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Do You Really* Own Your NFT? Chances Are, You Don’t

Screen Shot 2021 03 31 at 2.20.06 PM

NFTs have been pitched as a radical, new form of digital ownership detached from the whims of centralized companies. Unlike digital goods in mobile games, which are traditionally tied to the lifespan of a games’ server, NFTs are said to be truly “ownable.” In other words, as long as you own the token, you own the art. 

Unfortunately, the truth isn’t that simple. Many NFTs are more centralized than collectors realize, which means that true “ownership” is not necessarily a given.

Data Storage Problem

Despite NFTs being “decentralized,” most of the primary NFT marketplaces, including Nifty Gateway, SuperRare, Rarible, and OpenSea, have centralized elements  akin to any other webstore. 

When you buy an NFT, the token itself is stored on the blockchain, but because on-chain storage of large files is very expensive, the art or media that the token correlates to is usually stored off-chain. 

While the token portion of NFTs are fundamentally decentralized, the storage method for the metadata and media that an NFT hashes to is determined by the platform or artist who mints it.  So depending on the chosen storage method, the media aspect of many NFTs may hinge entirely on companies maintaining centralized servers. 

This is a problem for collectors who want to be sure that they still own their NFT even if the centralized company that minted it stops operating.

Recently, an NFT-skeptical programmer named Jonty Wareing wrote an in-depth thread on Twitter delving into where the media referenced by NFTs actually lives. 

He discovered that typically, the token will point off-chain to either an HTTP URL metadata file or an IPFS hash.

URLs

Since HTTP URLs are location-based (ie: they link to a specific site where the owner controls the data), they are centralized by nature. 

NFTs that hinge on HTTP URL metadata files can never be truly “ownable” in a complete form as they will always rely on the issuing organization continuing to operate their server.

Using the example of Beeple’s “Crossroad” minted on Nifty Gateway, the token points to an HTTP URL hosted on Nifty’s servers that contains Crossroad’s metadata. The metadata text points further to another HTTP URL that contains Crossroad’s actual visual media, which is hosted on a cloud-based media service, but still served by Nifty’s servers. 

(Crossroad’s metadata hosted on Nifty)

(Crossroads page on Nifty)

This means that if Nifty were to ever go out of business and shut off its servers, the owner of Crossroad’s NFT would really just be left with a token referring to a dead HTTP URL. Both the metadata and the image attached to the NFT are reliant on Nifty’s continued operation.

Nifty leadership did not reply to a request for comment. 

“Interplanetary” Storage

IPFS, or InterPlanetary File System, is a protocol for sharing and storing data centered around a decentralized peer-to-peer network. This allows for content-addressable storage (CAS), which means that content itself can be hashed (cryptographically encoded) and referenced. 

Think of it like this. Whereas traditional URLs are like telling someone to watch a specific movie at a specific theater (ex: Go watch The Godfather playing at AMC), content-addressable storage is like telling someone to just watch that movie in general (ex: Go watch The Godfather). The former requires permission from AMC; the latter simply requires the movie to exist, with the understanding that anyone who watches The Godfather anywhere will be seeing the same exact content. 

Theoretically, media stored using CAS via a protocol like IPFS can be completely decentralized while still being verifiable and inalterable. But reality isn’t that simple.

IPFS Nuances

Files hosted on IPFS must be hosted intentionally by a node in the IPFS network. Major, centralized NFT markets utilizing IPFS for storage currently act as the node intentionally hosting those files through their own private gateways

This means that even if an NFT references directly to media stored on IPFS, that media still might be reliant on a specific centralized marketplace’s IPFS node staying online.

Take, for instance, Beeple’s “Everydays: The First 5000 Days,” which sold for $69M through Christie’s and was minted on MakersPlace.  

Here, the NFT references metadata reachable through a public IPFS gateway, meaning that it is likely safe regardless of whether or not MakersPlace stays in business. The image reference, however, is stored through MakersPlace’s private gateway. So if MakersPlace ever stops hosting their IPFS node, there’s a good chance that the “Everydays” NFT token will refer to confirmed metadata, albeit for an image that can no longer be reached. 

The question remains whether or not the token linking to that metadata alone would still be worth $69M.

Not All NFTs

To be sure, not every NFT is in a dire situation. 

A number of high-profile NFT projects, including Avastars and Art Blocks, have been designed to live entirely on-chain, meaning that storage of both the metadata and visual media aspects  are completely decentralized. In short, NFT projects that live entirely on-chain allow for the purest form of digital “ownership” that NFTs have always promised.

(Avastars)

NFT42, the team behind Avastars, has even launched a new NFT minting platform, InfiNFT, capable of minting completely decentralized NFTs with on-chain metadata and image storage.

Unfortunately, full on-chain media storage isn’t cost-effective in many circumstances, especially for NFTs correlating to larger media files, so the majority of NFT projects need to find workarounds if they want to ensure the longevity of their products.

Off-Chain Solutions

In light of community concerns about NFT decentralization, Hashmasks announced that they added metadata of the IPFS URLs and explicit traits of all 16,384 masks on-chain. 

(Hashmasks)

Now Hashmasks owners don’t need to rely on the Hashmasks website for the IPFS image locations, as those links are permanently on-chain. Hashmasks images themselves, however, still faced the issue of living on IPFS through a node hosted by Hashmasks. 

Thus, Hashmasks is now also storing all of their images on Arweave.

The New Wave

Arweave is a decentralized data storage system that aims to permanently sustain information storage by financially incentivizing users to back and store as much data as possible with storage endowments rewarding those who contribute space. In other words, the more data a user backs and stores on Arweave, the more they profit.

Arweave also bridges to IPFS and offers incentives for IPFS pinning, essentially encouraging users to double-store information through both Arweave and IPFS. 

Manuel Alzuru, the founder of upcoming social NFT marketplace DoinGud, is also looking towards Arweave as one potential solution for long-term media storage.

“Most projects in the NFT space started as experiments and had to sacrifice their infrastructure for ease of development and limited tools, causing the media in these NFTs to be hosted in centralized servers or on IPFS where node operators have to be incentivized in order to keep storing the media,” said Alzuru. “We at DoinGud are exploring different alternatives like the permaweb to achieve permanent storage for the media attached to the NFTs ensuring a more resilient infrastructure.”

Arweave, Filecoin, Pinata

Arweave isn’t the only start-up building upon IPFS with the aim of sustaining long-term data storage. Other players include Filecoin, which essentially allows users to rent or lease decentralized storage space, and Pinata, which provides accessible UX for anyone interested in opening an IPFS node and managing their own data storage.

Aleph, a cross-blockchain layer-2 network, is also working on a potential NFT media storage solution.

“Currently, I am working on a tool that will help to ‘save’ a snapshot of an NFT data on the aleph.im network,” said Aleph CEO Jonathan Schemoul. “If current data is on IPFS, then good, we can pin them, and infer new gateways (as long as we have an IPFS hash and path) if ever needed. If not, we do a snapshot, the owner/creator/any user does it himself, and we can have witnesses that do the same job and compare it.”

For Hashmasks, utilizing Arweave and IPFS pinning incentivization ensures that their image storage will theoretically have a great deal of resiliency even if their own servers were to shut down.

But Arweave is still a newer start-up, and the long-term viability of their incentivization model is unproven. 

To truly ensure the sustainability of Hashmasks NFT media files, owners must pin their own Hashmasks to their own IPFS nodes.

Responsibility of Storage

Of the various IPFS-focused start-ups, Pinata, in particular, is geared towards NFT owners who want to take the permanent storage of their art investments into their own hands. On top of offering accessible management tools for anyone who wants to host their own nodes, they also allow users to pay Pinata for the service of continually pinning an NFT’s media on IPFS directly.

Elpizo Choi, the head of engineering at the NFT marketplace Foundation, envisions a future where creators and collectors will take an active role in storing their NFT-related assets.  

“Foundation NFTs are hosted on IPFS…[where] data will stay available on the network as long as someone pins the file or pays for pinning,” Choi told The Defiant. “Foundation currently takes on this role via Pinata, but see a future where creators and collectors do this directly on incentive networks like Filecoin and Arweave as these ecosystems mature.”

As Kyle Tut, the co-founder and CEO of Pinata wrote on Medium: “Is Da Vinci responsible for maintaining the Mona Lisa today? Of course not, that would be the Louvre. At Pinata, we believe that when NFTs are sold, there needs to be a clear understanding of how and when the maintenance responsibilities of the NFT data transfer.”

Ultimately, in the same way that a trading card collector is responsible for saving their most valuable cards in sleeves and binders, NFT collectors will eventually be responsible for maintaining the visual media and metadata of any NFTs with off-chain aspects.

Moving Forward

For some dedicated collectors, maintaining their own IPFS nodes may be the best option. For others, it might mean utilizing services like Pinata to continually pin their NFT’s media.

But for these storage options to be viable, the NFT must be minted in a way that allows for IPFS options. NFTs linking to centralized URLs, like those on Nifty Gateway, are essentially ticking time bombs.

One potential solution for older NFTs linking to centralized URLs could be for those centralized marketplaces to allow owners of those tokens to burn and re-mint them with IPFS functionality. But that’s likely easier said than done. 

As it stands, aside from NFTs where all the assets are fully on-chain, the “centralized” NFT market will likely experience some major growing pains in sustainability and permanence. Still, the space is more active than ever before and solutions are on the way.

The sooner centralized NFT marketplaces address and embrace change, the better.

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