Why NFTs should be forever — but often aren’t
NFT artwork can literally “disappear” if you're not careful
You’d have to have been living under a virtual rock not to have noticed the incredible activity around Non-Fungible Tokens (NFTs). Over the past few years, the NFT market has progressed from a standing start to a 40 billion-dollar-a-year industry.
As Messari noted in their Crypto Theses for 2022:
NFTs are cool because they represent verifiably scarce, portable, and programmable pieces of digital property.
Eventually, we believe that NFTs will transform the world by allowing blockchain transactions to be associated with digital or real-world assets. But for now, the NFT market is dominated by the acquisition and trading of digital art and collectibles.
How an NFT connects to digital assets
Newcomers to the NFT space are often surprised to find that not all of an NFT resides on the blockchain. In fact, the blockchain entry that represents a specific NFT will usually have a “pointer” to a metadata document that resides somewhere on the internet. For instance, here’s the Blockchain record for a Bored Ape Club token, which recently sold for about $120K worth of Ethereum:
The contract address and various blockchain transactions involved in the token may well be of interest to programmers, but for most, the token “is” the ownership of the Bored Ape image. So the BIG QUESTION IS where, exactly, is that image.
In a well-crafted NFT, we can locate the image in two steps. First, we interrogate the token's smart contract to obtain the tokenUri:
In a “good” token, this URI will point to a location within IPFS (InterPlanetary File System). We’ll discuss later why IPFS is so important, but for now, let’s look at what is located at that IPFS address:
So we have a document (in JavaScript Object Notation) that contains attributes for the token (mouth type, eye type, etc) and — more importantly — another IPFS link for the image. If we go to the image link location, we find the Bored Ape picture:
So to get from the token to the image, we follow the tokenUri to the metadata then from the metadata follow the image tag to the image itself. Something like this:
What’s so important about IPFS?
We mentioned IPFS before but didn’t spell out why it’s so important. You can read up on IPFS in detail elsewhere, but the main thing to understand is that IPFS links will always point to the same data. That is to say, it’s impossible for the data that an IPFS link references to change. If the data changes, then the link must also change because the link is a “hash” of the data’s contents.
In the context of NFTs, IPFS is incredibly important because it prevents the digital assets associated with the NFTs from changing.
If I created an NFT that did not use IPFS, then I could sell you an NFT of the Mona Lisa and then later change the image to a picture of my cat! With IPFS, this cannot happen.
So what’s the problem?
There are a couple of things that can go wrong:
- Sometimes, NFT creators do not use IPFS or do not use it properly, resulting in NFTs that can be changed after creation by the creator at will, allowing for “rug-pulling” and/or fraud.
- IPFS links can never change, but they don't necessarily last forever. If no one accesses an IPFS link over time, then it can “age out” of the distributed IPFS network. You spend $100K on an NFT, store it safely in your wallet, then come back in a year to find your NFT points to a “File not Found” error.
The solution to these problems are:
- Creators need to ensure that they are using best practices when constructing an NFT.
- Creators need to “pin” media and metadata to IPFS using a service such as alwaysNFT.cloud.
- Owners can also protect their investment against negligent creators by registering their NFTs with alwaysNFT.cloud. We’ll keep the media and metadata safely on our servers.
Next time….
In the next post, we’ll look at some of the errors we’ve seen in a survey of about 400,000 tokens and discuss what you can do to ensure you only buy quality NFTs and how to keep them safe once you’ve got them.
alwaysNFT.cloud protects NFT metadata and media by permanently pinning off-chain NFT files to the immutable IPFS platform. For the first time, NFT owners can protect themselves against rug-pulling and loss of artwork by pinning their portfolio using alwaysNFT. NFT creators can use alwaysNFT to ensure that their NFT media and metadata never “goes missing” and thereby protect their royalty revenues.
Sign up for a free alwaysNFT account today at alwaysNFT.cloud
