Published May 22, 2023
While FTX NFTs and other closed platforms have revealed that an on-chain token cannot guarantee the security of art, there are effective measures for safeguarding NFTs.
The world of NFTs is notoriously unpredictable, and collectors have spent years building up valuable generative art and digital assets.
Unfortunately, they are now facing the harsh reality that everything they've worked for could be lost in an instant. Imagine the chaos that would unfold if a major NFT marketplace suddenly announced its bankruptcy, leaving all NFTs on the platform inaccessible if shut down.
With only vague customer support responses to rely on, panicked users would be left scrambling for solutions. Don't let this be your fate – take steps to protect your NFT investments now.
Looming Danger
Recent events have demonstrated the unsteady foundation upon which NFTs operate. The shutdown of FTX NFTs and social token platform Rally have amplified concerns about trust and security, while hacks and exploits continue to compromise the value of NFTs for unsuspecting holders.
Experts warn of a record-breaking year for cyber attacks.
Sebastien Badault, the VP of Metaverse at Ledger, predicts that this year's hacking attempts will surpass any previous year. This trend will continue indefinitely as even industry pioneers become victims and suffer the loss of their hard-earned collections.
It's crucial to prioritize cybersecurity measures to protect valuable assets.
As the risks to collectors' assets increase, more and more blockchain companies are stepping up to provide solutions for protection.
While some may see InterPlanetary File System (IPFS) or on-chain collections as foolproof storage methods, this is not always the case. Maintaining these systems comes with ongoing fees, putting assets at risk. It's crucial to remember that in the dynamic world of Web3, blockchain assets are never entirely safe.
The Challenge of Storing NFTs
New research from YourNFTS and ClubNFT reveals that only 10% of NFTs are stored on-chain, with 50% relying on IPFS and 40% using private servers.
While this is cause for concern, the real problem lies in the potential loss of artwork if marketplaces collapse. If the artwork is stored off-chain, a server shutdown could result in broken links and lost NFTs.
During the crypto crash of 2018, FTX NFTs and other platforms such as Ascribe, RARE Art Labs, Editional, and Digital Objects closed.
The NFT market is at risk as 40% of Ethereum-based NFTs rely on external servers, making them susceptible to breaking.
This could have a significant adverse impact, given that last year's sales alone amounted to almost $25 billion.
Collectors may opt to use platforms such as IPFS, but it too comes with risks. If images are not paid to be pinned on IPFS, they may be removed in a periodic cleanup to reduce redundant data.
Collectors must take responsibility for safeguarding their NFT files by either pinning them to IPFS or creating local backups, or both. However, these methods can be technically challenging, and as a result, many collectors fail to invest the necessary time.
Unfortunately, an independent academic paper published in 2021 by UC Santa Barbara reported that between June and December of that year, 3.91% of IPFS-hosted image assets and 9.04% of metadata records vanished. An updated analysis of assets bought and minted in 2022 is currently underway.
Although there are challenges, a research paper highlighted that IPFS is still a superior alternative to private servers.
On the other hand, the same paper revealed that missing NFTs that are not hosted on IPFS resulted in a staggering revenue loss of $160,761,805 from 118,294 transactions.
The study recommends that creators and collectors continue to use IPFS to store NFT assets and metadata, not just for Ethereum NFTs but also for NFT-like assets on Bitcoin-supported chains that are not fully protected when stored solely on-chain.
As cautioned by Joe Looney, creator of the Rare Pepe Wallet, all NFTs are at risk of losing their associated media, regardless of blockchain, if the media is not stored directly on the same chain as the NFT was created.
Where Do We Go from Here?
Artnome, otherwise known as Jason Bailey, is a highly respected influencer within the NFT community. His compelling pieces published in 2017 and 2018 provided a launching pad for countless artists and marketplaces, including KnownOrigin. He also teamed up with the creator of CryptoPunks, Larva Labs, to introduce the Autoglyphs generative art endeavor in 2019, cementing his reputation as a visionary in this space.
Inevitably, a few startups emerge as the leaders in their industry, while the others either close their doors or get bought out by larger corporations. This mirrors the trend of people preferring to use YouTube for videos or Amazon for online shopping, rather than relying on multiple websites.
NFT Marketplaces are shutting down and NFTs minted on those platforms are breaking, warns Bailey.
The recent example being the FTX NFTs that broke when FTX shut down. This is just the beginning and many more marketplaces are expected to follow. However, solutions and alternatives are emerging to address and solve these challenges. Here are some examples:
#1 ClubNFT
Bailey, endowed with practical knowledge on losing valuable assets on the RARE Art Network, believes that the NFT industry poses a significant risk. Therefore, he teamed up with engineer Chris King to co-found ClubNFT in 2021.
ClubNFT is dedicated to developing state-of-the-art tools that ensure the durability of NFTs stored on IPFS. The company launched its cutting-edge backup tool in June 2022, which has since backed up over 6,000 portfolios, containing over 800,000 NFTs and almost 3.5 million IPFS files.
ClubNFT's mission is to safeguard artists and collectors from market forces that could compromise the safety and longevity of their NFTs.
To that end, ClubNFT provides a free analysis tool to help collectors locate their NFTs' storage points. This tool uses an "X-ray view" to scan all files and create a comprehensive backup, ensuring the protection of IPFS NFTs.
Discover more venues for NFTs beyond Ethereum through a collaboration between ClubNFT and fxhash. Created by generative artist and developer Baptiste Crespy, known as ciphrd, FXHash offers an open avenue for code-based Tezos-based generative art creations, collections, and curations.
The platform has reached an impressive milestone: over 1.2 million one-of-a-kind generative art NFTs have been minted and collected so far.
With more than 20,000 projects created by talented generative artists, we know the value of accessible tools for art creation and collection. That's why there’s an integrated backup service, which provides a high degree of redundancy, ultimately safeguarding irreplaceable digital artworks.
Ciphrd highlights the importance of this integration and how it benefits the creative community's work.
Bailey asserts that their foremost priority is to educate and shield collectors from market collapses. Given this, they’ve taken proactive steps to ensure that collectors are fully equipped with the necessary tools and knowledge; however, they believe that once the simplicity and efficacy of our tool are experienced, collectors will lament not utilizing it sooner.
#2 Arweave
Founded in 2017 by Sam Williams, Arweave is a decentralized storage network that offers a permanent and cost-effective storage solution for your data.
Arweave uses a unique approach called "blockweave," combining blockchain principles and a proof-of-work model for a secure and efficient storage system. It stores data across a distributed network of nodes, like IPFS and other decentralized storage networks.
Arweave is a reliable and secure storage solution that ensures permanent storage of data through its consensus algorithm.
Unlike IPFS, Arweave continuously mines new blocks and attaches them to the end of the "blockweave", creating a tamper-proof network.
By paying a one-time fee, users can store data on the network indefinitely, eliminating the need for recurring fees for storage. Arweave's unique model provides peace of mind knowing that once data is stored on their network, it cannot be deleted or altered, even by the network operators.
Although Arweave shares similarities with IPFS, it operates with greater complexity. Several crucial factors, such as a stable token value and the viability of running an Arweave node, ensure the safety of stored data. However, a notable concern with Arweave is the lack of user control over data safety.
Arweave's integrated blockchain technology makes traditional backups redundant.
This is because the unique transaction ID is used to access data, rather than a verifiable hash of the file. If data is lost on Arweave, it cannot be reuploaded to the same transaction ID, resulting in a permanent broken link.
#3 Akord
Despite the risks, countless users continue to choose Arweave as their go-to permanent web solution. However, due to the technical challenges involved in paying and storing files on the Arweave blockchain, more novice-friendly alternatives have recently surfaced, the likes of which include Akord.
To explain simply, Akord is a secure storage and publishing protocol specifically designed to streamline the Arweave experience. With Akord, users can effortlessly create vaults and public or private folders on the blockchain, and receive an initial 500MB worth of free data.
Akord's manifest feature simplifies information management by mapping user-friendly names to files and contents within a vault.
Like an ENS domain for Ethereum wallets, manifests use intuitive naming conventions (e.g., /foldername/myphoto.jpg) instead of long hashes to refer to files. While they can also store NFT metadata, the primary purpose of manifests in Akord is to organize stored data, making information retrieval easy and efficient.
#4 Filecoin
Filecoin is the cryptocurrency that rewards a worldwide network of computer operators to create an affordable, censor-free file-sharing and storage solution. It operates via IPFS and stands apart in that it compensates miners, whereas IPFS does not.
Streamlined and powerful, Filecoin offers competition to other protocols like Storj and Siacoin.
Content addressing is a complex topic, as explained by Protocol Labs Director of Engineering, Jimmy Lee. However, it's imperative for individuals to understand that their data is unique and has its own signature.
By implementing content addressing, people can ensure that they are not deceived when seeking specific information. Once this concept is grasped, it becomes easier to navigate and comprehend.
Lee stresses the significance of safeguarding digital art to prevent loss.
He recommends decentralized storage networks as a solution, providing fault-tolerant and hack-resistant storage with a global network. Lee draws a comparison between physical collectibles and digital ones, as both require significant measures to ensure protection.
Filecoin can accommodate up to 20 exabytes of storage capacity, and has the ability to replicate NFT data globally. Although it may not be as extensive as Amazon AWS, which can handle over 400 exabytes, Filecoin offers a reliable and safe approach to safeguard your valuable data.
This way, you know exactly what machines your digital assets are on and how to protect them for the long haul.
Final Thoughts
At the end of the day, it’s important for us to take precautionary action to ensure the security and safety of our digital assets.
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