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Today’s Lesson: Non-Fungible Tokens - Level: Beginner
Fungible vs. Non-Fungible
The concept of fungible vs non-fungible is not new or unique to web3. In traditional markets, you have money which is a fungible asset, and houses that are non-fungible assets.
So, what sets them apart?
Well, money is interchangeable which makes it fungible. For example, $20 can be converted to two $10 bills, twenty $1 bills, or four $5 bills, and no matter what you’d still have $20. This is fungibility, which is the ability of a good or asset to be interchanged with other individual goods or assets of the same type. Whereas, each home is unique and not interchangeable.
Traditionally it has been difficult to digitize non-fungible goods and assets like homes, collectibles, identities, and others because the technology to allow the good or asset to keep its unique identity did not exist. This made it impossible to authenticate or track ownership but blockchain technology has completely revolutionized this.
Blockchain platforms like Ethereum allow you to create a non-fungible token that represents a unique and indivisible item — physical or intangible — like a picture or intellectual property; and using the underlying blockchain technology it’s easy to prove ownership. NFTs open the possibility to digitally trade items that were otherwise impractical to trade online and remove the middlemen while doing so.
Today, NFT technology is mostly applied to art, collectibles, fashion, and in-game assets. They’re getting all the headlines (and rightfully so) because of the dollar volume in NFT sales generated over the last year and a half. Also, because of art or collectible-based NFT projects launched by large brands like Nike, Adidas, McDonald’s, Coca-Cola, NBA, NFL, MLB, Gucci, et al…
However, other industries like real estate, music, healthcare, ticketing services, and others are quickly adopting NFT technology. We are in the very early stages and use cases will continue to grow. What other industries can you see NFT technology being implemented in?
The Difference Between NFTs and Cryptocurrencies
NFTs and crypto both use blockchain technology but are different. One key difference is that cryptocurrencies are a medium of exchange used to conduct transactions on the blockchain. NFTs on the other hand, represent real-world and digital assets that can be purchased with or traded for cryptocurrencies.
Check out this video by Simplilearn -
History of Non-Fungible Tokens
2021 will forever be remembered as the year that NFTs went mainstream. In early March 2021, Christie’s auction house sold Beeple’s “Everyday - The First 5000 Days,” digital art piece for over $69 million, and that kicked off an NFT frenzy that has yet to slow down. Since then, an entirely new sector of web3 worth $41 billion today has been built, and it’s just getting started. It seems like this all happened overnight, but of course, that’s not the case.
The idea of NFTs is traced back to 2012. So let’s take a quick stroll down memory lane and look at the history of NFTs:
2012 - 2013
The concept of Colored Coins, a way to class and manage real-world assets on top of the Bitcoin blockchain was introduced. It was never realized but did lay the groundwork for NFTs.
2014 - 2016
Adam Krellenstein and Evan Wagner built on the Colored Coins concept and founded Counterparty, an open-source platform that allowed asset creations on the Bitcoin blockchain.
Digital artist Kevin McCoy minted the first-ever NFT known as Quantum on the NameCoin (a copied version of Bitcoin) blockchain:
Game creators and Swiss-based company EverdreamSoft pioneered issuing in-game assets on the blockchain using Counterparty. They launched BitCrystals, an in-game currency for their Spells of Genesis game.
Popular trading card game Force of Will launched on the Counterparty platform.
Rare Pepes became the first meme on the blockchain launched on the Counterparty platform:
2017
Rare Pepes began trading on the Ethereum blockchain and marked the first time digital art was given a monetary value.
John Watkinson and Matt Hall launched Cryptopunks, the first randomly generated NFT collection of 10,000 pixelated unique characters on Ethereum. The entire collection was given out for free.
Axiom Zen (now known as Dapper Labs) launched CryptoKitties, a blockchain-based virtual game that allows players to adopt, raise, and trade virtual cats. This started the first mainstream use of blockchain NFTs.
OpenSea is launched in December 2017
2018 - 2020
William Entriken, Dieter Shirley, Jacob Evans, and Nastassia Sachs proposes ERC - 721 in January 2018, creating a Non-Fungible Token Standard that implements an API for tokens within Smart Contracts. This becomes the primary standard used going forward.
100+ projects are developed to expand NFT use cases to include NFT studios, marketplaces, infrastructure, games, and collectibles.
2021 - Current
Beeple’s “Everyday - The First 5000 Days,” digital art piece sells for over $69 million.
Board Apes Yacht Club is launched and has become the most profitable collection by sales volume; with over $2.5 billion in sales to date.
NFT development and growth expands to other blockchains like Solana, Avalanche, Phantasma, Wax, Cardano, Fantom, and Binance Smart Chain
Other Lessons You May Be Interested In -
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