The Evolution of the Crypto Space: From Distributed Ledgers To Cryptopunks

It all started as a medium of making financial transactions without third parties getting involved. Nowadays, the concept has expanded to many other areas, and one of the areas is the appreciation of art. In this post, we will talk about how blockchain has evolved over the years.

Blockchain and Bitcoin (1998–2009)

In the stressful and nosy old days, the primary mean of financial exchange was through banks. You could only make payment through wads of cash authorised or recognised by a traditional bank. In every transaction, the bank is involved, either by authorising the printed notes or processing payments electronically. There’s little to no anonymity or privacy about your financial background and transactions.

The blockchain started as a means to change how financial exchanges work. Mainly, it answers the question of how one can transact with other people without the interference of third parties like banks and the government.

As the name implies, Blockchain is a series of blocks that are all connected like a chain. A block contains all of the details of a unit of transactions. Then it connects with the next block, containing the next unit of transactions.

The effectiveness of blockchain technology relies on decentralisation. It is a fancy way of saying the detail of each transaction is distributed to a network of members in multiple locations.

Distributed Ledgers

The details of transactions carried on a blockchain are not kept with a single entity, unlike in traditional banks. Instead, a copy of each transaction is distributed to many networks.

Therefore, it is hard or impossible to manipulate the details once it is distributed. This process makes blockchain a lot safer, secure and user-oriented.

User-oriented? Yes, most decisions are reached or determined through a consensus mechanism, which is the method by which participants in each blockchain approve transactions. This mechanism varies from blockchain to blockchain, but it aims to create fairness, contribution, and reward for each activity.

Blockchain participants are often referred to as Miners, or validators, depending on the blockchain they’re working for.

Type of consensus mechanism

There are various types of consensus mechanisms, but for the purpose of this article, we’ll focus on the two prominent types: Proof of Work and Proof of Stake.

Proof of Work

Proof of Work (PoW)is a consensus mechanism where miners use a large amount of processing power to add new blocks to the blockchain. It involves miners worldwide vying to solve a difficult maths puzzle using high computational resources. The winner, the miner who is the first to get a valid answer successfully, would be rewarded by the network. Usually, the value of that reward is prescribed before the process begins.

Proof of Stake

Proof of Stake (PoS)is another consensus mechanism that tries to eliminate the common limitations of Proof of Work, such as the consumption of too much power and making all miners work simultaneously. PoS has a group of validators who have shown interest by contributing or staking some of their tokens to be selected. At random, one of the validators is picked to validate transactions, add new blocks, and get rewarded for completing the task successfully. Usually, a validator loses some of their “stake” if they carry out malicious acts on the network. This is known as “slashing”.

Smart contracts (2015–2017)

Over time, the use cases of blockchain have increased. For example, the Ethereum blockchain saw new features, adding more utilities to the concept of the first blockchain, Bitcoin.

One of the features is called smart contracts. They are like immutable computer codes. They serve as tools for their network members to create other useful features.

For instance, with smart contracts, developers can

• Create Tokens and NFTs
• Tokenize Real estate
• And power DEFI — liquidity pools, AMMs, and yield farming

Of course, there are other and wider uses of smart contracts. They are self-executing, making it easy to automate tasks based on certain conditions. Their immutability and the absence of the activities of mediators or intermediaries are some of the reasons they save cost, process transactions faster, and eradicate malicious activities.

NFT 2012 — date

As the use cases of blockchain technology continue to spread, developers have found new ways of adopting the system into other areas of life and work. Another discovery is the invention of NFT.

NFT stands for Non-Fungible Token. It is a technology that allows the creation of unique items on the blockchain. The major difference between an NFT and a fungible token is that it cannot be copied or interchanged. (Examples of fungible tokens include Bitcoin.) This explains the name Non-fungible Token.

An NFT has unique ownership. Therefore, an owner can prove that the physical or digital object belongs to them on the blockchain.

You can think about this technology as a tool for adding “identity” to digital objects or arts, such as images, videos, gifs, or music.

But I can save someone else’s NFT on my phone, so how does that work?

That’s a very good question.

Screenshotting an NFT doesn’t make you the owner. Taking pictures of a car of the same brand, colour, and model as someone else doesn’t mean you are the owner of their exact car. Each car has its licence plate, which proves its ownership. The concept of “licence plate” is what NFT applies to the ownership of digital items. The rightful owner of an NFT would be able to prove ownership, while someone who just saved the picture wouldn’t have an acceptable way to prove that the art belongs to them.

The use cases of NFT include:

• Authenticating physical and digital arts and collectibles
• Authenticating physical and virtual real estate
• Differentiating counterfeit from original items
• Fighting the use and spread of fake medications
• Verifying the authenticity of luxury items like jewellery, watches, and bags
• NFT transactions do not need middlemen or intermediaries like banks and governments.

How NFTs started

2012

According to a publication in 2012, it is possible to represent the ownership of assets, either physical or digital, on the blockchain. At first, an attachment was created for a Bitcoin transaction. These transactions had coloured dots that served as a unique mark. The idea brought the creation of coloured coins, and it further opened more ideas for improvement on how the technology could be used.

2014–2017

The first Art NFT was recorded in 2014. A young man minted NFT “quantum” and published it on the blockchain, and called it a digital work of art.

It wasn’t named “NFT” until much later. People called it monograph, a kind of monetised graphics.

More NFTs were created between 2014 and 2015, but they started to reveal their true potential around 2017 when people started minting more NFTs and creating life-changing opportunities out of them.

2017–2021

The first NFT sold for above $1.5 million in 2021.

However, they didn’t become that big without some effort. Part of that can be attributed to Cryptopunks.

Cryptopunks

Larva Labs launched Cryptopunks in June 2017 in their studio. The idea was inspired by the London Punk Scene 2. It was created as an experiment named Cryptopunks, but it became so huge that the simple design and concept behind it did pioneer the entire industry.

Today, there are 10,000 Punks with distinct characteristics. All are similar but have unique differences, and some are rarer than others.

Cryptopunks have gained a lot of fame today. As of 2022, the most expensive of them cost about $23,000,000.

2021–2022

Many people started to notice the worth of Cryptopunks and wanted to be a part of it. Then a new trend began called CryptoKitties.

Crypto Kitties is a game that uses NFT technology. A user breeds the Cryptokitties by playing the game and trades them as cats or items. Each crypto kitty is a digital genome developed on a smart contract. A user can breed two of them at a time.

The kitty with the highest value was sold for above $170,000. Many projects followed after that, and today it would be unforgivable, not to mention one of the most successful among them, the Bored Ape Yacht Collection.

Bored Ape Yacht Club Collection

One of the hottest NFTs at the moment is the Bored Ape Yacht Club. It has a collection of 10,000 unique assets. Some of the owners of these pieces include celebrities and artists such as Justin Bieber, Paris Hilton, Eminem, Gwyneth Paltrow, Snoop Dogg, Shaquille O’Neal, Mark Cuban, Stephen Curry, Post Malone, Serena Williams. The purpose of the BAYC assets starts from using the NFT as avatars, but more than that, an owner can become a member of the secret club, called the apes-only club, where many of the members are celebrities.

Having a BAYC NFT has other utilities, which include:

• You can use the apes for commercial purposes. Print it on shirts, mugs, etc., and sell them.
• Members have direct access to the BAYC merch. Whenever there are new releases, a member can sign in with their ETH wallet and verify their ownership, and be among the first to buy the merch.
• You have a say on what the funds are used for and what projects are funded. (Millions of the funds have gone to charities through these community initiatives).

Wrap Up

Blockchain technology has changed how people can process financial transactions irrespective of location, government rules, and financial background. Furthermore, the concept has expanded into other areas of life, work and business. One of those is art. Non-fungible Token (NFT) is a technology that allows identity to be added to digital art. Crypto punks is one of the platforms championing a modern way to appreciate arts, creating opportunities, and expanding the use cases of NFT technology.