Yes, your NFTs can “disappear” anytime.
From being named word of the year to becoming a romantic Valentine’s Day gift idea, NFTs have become more and more mainstream in the past year.
The surge in popularity of NFTs also brings up a pressing need to update yourself on everything relevant, such as how to save yourself from scams and how to avoid high gas fees. However, as an NFT owner or enthusiast, the most important thing to know is—how to protect your ownership over them.
You must be wondering—why would ownership ever be an issue? I mean, ownership is “baked” into NFTs, right? Correct. But what you probably don’t know is that when you purchase NFTs, you get directed to them and all their historical information via links. Links can die and leave behind that all too familiar “404 error” page. Confused? Let’s take a closer look at this problem and its possible solutions.
Where do the NFTs get stored? What’s the problem with it?
The 404 error is not a problem that affects a single NFT but the entire model of NFT sale and purchase. While an NFT’s metadata is stored in perpetuity on the blockchain, the actual asset isn’t. The reason is simple: it costs a lot of money to store images on the blockchain. For instance, to store a single gigabyte of data on the Ethereum blockchain, you would have to spend US$1.68 million.
Naturally, an artist would not want to spend this massive amount of money to store the images of their NFTs on the blockchain, as there is no guarantee that their NFTs are going to make it big. Thus, they use traditional uniform resource locators (URLs) instead. The problem with traditional URLs is that they can be easily hacked and edited. In March 2020, an artist by the Twitter username “Neitherconfirm” changed the JPEGs of their NFTs to images of rugs (like a literal “rug pull”) to show how unreliable NFTs can be.
The second issue with links is that links expire after a certain period of time. Almost a third of the links shared on social media are dead after two years. Moreover, if the website hosting the links goes under, they will break down as well.
How to secure NFTs, then?
A possible solution to the 404 error on NFTs is the InterPlanetary File System (IPFS). The IPFS is a file system with a distributed hash table (a decentralized data store). When a file is uploaded onto the IPFS, a content ID (CID) is created. A CID is a complicated set of hashes that contains details about where the file is located and its metadata. This system allows you to locate a piece of content as long as someone is hosting it somewhere on the IPFS network.
The system itself is not a data storage and does not provide permanent storage. Rather, it is a layer on top of data storage to help retrieve the content with its CID. Hence, it can prevent the dysfunction of links, but the problem of where to store the images of NFTs still remains.
There are other issues concerning the system as well. For instance, there have been instances where the files uploaded onto the IPFS would just not load and only show up once their absence has garnered significant attention. Naturally, the system would only be effective if the files were actively available on the network without a need for constant checking. But, with the IPFS, there is no single authority responsible for making that happen.
IPFS’s sister project, FileCoin, solves this accountability issue. It ensures that data is consistently present by writing and distributing files over a crypto network. It incentivizes individuals to host that data on the IPFS by paying them in FileCoin (FIL) tokens. However, there is no absolute guarantee that the FIL token would never go through a bear market, which might cause the downfall of the nodes on which your NFTs are located. In short, there is, at present, no “perfect” solution to the NFT storage problem despite these attempts.
To quote Geoffrey Huntley, the man behind NFT Bay (an index of the 20-terabytes worth of downloaded NFTs), “There is a gap of understanding between buyer and seller right now that is being used to exploit people.” The gap he refers to is the lack of knowledge not on NFTs but rather on the metadata that is preserved on the blockchain.
He says, “What people are buying when purchasing NFT art right now is nothing more than directions on how to access or download an image.” Huntley’s argument should tell you that there are questions you need to ask yourself when you make an NFT purchase. For instance, where is this NFT stored? How safe is that storage system? Does it have any backups? At the end of the day, it is crucial to make an informed NFT purchase and not get swayed by fancy technology or promises of proof of ownership.
Header image courtesy of Unsplash.
