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NFTs Are About To Get Real

NFTs Are About To Get Real

The Non-Fungible Token (NFT) industry can be traced back to the early days of the internet. The first NFTs were digital collectibles created on forums and message boards. These tokens were simply images or text used to represent a unique asset.

However, it wasn't until the development of blockchain technology that NFTs really began to take off. Blockchain provided a way to securely and permanently store data on a decentralized ledger. This made NFTs much more secure and trustworthy than traditional digital collectibles.

Since then, the NFT industry has exploded in popularity. Millions of dollars worth of NFTs have been sold, and the market is only getting bigger. With the help of blockchain, the NFT industry is revolutionizing the way we think about digital ownership.

This article discusses NFTs, including where they came from, important milestones, and what to expect in the future.

The Origin of NFTs

The first-ever known non-fungible token (NFT) was created in 2014 by Kevin McCoy and Anil Dash. It was called Quantum and consisted of a video clip of digital art created by McCoy’s wife, Jennifer. Originally, the technology was called “monetized graphics,” and Quantum was registered on the Namecoin blockchain and sold to Dash for $4. Today, it’s on sale for $7M.

In October of 2015, three months after the launch of the Ethereum blockchain, the first NFT project, Ehteria, was launched and demonstrated at DEVCON 1 in London. Most of the 457 NFTs went unsold for more than five years until March 13, 2021, as interest in NFTs was renewed. These remaining pieces sold out in 24 hours for a total of $1.4M. At the time of their launch in 2015, their cost was only $0.43 each.

Increased public awareness began in 2017 when an online game CryptoKitties monetized cat NFTs. During 2020, the value of the NFT market exploded, tripling to $250M. During the first quarter of 2021, more than $200M was spent on NFTs.

Or Was the Origin in 2012?

There is another origin story out there on NFTs worth discussing, known as Colored Coins. Colored Coins, created in 2012-2013, are made of small bitcoin denominations–known as a single satoshi–which can be used to represent a multitude of assets and have multiple uses, including:

  • Coupons
  • Property
  • Issue shares of a company
  • Ability to issue your own cryptocurrency
  • Digital collectibles
  • Access tokens

Unfortunately, the whole Colored Coin system carries several flaws. But, they played a significant role in laying the groundwork for NFTs. You can learn more about them here in the “Overview of Colored Coins.” 

Counterpoint: “Counterparty”

Another early consideration for the creation of NFTs is Counterparty. Counterparty is a peer-to-peer financial platform and distributed, open-source Internet protocol built on top of the Bitcoin blockchain. It allowed asset creation and even included a trading card game and meme trading, where Rare Pepes originated.

Rare Pepes

In October 2016, “rare pepes” were issued along the Counterparty platform. A rare pepe is a meme featuring a frog character that has developed an intense fanbase. Besides being incredibly quirky, the uniqueness of these images makes them such desirable NFTs. 

How the NFT space has evolved

In simple terms, an NFT is a unit of data stored on a variety of digital ledgers called a blockchain, which can be sold and traded. But, what started as a simple video clip has evolved into many use cases across various industries. But, perhaps none is more compelling than the art industry.

The History of NFT Art

Art is perhaps the most common way to use NFTs, as auctions from high-profile NFTs have made the biggest splash in public attention. Currently, the most expensive NFT ever sold was at an auction price of $91.8M–work by artist Pak, entitled The Merge.

The merge

The Merge is both a single piece of artwork and a series of artworks. When it launched, buyers could purchase an NFT, called a mass, for a set amount of money ($575). However, for buyers who purchased more than one mass, instead of receiving another NFT, their current mass actually increased in size. The price of a mass NFT grew throughout the sale, and buyers who bought a lot of mass were rewarded with free mass. 

It sounds a little confusing, but if you can picture a tiny ball of mercury as one mass, then add other tiny balls of mercury to it, you can see how each comes together to get bigger and bigger. That’s what The Merge is and was before the sale was brought to a close. Now, even though the launch is over, buyers and traders can still sell or trade their NFTs to grow their mass bigger, making their NFT more valuable. 

In the end, more than 28,000 buyers spent over $91M on what has been one of the most compelling NFT art concepts to date.

Everydays: The first 5000 days

The second most expensive (at $69M) was a piece of artwork by Michael Winkelmann–known as Beeple–called Everydays: the First 5000 Days.

Beeple is a graphic designer and motion artist from South Carolina who is well-renowned in the digital art world. However, his rise to fame reached a new height with his NFT collage created from 5,000 images created daily for 13 years. The images were put together and formed one NFT unit that sold for almost $70M making it the third-most-expensive piece of art ever sold.

CryptoPunks

Perhaps, the most well-known NFT digital art pieces are the collection of CryptoPunks, which is credited with starting the NFT craze of 2021.  

CryptoPunks is a series of 10,000 unique collectible characters stored on the Ethereum blockchain. Each character is created using an algorithm and no two are identical. The images are 24x24 pixels and feature some combination of guys, girls, apes, zombies, and aliens. While some of the images share attributes, the rarest ones feature the fewest attributes. For example, on the current marketplace, CryptoPunk 5822 is on sale by the owner for $34.89M. It features one attribute–a bandana–which is only shared by 481 punks. 

Perhaps the wildest part of CryptoPunks is that initially, they were all free. One simply had to claim them. Now they sell for hundreds of thousands to multi-millions of dollars.

CryptoKitties

In the 90s, we had Tomagotchi–a handheld digital pet that you could feed, love, and–if neglected–kill. In the 2020s, we have CryptoKitties! CryptoKitties are digitally created breedable and collectible cats. Each is one-of-a-kind and cannot be replicated, taken away, or destroyed.

It turns out that breeding digital pets is big business for at least a short period of time. While CryptoKitties was the first widely recognized blockchain game and featured astronomical growth, the popularity was short-lived. In fact, it reached its peak on December 10th, 2017. But, by the beginning of 2018, the game’s popularity fell by 90% of users. However, for those that were fortunate during that short time. One CryptoKitty fetched $1.3M, another $566,000, and the third most expensive CryptoKitty was sold for $107,000.

Bored Ape Yatch Club

Similar to CryptoPunks, Bored Ape Yacht Club (BAYC) is a collection of 10,000 unique, algorithm-created images. Except instead of aliens, zombies, and humans, BAYC features images of–you guessed it–apes. In March of 2022, sales of BAYC made up more than a third of total NFT sales. In January of 2022, BAYC surpassed $1B in total sales.

Who Can Create & Purchase NFTs?

The easy answer is that anyone can create or purchase NFTs. Some companies help guide you through the process of creation, connecting your content through blockchain, and getting the proper paperwork done to develop your own NFTs. Purchasing is also as easy as connecting with an online marketplace and working with vendors to purchase or acquire the NFTs you want.

You can launch your NFT collection in seconds with Mantial. We assist everyone, from entrepreneurs to celebrities and large companies throughout the whole process of conception, sales, and management of NFT collections.

In Conclusion

The future is wide-open for the NFT industry. As it becomes more and more popular, creators and even NFT experts are still exploring the possibilities of this technology and how it collides with our everyday lives. While the exact future of NFTs is uncertain, the market is expected to continue growing, and NFTs worth millions of dollars today could be worth billions in the future. 

And, when money like that is involved, everyone will want a piece of the action.

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The Walking Dead

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Rick’s NFT

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The Walking Dead

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Michonne’s NFT

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The currently popular function of NFTs — that is the creation and trading of digital collectibles — is just the leading wave of a coming tsunami of NFT utility. NFTs are slowly but surely making their way into the real world and completely changing the way the world does business.

Every piece of real estate is an NFT — of sorts

Real estate is a prime example of physical property that can be represented by an NFT. In one sense, plots of real estate are already NFTs. They're just in the form of property deeds rather than Ethereum tokens. 

It goes without saying that the deed to a plot of land is not the plot of land. The deed merely represents ownership of the plot of land. It’s a token that represents an underlying contract. The contract spells out the details of a piece of real estate such as its location and size, the date the deed was first issued, the succession of ownership, the selling price, the current owner’s address and contact information, and so forth. This information is stored in a centralized database called a deed registry. 

When the property is sold, it’s not the land that changes hands, it’s the deed. The buyer and seller don’t need to meet on the property and shake hands on the deal. The deed acts as a contract between the seller and the buyer. When the deed changes hands, it’s used to update ownership information in the deed registry database. 

This sounds a lot like an NFT, doesn’t it? In fact, in virtual worlds such as Decentraland, NFTs are used very much like deeds to represent ownership of virtual land. 

NFTs in REAL real estate

Nothing can hold back the coming tsunami of real property NFTs. The floodgates were opened recently when a homeowner in the U.S. state of Florida sold an NFT tied to a plot of land containing a tiny 164-square foot house. The first such transaction of its kind in the U.S. the deal was mediated by an NFT real estate startup called Propy. 

Bids were only accepted in ETH. The property sold for 210 ETH at auction (approximately $653,000 at the time of sale, or about $3,000 over the asking price). 

The way the sale works is that the NFT is linked to ownership of a limited liability corporation (LLC). And the LLC owns the deed to the property. Thus, whoever owns the LLC owns the property. 

In an interview with crypto news and information source Coindesk, Propy CEO Natalia Karayaneva said the company has gotten “hundreds and hundreds of requests from sellers to sell their homes all over the U.S.” 

This is just the opening salvo of the coming battle between traditional real estate sales and a blockchain-enabled real estate market. 

The Florida house isn’t the only example of NFTs breaking into real estate. In May 2021, an apartment listed via the Propy platform sold for more than $93,000. And across the pond in Portugal, real estate developer, Prometheus, sold two luxury homes for crypto with NFTs acting as a contract for ownership.

Pros and cons of real estate NFTs

If you’ve ever tried to purchase a home you know that the process can be quite an ordeal and can take many weeks to resolve. However, if the property is owned by an LLC, and the LLC is sold as an NFT and paid in full there’s no mortgage involved. The transaction is, for all intents and purposes, instantaneous. 

Another benefit of offering real estate in the form of an NFT is that it appeals to those who got into crypto early and have thus enjoyed windfall profits. Since the advent of Bitcoin, more than 100,000 crypto millionaires have been ordained. And far more crypto enthusiasts hold hundreds of thousands of dollars worth of crypto. Today, any company marketing to this audience will have little competition. 

On the downside, however, more traditional homeowners that aren’t crypto savvy and who don’t want to buy an LLC might disqualify an NFT transaction offhand. 

Pros and Cons of Real Estate NFT

Blockchain will eat the world

We’re still only a few steps along the journey toward NFT real estate. It’s hard to tell what the future holds. The question becomes, how likely are homeowners to adopt cryptocurrencies and smart contracts? It could take years to answer that question.  

Meanwhile, houses aren’t the only big-ticket items to start trading on Ethereum. Recently a 110-foot yacht, designed by Gregory C Marshall, was minted as an NFT. Marshall partnered with superyacht sellers Cloud Yachts on the deal. The custom-designed superyacht to be built by Delta Marine in Seattle will be listed at $95 million. Whoever buys the NFTs will get more than just a big boat. They’ll also get VIP access to exclusive big wig events as well as a rich list of other benefits.

In 2011, World Wide Web innovator Marc Andreessen clearly foresaw that the web would disrupt all industries. He famously wrote, “software is eating the world.” Since then companies such as Netflix have put video rental stores like Blockbuster out of business. And companies like Priceline.com and Airbnb have put thousands upon thousands of travel agents out of business. And the list goes on and on.

As Andreessen did over a decade ago, many experts today predict that eventually all property — physical and intangible — will be attached to an NFT. 

Being such a nascent technology, the legalities and protocols of NFTs and smart contracts are still being worked out. However, detractors of blockchain technology have yet to come up with a good reason why physical asset owners should trust centralized databases more than blockchains.