Alongside the expansion of cryptocurrency as an asset, a variety of innovative systems grew to fill user demand. Non-fungible tokens (NFTs) represent one such novel product, filling a need for unique and verifiable items within the blockchain ecosystem. At their core, they exist to verify digital ownership – specifically, the ownership of the token itself and anything explicitly linked to that token. When initially conceptualized, developers saw NFTs as a means to tokenize assets, including those in the real world. Yet, the public now associates NFTs with digital art almost exclusively.
In part, this association is due to CryptoKitties, the first breakout NFT project on the Ethereum blockchain. Proclaiming themselves a “crypto collectible,” CryptoKitties exploded in popularity in late 2017 during the previous major cryptocurrency boom cycle – going so far as to clog the Ethereum blockchain with transactions. The price of digital cats soared, even as scores of new users poured in each day. The crypto-winter hit soon after, taking a toll on every project in the space, including CryptoKitties, but the precedent had been set. NFTs now meant digital art and collectibles to many investors.
The cryptocurrency space matured by leaps and bounds between 2017 and now, becoming a much more polished and easy-to-use technology. 2017 marked the beginning of a UI/UX revolution within the space. Exchanges like Binance and Coinbase drastically reduced the learning curve required to invest in cryptocurrency – and CryptoKitties introduced the concept of crypto gaming to the world. Cryptocurrency investing consists mostly of numbers and trends, making CryptoKitties a stark difference with colorful cats and simple mechanics. That difference drew in a remarkable number of new players.
Built as an ERC-721 token, each CryptoKitty verifiably belonged to a single wallet. Blockchain technology protected these assets from fraud, making them unique, secure, and functional within the CryptoKitties ecosystem. Users could breed their cats, a potentially lucrative process that created new tokens with features of both parents. Earlier generations often fetched a higher price, with the genesis CryptoKitties reigning supreme.
While those with knowledge of blockchain technology could identify CryptoKitties as NFTs, the acronym rarely emerged at that time. Rather, the phrase “crypto collectible” served as a catchall and differentiator for digital art assets. That would change with the NFT boom of 2021.
The Evolution of NFTs
The aforementioned lowered learning curve and introduction of user-friendly frontends drastically increased the number of users engaging with cryptocurrency. No longer requiring considerable technical knowledge to invest, the focus of cryptocurrency shifted away from solely digital currency and related platforms. The power of smart contracts enabled a new ecosystem that existed in 2017 only as a far-off promise.
Interest in early crypto collectibles grew, and the concept of an NFT as digital art piqued the interest of several major players. CryptoPunks, one of the first experiments with NFT technology, fetched high prices and drove innovation in the field. DapperLabs, the creator of CryptoKitties, worked with the NBA to produce digital trading cards in the form of NBA Top Shots.
Absurdly high values for NFTs like the Bored Ape Yacht Club further accelerated the craze. It became clear that NFTs were the poster child for the 2021 cryptocurrency boom, making and breaking fortunes for investors and artists alike. The original concept of NFTs as a digitized asset now skewed almost entirely towards digital art and crypto gaming.
CryptoKitties in 2021 and Beyond
CryptoKitties created the NFT market wholesale, and the original NFT marketplace continues to exist. DapperLabs remains one of the top players in the market, albeit in the form of NBA Top Shots and other projects. While the value of an average CryptoKitty has dropped from its peak in 2017, some of the unique cats – such as the genesis generation – command high prices to this day. In part, this continued popularity is a specific result of their place in cryptocurrency history.
While the industry remains a new phenomenon, we are beginning to see some degree of both nostalgia and appreciating value for historic context. The original CryptoPunks cost nothing on their release – their high-value today is specifically a result of their status in cryptocurrency history. The same is true of the CryptoKitties genesis cats. People desire to own these NFTs because of their place in the formation of the industry as it is today.
CryptoKitties will continue to exist and perhaps flourish, on their new blockchain: Flow. Created by DapperLabs to power projects like CryptoKitties, the new blockchain will do away with the transactional friction faced on Ethereum.
NFTs into the Future
It can be hard to predict where the cryptocurrency industry will move in the future. NFTs seemed to emerge out of nowhere to dominate the news cycle in 2021 – much as smart contracts and their associated platforms did in 2017. New technology drives innovative use cases, but not every project will become successful. Developers learn the capabilities and strengths over time, leading the industry to a more efficient future.
In the same sense, while art-based NFTs remain in vogue, for now, that may not hold moving forward. The original use-case certainly included art, but focused more on tokenization of assets like real estate and precious metals. As the technology expands, it may even be useful for complex, decentralized gaming and the realization of the ‘metaverse’ concept. We are only now entering the world of NFT 2.0, and the concepts of nested, complex NFTs with associated values and features. These new NFT projects could spark a revolution in ways we cannot even conceive.