulled the plug in 2023 as the hype cooled.
Why would anyone pay big money for a JPEG as a profile photo? Think of it as the ultimate online status symbol. The ultimate digital flex!
It’s similar to flashing a Rolex, Lamborghini, or limited-edition sneakers in real life – in the digital world, owning a rare NFT avatar signals that you have the means (or early adopter savvy) to access exclusive digital goods.
As NFT enthusiasts liked to say during the boom: “Sure, you can right-click and save the image, but you can’t right-click and save the clout
The Luxury Brands of the NFT World
A few exclusive NFT collections emerged as the crypto-equivalents of Gucci or Louis Vuitton.
Popular PFP (profile picture) NFT art projects like CryptoPunk and Bored Ape Yacht Club are limited edition NFT collections and memberships, and they don’t come cheap.
CryptoPunks became the OG luxury NFT brand. These 10,000 pixelated characters, launched for free in 2017 by Larva Labs, became incredibly valuable by 2021.
In May of that year, a bundle of nine CryptoPunks sold at Christie’s auction for nearly $17 million – not bad for what originally were free 24×24 pixel art icons!
Then came Bored Ape Yacht Club (BAYC) in 2021, another powerhouse in the NFT universe.
The collection features 10,000 cartoon apes with unique traits and doubles as membership to an exclusive “club” with perks like fancy party invites and additional NFT drops.
At the height of the frenzy, these sought-after NFT avatars skyrocketed in value – by early 2022, the floor price (cheapest available Ape) exceeded 100 ETH, translating to more than $300,000 during the crypto market peak.
Celebrities couldn’t resist “aping in” either: NBA star Stephen Curry bought a Bored Ape for around $180,000, and pop icon Justin Bieber famously paid $1.3 million for his Ape in January 2022.
But… Why Not Just Screenshot?
“Why not just screenshot these images instead of spending a fortune?” I hear you asking. Great question!
Yes, you can save the image, but you can’t copy the blockchain-proof of ownership that comes with the NFT. That proof of authenticity (recorded on a public ledger) is where much of the value comes from.
It’s like the difference between having a poster of the Mona Lisa versus owning the real Mona Lisa in the Louvre. One is a $50 print anyone can buy on Amazon; the other is literally priceless (or insured for over $800 million).
In the crypto world, those who wish to flex their wealth and digital savvy do so with authenticated NFTs from top-tier collections.
When Celebrities Joined the Party
And did celebrities ever join this party! Rappers like Jay-Z and Snoop Dogg, DJ Steve Aoki, pop stars like Justin Bieber, athletes like Serena Williams and Steph Curry – they all jumped on the NFT bandwagon, proudly showing off their CryptoPunks, Bored Apes, and other coveted NFTs as profile pics or in music videos.
This flood of celebrity endorsement in 2021 helped cement these NFTs as positional goods – basically, status symbols – which only drove prices further into the stratosphere.
By late 2021, Hollywood actors, musicians, and pro athletes were regularly talking about their NFT collections on talk shows and social media. NFTs had officially become part of pop culture.
The “$1 Million Rock” and the NFT Gold Rush
At the rate the industry is booming, it seems that anyone could assign a tokenized digital certificate on a rock and call it an NFT.
And true enough, clip art NFTs of jpeg rock images known as EtherRocks have gone on sale for a little over a million dollars in August 2021.
Yes, people paid millions for pictures of rocks. If that sounds absurd, well, it is – and it perfectly captured the peak of the NFT bubble where speculation sometimes trumped logic.
Of course, not all NFTs were worth anywhere near that, and soon the market was flooded with “NFT trash.” By 2022, there were tens of thousands of NFT collections, most of which sank into obscurity when the hype died down.
In fact, a late-2023 analysis suggested about 95% of NFT collections had “died,” meaning they had almost no trading activity or value remaining.
The Dark Side: Scams, Forgeries, and Rug Pulls
Like any gold rush, the NFT boom attracted its share of scammers and swindlers. The NFT industry turned out to be no stranger to shady business:
Plagiarism and forgeries: In early 2022, OpenSea, the largest NFT marketplace at the time, admitted that over 80% of items created with its free minting tool were plagiarized copies, fake collections, or spam. Thieves would steal artists’ work and mint unauthorized NFTs, or make copycat versions of popular collections to dupe buyers.
Rug pulls: A rug pull happens when a seemingly legitimate project, often hyped with flashy art and big promises, suddenly has the creators disappear with all the money, leaving collectors with worthless tokens. Throughout 2021-2023, numerous rug pulls occurred as scammy developers realized they could cash in on unwary NFT buyers.
Pump-and-dump schemes: In the NFT version, shady influencers would buy up a bunch of a low-value NFT collection, loudly hype it on social media (creating FOMO among followers), and then quietly sell off their stash once prices pumped, leaving latecomers holding the bag.
Many people learned the hard way that just because something is an NFT doesn’t make it immune to age-old financial scams.
The Great NFT Crash of 2022
By 2022, the NFT craze that had skyrocketed was facing a reality check. A broader crypto market crash (the “crypto winter” of 2022) cooled off NFT demand significantly.
After NFT trading volumes hit record highs in early 2022, they collapsed by late 2022, falling by roughly 97% from the peak.
Prices of “blue chip” NFTs like Bored Apes and CryptoPunks tumbled hard. The Bored Ape Yacht Club collection, which had a floor of around 120 ETH in mid-2022, saw floor prices drop to barely 10 ETH by late 2023, a 90%+ decline in both ETH and dollar terms!
Even celebrity collectors felt the pain: Justin Bieber’s NFT portfolio, which cost over $2 million at the peak, lost around 95% of its value by 2024.
The great NFT “flex” became a bit less impressive when everyone realized the market wasn’t a one-way rocket to the moon. By early 2023, headlines declared the NFT boom over and asked if the bubble had burst for good.
Not Dead Yet: Evolution and Adaptation
Yet, reports of the “death” of NFTs turned out to be exaggerated. While the speculative frenzy quieted down, the NFT ecosystem kept evolving in 2023 and 2024.
A new NFT marketplace called Blur launched in late 2022 and gained massive traction among traders by offering incentive rewards; by 2023 Blur was handling as much as 80% of Ethereum NFT trading volume, overtaking OpenSea. (OpenSea, which had been valued at $13 billion in January 2022 at the peak of the boom, had to lay off staff and saw its trading volumes plunge by over 90%.)
The NFT market as a whole found a new equilibrium: monthly volumes in late 2023 were a fraction of the 2021 highs, but a core community of collectors and builders remained active.
There were even signs of a modest resurgence in early 2024, with trading volumes rising again quarter-on-quarter, partly thanks to novel trends like Bitcoin Ordinals (NFTs on the Bitcoin blockchain) injecting fresh excitement.
New Horizons: Brands, Games, and Practical Uses
New NFT collections and use-cases kept emerging post-2022. Projects like Azuki (anime-inspired avatars) and Moonbirds (owl-themed NFTs with club membership perks) made waves in 2022, showing there was still an appetite for innovative PFP communities even after the initial boom.
Major brands and companies jumped in too:
- Nike acquired an NFT studio (RTFKT) and released digital sneaker NFTs
- Starbucks launched a loyalty program in 2023 using NFT “stamps” on Polygon
- Reddit cleverly onboarded millions of users to NFTs by launching Collectible Avatars (digital profile pics on Polygon) without even using the scary “NFT” word).
By October 2022, Reddit users had created over 3 million crypto wallets largely to buy these avatars, making it one of the most successful mainstream NFT integration, and many of those users had no idea they were even using NFTs!
In the entertainment world, big names like Disney and Warner Bros. experimented with NFT drops for fans (think limited-edition digital comics or movie memorabilia).
Meanwhile, the concept of Soulbound Tokens introduced by Ethereum’s Vitalik Buterin in 2022, essentially non-transferable NFTs for things like credentials or achievements, highlighted that NFTs weren’t only about goofy pictures but could have practical identity and verification uses.
Some universities have already issued NFT diplomas, and conference organizers use NFTs as tickets or proof of attendance badges.
Here Come the Regulators
Not surprisingly, as the NFT space matured, regulators began to take notice. By 2023, regulatory bodies were scrutinizing NFT offerings to see if they violated securities laws.
The U.S. SEC reportedly opened investigations into prominent NFT projects (like Yuga Labs, the company behind BAYC) and marketplaces in 2022.
While no broad regulations specifically for NFTs exist yet, there have been cases of the SEC charging NFT projects for conducting unregistered securities offerings (for example, one project selling NFT memberships to a fancy restaurant got slapped by the SEC in 2023).
Issues like money laundering and sanctions evasion via NFTs also popped up on regulators’ radar. Around the world, governments are debating how to classify and tax NFTs – whether as collectibles, art, commodities, or something else.
The Wild West days are slowly ending as the lawmen come to town, but the NFT industry is adapting, with marketplaces implementing stricter compliance and creators being more careful with promises.
Where Are We Now?
NFTs have had quite the rollercoaster journey: from obscure tech experiment, to 8-bit cats clogging Ethereum, to multi-million-dollar digital art sales and celebrity-fueled frenzies, and then to a sobering cooldown.
The initial bubble may have burst, but a foundation of real use cases and committed communities remains. NFTs are now an established part of the broader Web3 landscape.
They power community membership clubs, drive ownership in play-and-earn games, represent identity in decentralized social networks, and enable new models for creators to monetize and interact with fans.
The market has certainly right-sized – you won’t see random rock JPEGs selling for a million bucks quite so easily anymore – but innovation continues.
Just like the early internet mania gave way to a sustainable digital economy, the NFT frenzy of the early 2020s is evolving into more practical applications (with, hopefully, a bit less madness).
The Bottom Line: It’s About Digital Ownership
In the end, the brief history of NFTs has shown us one thing: humans have an innate desire to collect and show off things they value, and that instinct carries over into the digital realm.
Whether it’s a rare CryptoKitty, a buzzy Bored Ape, a plot of virtual land, or a badge proving you attended a certain event in the metaverse, NFTs are all about digital ownership and community.
The tech will no doubt keep advancing (and unfortunately, the scams will try to keep up).
If you decide to dive into NFTs, remember the lessons of recent history:
- Do your homework
- Be wary of the hype
- Secure your assets
- Only spend what you can afford to lose
Because the next chapter of NFTs will surely have its own ups and downs, laughs and rug pulls, million-dollar sales and hard-learned lessons. And through it all, a digital cat or punk or ape might just be lurking on the blockchain, waiting for its moment to shine again.