The Rise of NFTs: How Have They Revolutionised the Art Market?

Before proceeding with NFT investments, it is important to understand their origins and advantages. In this article, we explore the history of NFTs, in order to answer the question of what makes them so revolutionary.

2 February, 2022

As we’ve explored in previous articles, NFTs stand for Non-Fungible Tokens which come with many benefits for artists and collectors alike. Before proceeding with NFT investments, however, it is important to understand their origins and what they stand for. In this article, we explore the history of NFTs, in order to answer the question of what makes them so important. 

Before we dive into the history of NFTs, we need to talk about the origins of blockchain technology, which is the system in which all cryptocurrencies and NFTs are built on. Blockchain technology developed in the aftermath of the 2008 financial crisis as a means of changing ‘a broken system’ (Forbes). As a decentralised online ledger, it seeks to offer more transparency and accountability, placing power in the hands of its users rather than institutions. Blockchain strength lies in the fact that it records all transactions, rendering it very difficult, if not impossible, to cheat the system. Following 2008, when big banks gambled big sums of their clients’ money, it can easily be understood why blockchain would be welcomed by many who were left feeling disappointed by the traditional financial system. 

As you may already know, Bitcoin was the catalyst in blockchain innovation. It represented the first global currency, which could be exchanged internationally without additional rates. Instead of going to a bank, individuals could now exchange their money on highly secure platforms. This revolution was followed by Ethereum, which then gave birth to NFTs. Indeed, the difference between Bitcoin and Ethereum is that the latter allows for developers to implement ‘smart contracts’, or a series of code that is linked to a digital asset, asserting it as being unique, traceable and verifiable (Forbes). As you may have guessed, NFTs are linked to those ‘smart contracts’, rendering it impossible to hack or copy the assets that they are associated with.

To provide you with some context, the first NFT was actually minted in May 2014 by digital artist Kevin McCoy. The work, titled ‘Quantum’, was a pixellated octagon with various shapes in a hypnotic way and recently (November 2021) sold for $1.4 million in a Sotheby’s auction. Cryptoart as a category began emerging as a cultural phenomenon, deriving largely from the gaming scene, as early as 2016 with players, such as CryptoPunks, Rare Pepe and Cryptokitties. However, NFT art really started to grab attention at the beginning of 2021, when digital artist Beeple sold ‘Everydays: The First 5000 Days’ for $69 million at a Christie’s auction. This marked the beginning of a strong association between NFTs and art, as Michael John Peters, owner of Maui Art Gallery, highlights:

‘It is very easy to fake certificates of authenticity or replicate art. Some paintings that are exact in size and composition sell for drastically different prices depending on if they have provenance (a tracked history) and certificate of authentication… NFT provides an iron clad indestructible proof of ownership along with provenance that will last for eternity.’ (quoted in Forbes)