History of NFTs
Quantum, an NFT minted in 2014 by New York artist Kevin McCoy on the Namecoin blockchain is often considered the first NFT in history. However, while it is one of the oldest, it is not technically the first NFT in existence.
The first NFTs can be traced back to Colored Coins, designed on the Bitcoin network back in 2012.2 Colored Coins was an experimental project designed to explore the idea of Non-Fungible Tokens.
Several whitepapers analyzed its capabilities and hailed it as an achievement for distinguishing itself from regular Bitcoin transactions. However, because it was created on the Bitcoin network, there were technical limitations in place because Bitcoin’s scripting language required full consensus on its value.
“For example, 3 people agree that 100 Colored Coins represent 100 company shares. If even one participant decides they no longer equate Colored Coins to representing the company shares, the entire system falls apart.”
Nonetheless, Colored Coins spurred further innovation and established the foundation for NFTs. Subsequent projects like Counterparty (asset creator and decentralized exchange) reaffirmed the potential of putting real-world assets onto distributed ledgers. However, it was evident that developers require a more versatile blockchain to showcase the full potential of NFTs.
When the Ethereum network launched in July 2015 and introduced programmable code through smart contracts, developers finally had a viable platform to develop NFT projects. One of the first NFTs on the Ethereum network was Etheria, a virtual isometric world where players can own tiles, farm them for blocks, and build things. The project was created in 2015 and has since become a collector’s item for being a part of Ethereum’s history.
Fast forward to 2017, and we saw the release of notable projects such as CryptoPunks, Mooncats, and CryptoKitties are now widely known.
It was also around this time that proper NFT development standards started taking shape. Before this, most fungible tokens on Ethereum utilized the ERC-20 standard (ERC stands for Ethereum Request for Comment). The ERC-20 standard works well for many functions on Ethereum used in building fungible tokens, but it is not well-equipped to create unique tokens.
In September 2017, Dieter Shirley, a Github contributor, proposed ERC-721 to standardize token standards for unique tokens. The proposal aimed to improve past iterations such as gas efficiency and enable the blockchain to recognize non-fungible tokens.
It was also in this proposal that the term “NFT” was first coined. This new standard will be used later by CryptoKitties, the first project to implement ERC-721. Since CryptoKitties, many NFT projects have followed suit and adopted the ERC-721 standard.