NFT 404: There’s a Glaring Problem with Non-Fungible Tokens

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Art – outside the traditional auctions of classical works – is hard to market online. Digital files are able to be infinitely replicated, and sharing a jpeg doesn’t lose the original’s aura like a scan of a painting might. Since NFTs (non-fungible tokens), that’s all changed.

NFTs have made art a valuable commodity in the online arena- valuable to top-tier creators (mostly in the dominant ‘quirky characters’ genre), but also valuable to buyers, who routinely drop thousands to add apes, aliens, skeletons and dogs to their portfolios.

Punk 7804 bought for 4,200 ETH ($7,566,173.88 USD) by 0xf4b4a5 from 0x03911f. https://t.co/0aatHjfooI #cryptopunks #ethereum pic.twitter.com/TrMgPUK0Hn

— CryptoPunks Bot (@cryptopunksbot) March 11, 2021

With prices like that, and these, it’s shocking to realize – especially when part of the selling point is that the transfer of ownership is cryptographically verifiable and branded forever on the blockchain – most NFTs are built on unstable foundations.

The current NFT model is bugged

NFTs are fragile because while the metadata may be stored forever, the asset itself is likely not.

One famous case of en-masse NFT loss is NiftyMoji, where an exit scam that involved taking the central servers offline vanished the assets themselves in the process.

In more modern times, cryptopunks as an obvious example again – the master list of punks is stored as punks.png on Larva Labs’ website, in turn is hosted by centralized VPS company Heroku. When a collector buys a punk, they buy a hash of the master image and an ID that references that punk’s position in the master grid – an image hosted in one place.

Why, though, are the original images of the punks not stored irrevocably on the blockchain?

The answer comes down to price. It costs over $1,000,000 to store a gigabyte of data on Ethereum, and while the master grid of punks would cost just under $1,000 to store, it’s still not viable from the outset unless a creator is certain they’re going to profit.

The most on-the-nose example of NFT fragility comes from artist neitherconfirm – the famous rug pull, where the artist changed media files referenced by 26 of their auctioned artworks to stock photos of rugs. “It is pretty easy to change the jpg, even if it does not belong to me or it is on auction. I am the artist, my decision, right?”.

All discussions about the value of NFTs are meaningless as long as the token is not inseparable from the artwork itself. pic.twitter.com/iUKoUrWlat

— neitherconfirm (@neitherconfirm) March 9, 2021

While we might be able to trust that most artists won’t remove or alter the original asset, we shouldn’t trust that the files which NFTs reference – files stored by the artist or by centralized servers – will be around forever.

Almost a third of links shared on social media are dead two years later. Over 20 years, that goes up to 98.4%. This rate of decay makes it it an eventuality that collectors may in the future be owning a gallery of 404s.

What’s actually being done to safeguard NFTs?

Some major marketplaces still simply store assets on centralized providers by default – Binance Featured uses AWS, and Rarible simply offers a link field for the asset’s location in the cloud.

An OpenSea announcement from June 17th 2021 states that the marketplace will now provide the option for artists to attach decentralized metadata to NFTs via Arweave. This means the media file an NFT points to can be stored permanently and immutably on the blockweave. OpenSea will also provide a way for buyers to see if the NFT’s metadata is frozen, making it easier to tell if an NFT will truly stay the way it was bought forever.

For the largest NFT marketplace to support data permanence is a big step in the right direction and an important course-correction away from using pure Ethereum to (not) store assets. OpenSea’s announcement doesn’t make it the first marketplace of its kind, however. There are several places to buy NFTs which use Arweave permanent storage:

• • WENEW. Founded by beeple and announced late June 2021, WENEW is an Arweave-based NFT marketplace dedicated to minting iconic historical moments. The store’s current only collection is moments from Andy Murray’s 2013 Wimbledon victory.
  • Pianity. A music-focused NFT marketplace leveraging Arweave storage – “on Pianity, your CryptoArt is inseparable from the Smart Contract. They both live together on the blockchain, forever”, the FAQ reads.
  • Mintbase. Uses NEAR for transactions and allows artists to use any smart contract or storage service they choose – focused on not locking their creators and audience into one platform, instead providing greater freedom of choice.
  • universe.xyz. Underpinned by the native $XYZ token and governed by the xyzDAO, universe.xyz is a a trustless decentralized auction house which only charges fees on resales. Still pre-launch but has a public whitepaper and is currently running its first drop of Polymorph NFTs.
  • KodaDot. A carbonless NFT marketplace built on top of Kusama using IPFS and Arweave for storage. At the time of writing, KodaDot uses ipfs2arweave and covers storage costs for users. Although, a native Arweave integration is in the works.
  • koi.rocks. Based on the Koii protocol, koi.rocks has a unique take on NFTs. While the marketplace feature (facilitated by Verto) won’t be available until it’s out of beta, creators can earn KOI each time their NFT is viewed. Minting an NFT requires both AR and KOI tokens.

• CheckMyNFT. Not a marketplace but also worth a mention – an NFT rating tool which assigns a safety score to ERC-721 contract IDs and provide backups if the NFT isn’t as secure as it could be.

Individual creators are also using Arweave for permanent storage. Gary Vee revealed on Twitter that his VeeFriends NFT collection is stored on Arweave. Kevin Abosch has uploaded works like Black Potato Yellow #2 to Arweave via koi.rocks and hosts 1111 on the Arweave permaweb via OpenSea.

Notably, creator of the world wide web Tim Berners-Lee stored the source code for the NeXT browser on Arweave as it headed for auction as an NFT on Sotherby’s.

In a personal letter offered in the repo, Berners-Lee writes, “As people seemed to appreciate autographed versions of books, now we have NFT technology […] I have never once felt I could relax and sit back — as the web was and is constantly changing”.

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