Without decentralised storage your NFT is worthless
Introduction
The NFT fever pitch may have crescendoed, but this nascent market isn't going anywhere. This month alone has already seen 100k of NFT sales amounting to $57m recorded on nonfungible.com. We also saw last week the NFT sale of digital real estate for a staggering $913k on Decentraland, the Ethereum-based metaverse game.
So whether you think NFTs are part of the crypto future or just another ICO fad, it can’t be denied that big money is being poured into these digital assets. And with that money comes the assumption that these purchases hold real value that is undeniably owned.
In this blog post we’ll look at the often surprisingly shaky foundations these NFTs are sold on, which undermines their value and the very idea that you even own what you’re buying. But before we dive in, if you’re not familiar with what NFTs are, check out our blog post, The NFT Revolution – Reimagining Digital Assets.
First-generation NFTs
When most people buy an NFT, they probably think they’re buying the image, the original that is, that they see on a marketplace like opensea.io. But there’s an important aspect to what you could call this first-generation of NFTs that is often overlooked.
An NFT is mapped to an NFA – a non-fungible asset. The NFT is a unique address on the blockchain that maps to a unique asset, the NFA. So we see that what most people understand as their purchase is actually the NFA, the underlying asset mapped to the NFT.
Enter NFT metadata. Metadata describes the NFA. For example, if you buy a crypto kitty NFT then its metadata will contain the URL of the image, the name, creator’s name, description etc.
Metadata is what makes an NFT valuable, it is the glue between the token and the asset it represents.
Crucially, while metadata can be stored on chain, the storage costs are often prohibitively high. For example, storing an image of a few megabytes on Ethereum would cost you several thousand dollars.
NFT startups have to figure a workaround, and so these assets in the majority of cases end up being stored on centralised services like AWS, or on the InterPlanetry File System (IPFS). The IPFS is a distributed peer-to-peer system, but most of the time the data references an IPFS gateway that is hosted by the startup.
For example, an artwork sold by Beeple on Nifty Gateway was actually hosted by Cloudinary CDN served by Nifty Gateway’s servers. The NFT token points to a URL, which is not the media but a JSON metadata file hosted on the company’s server, and in turn points to where the media is ultimately located – in the example above, a third-party centralised service.
With these factors considered, I wonder if the owner of that Beeple NFT would really feel like they owned that artwork?
NFT rug pulls
It should be pretty clear by now that the way most NFTs are sold opens up the possibility that the people who buy them are exposed to multiple risks. If that startup goes bust, goes out of business, or for any other reason takes down, censors or loses the content, then your NFT is worthless as you can no longer access the metadata.
In the case of Cent, a startup selling Tweets as NFTs, there have already been cases of minted and sold tweets being deleted. The Twitter user @SLVTRMNDI claimed to have uncovered the first rug pull on Cent (and then went on to make that tweet an NFT on Cent!).
An artist known as NeitherConfirm highlighted the issues surrounding NFT assets when he changed the images mapped to his NFTs from the portraits to pictures of rugs. Commenting on the move he noted, "As long as the value of your artwork relies on a central service you do not own anything."
In the world of fine art, an artwork is usually accompanied with a certificate of authenticity. This certificate is worthless without the artwork, but the artwork retains its value regardless. It just may be harder to resell. In the world of NFTs, the relationship seems to be inverted where the primary focus is on the sale of the certificate and the actual ownership of the artwork is overlooked.
The answer: permanent storage
Our mission at Akord is to empower people to truly own their digital assets. It’s why we’re looking into bringing a decentralised and permanent storage solution to Akord. We believe the good folks at Arweave have a strong antidote to the issues surrounding this hugely exciting new digital asset.
On Arweave, data is stored in a decentralised manner through the Arweave protocol. And it is made permanently available through an economic mechanism of storage endowment. In their own words: "Arweave is designed to permanently store virtually unlimited quantities of data on-chain." This effectively means your data would never be held by one central service and could in theory be accessible forever, or as long as the web lives.
Storing data in this way has a profound effect for how we own NFTs and all our digital assets. A trustless, severless and censorship resistant means to store and access your data anytime and anywhere. And on Akord we wont stop at just your PDFs and NFTs, we want to take all your encrypted messages on Akord and store them in the same decentralised fashion.
The NFT space is just beginning to reveal to us its full potential. While use cases are primarily focused on digital arts and gaming, over the coming years there will be a proliferation of creative uses for NFTs. We plan on equipping Akord with all the tools people need to leverage the creative possibilities NFT technology offers.
