# From NFT 1.0 to NFT 2.0: A Review of the Evolution of Non-Fungible Tokens
## 2 Background and Preliminaries
### Non-Fungible Tokens (NFTs)  
NFT stands for non-fungible token [8], and they are used to identify digital or physical assets uniquely. Tokens are cryptographic assets on a blockchain, and they have unique identification codes to distinguish them from each other. Traditional cryptocurrencies (e.g., bitcoin or ether), are like fiat currencies, meaning that each token of the same currency has the same value, making them fungible. Instead, each NFT is unique and irreplaceable. The meaning of their non-fungibility is that one NFT can not be equal to another. Additionally, NFTs can not be divided or merged [30]. For all these reasons, they present unique properties.  
NFTs enable a variety of new use cases and application scenarios, such as digital artwork, virtual gaming assets, and software licenses. In particular, it makes possible the tokenisation of individual digital or physical assets, which is not feasible with fungible  
\begin{table}
\begin{tabular}{l l l} \hline \hline
**Acronym** & **Decide Block Creators** & **Confirmation Time** \\ \hline PoW & Solve a computationally hard problem & High \\ \hline PoS & Stake cryptocurrency to have a chance & Medium \\ \hline DPoS & Staking gives rights to vote & Low \\ \hline LPoS & Mix of PoS and DPoS & Medium \\ \hline PoA & Chosen by an authority & Low \\ \hline PoSA & Authority choses from a pool of DPoS-elected nodes & Low \\ \hline PoH & Compute a sequence of values & Medium \\ \hline \hline \end{tabular}
\end{table}
Table 2: Comparison of the blockchain consensus protocols.  
tokens. Table 3 summarises the most important differences between fungible and non-fungible tokens.  
As concerns the idea for NFTs, it was generated from 'Coloured Coin' [31], initially distributed on the Bitcoin network. Coloured coins are tokens that represent real-world assets and can be used to establish the ownership of anything [32].  
In 2014, Counterparty, a peer-to-peer distributed financial system built on the Bitcoin blockchain, was founded. Counterparty is an open-source protocol that allows users to create new digital tokens and establish smart contracts that are performed within the Bitcoin blockchain. Spell of Genesis was the first game built using Counterparty. It was only in 2016, with the release of Rare Pepe NFTs [33] on the Counterparty platform [31], that the concept of NFTs started being applied to pictures and digital art.  
Thanks to the introduction of the Ethereum blockchain in 2014, a set of token standards was introduced to allow the creation of NFTs by developers. Rare Pepes started to be exchanged on Ethereum in early 2017, and later on, other important initiatives were proposed. Two of the most famous are Cryptopunks and CryptoKitties [34]. Cryptopunks is one of the earliest examples of NFT deployed on top of the Ethereum blockchain. Although these NFTs do not follow any token standard, the developers of the ERC-721 (Ethereum's Request for Comment) standard took deep inspiration from the Cryptopunks smart contract for the definition of the standard. Cryptopunks NFTs consist of 9999 algorithmically generated portraits that can be collected or used as profile pictures. CryptoKitties NFTs are instead fully-fledged ERC-721 compliant tokens. They are a virtual game that lets players adopt, breed, and trade virtual cats using Ethereum. There are already more than 2 million Cryptokitties NFTs circulating on the Ethereum blockchain [35].  
Between 2018 and 2022, NFTs slowly moved into public awareness before exploding into mainstream adoption in early 2021, mostly via NFT gaming and metaverse initiatives [36].