- An NFT is nothing more than a link to an asset hosted somewhere online
- Not many people realize that the link is embedded on the blockchain, not the asset
- These assets are in no way permanent and can disappear for a variety of reasons
The NFT gold rush may be over (or at least this one is), but there are still billions of dollars of volume traded on NFTs on a weekly basis. Hundreds of thousands of blockchain addresses hold NFTs, but what these holders don’t know is that their NFTs could outright die with no warning and they would have no recourse to complain. But what is this blight that threatens to cut a swathe through the NFT-buying community? That famous digital death-bringer… storage.
What Your NFT Is…And Isn’t
Before you find out how your NFT can die, let’s remember what an NFT is – or more importantly, what it isn’t. An NFT is not a digital asset, it is a link to an asset somewhere on the internet that someone else has created and that lets you do certain things with it. If that asset were to disappear, then so would the value of the NFT.
Think about a bookmark on your browser – if the website it links to goes down, the bookmark is now useless. The only difference is that the bookmark hasn’t cost you $100,000.
But surely assets used to create NFTs are on the blockchain, and blockchains are immutable, so they can’t just disappear? Wrong. The majority of assets behind NFTs are stored on centralized servers, be it the laptop of a photographer wanting to earn a few extra bucks to a full blown NFT game using Amazon Web Services to store its assets. The asset stays on the server and only the link goes onto the blockchain, and because centralized servers have a single point of failure this puts the whole thing in jeopardy.
Hackers, Hard Drive Failures, and Hokey Projects
All this means that your NFTs could die in any number of ways – for example the owners of the assets could intentionally or accidentally delete the images; the server or hard drive holding them could fail; hackers could gain access to the file system and wipe everything; or an NFT project could fall on hard times and may be unable to pay the bills for its web hosting services.
These eventualities, and others like them, are all possible with NFTs stored on centralized servers. All of them would lead to your cute dog, unicorn, or ape being replaced by a black screen or, if you’re lucky, a swirling blue ‘thinking’ circle. Remember, the only thing immutable about an NFT is the link – the rest is very mutable indeed.
Decentralized Solutions to the Rescue?
There are technologies that are helping to resolve this issue, such as IPFS (InterPlanetary File System) and FileCoin which increase the robustness of the underlying assets on the web, but these solutions still don’t offer the kind of permanence that NFT buyers crave, and indeed believe they are getting.
There are tools out there that can help you determine how at risk your NFT is, such as checkmynft.com, but in the end, the likelihood of your NFT becoming nothing more than an expensive broken hyperlink is down to the quality of the project and the people running it. CryptoPunks, Bored Apes, Moonbirds, and other blue chip NFT projects probably have better systems in place for protecting their assets, and enough money sloshing around that they can afford to pay their server hosting bills.
The risk comes with smaller NFT projects, much like it does with shitcoins, who might just pull the rug the moment they have either a) made enough money for the founders to retire or b) they realize the whole thing is going down the pan.
As with anything in the crypto space, the saying ‘caveat emptor’ is at the heart of the NFT-buying experience, and that nothing is permanent.