05.03.2024

NFT tokens may disappear. How can the owners not lose them?

In early March, the artist under the pseudonym 3LAU sold his album, backed by a unique NFT token. He did it on the NiftyGateway platform, and the deal amounted to $ 11 million. But the problem is that the original work of the musician can no longer be found.

You can download a copy of the album, but the original digital product does not exist. It turns out that the trend of unique tokens has a flip side of the coin – this is a serious flaw that needs to be urgently corrected.

NFT tokens are the main trend of the beginning of this year in the world of technology. They uncover the benefits of blockchain and make them available to new industries. In this case, we are talking about digital art, which the blockchain allows to confirm the ownership of it.

In general, the logic is simple: information about a specific subject is tied to a unique token within the blockchain. Since the latter is immutable, it is simply impossible to fake data or appropriate a coin to yourself. Instead, investors receive protection from fakes and the ability to easily prove that they own a particular item. We discussed the NFT topic in detail in a separate article. We recommend that you familiarize yourself in order to understand the essence of what is happening in the niche.

There are many examples of unique work involving NFT. Among them, there are also branded drawings from the 2Miners mining pool, which depict the main characters of the world of cryptocurrencies like Vitalik Buterin or the Winklevoss brothers.

To admire them and get acquainted with the details of the process of creating an NFT, follow the link.

Disadvantages of NFT tokens

When we talk about NFT, we usually talk about tokens created using the Ethereum network standard called ERC721, while other blockchains also have a similar standard. Tokens can be physical property such as a house or artwork, or they can be virtual collectibles such as digital trading cards or even video clips of flashy NBA events.

However, in most cases, the NFT is actually just a smart contract, meaning content and metadata are kept separate from the object itself . This is mainly because it is too inconvenient and cumbersome to store it on the Ethereum blockchain, Decrypt reports.

After purchasing an NFT, you must make sure that all information about the token and its relationship with a physical object or digital code is safe. There are several ways to lose or change a purchased NFT. First, a token with a smart contract may not link directly to an asset. The asset could also be held by a centralized provider like Cloudinary used by NiftyGateway, which could eventually shut down its servers. Second, the NFT can simply refer to a URL, the information from which is in fact easily modifiable by outsiders.

In other words, when you buy NFT, you have two components in your hands: a smart contract and the metadata itself associated with the object. A smart contract is located and executed on the Ethereum blockchain, but everything else is most often stored on a centralized source. If any problem happens to it, the fact of the “uniqueness” of the NFT and, in fact, the entire value of the token will be completely lost.

How can this problem be solved? Experts recommend using a combination of IPFS and Arweave. The first is the interplanetary file system, that is, a peer-to-peer communication protocol, and the second is a crypto startup that can provide permanent storage of information in IPFS on a decentralized basis. Only then can the owner of the NFT receive an almost one hundred percent guarantee that nothing will happen to the collectible he has purchased.

nft cryptocurrencies blockchain

NFTs sold for more than 200 thousand dollars

We believe that such problems are a consequence of the youth of this niche. And although the CryptoKitties cryptocurrency cats have existed since 2017, it was in 2021 that the NFT sphere began to be massively popular. So she has a lot to develop – as well as problems that need to be addressed.

So in this case, users need to wait until the creators of trading platforms get rid of possible risks. Fortunately, so far the cases of loss of digitalization objects are isolated. Therefore, most likely nothing will happen to the purchased works.

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