NFTs Are Mysteriously Disappearing, Here's How
Non-fungible tokens have become a great source of earnings for many crypto investors around the globe. NFTs worth millions of dollars are being traded in online marketplaces like OpenSea and SuperRare every month.
Cryptocurrency experts explain that NFTs are maintained on a decentralized Ethereum blockchain ledger in the form of unique digital codes, so they can not be replicated or altered within the blockchain. Surprisingly, this fact has led many purchasers of NFTs to believe that the NFTs stored in their digital wallets are safe forever, but this may not be entirely true.
In September 2021, property developer Tom Kuennen claimed that an NFT that he had purchased for $500 through the OpenSea marketplace, had gone missing from his wallet, along with the purchase history. Likewise, the $11 million-dollar NFT album sold by popular American DJ 3LAU in March through NiftyGateway went missing. Although a copy of it existed on NiftyGateway, the actual NFT asset is no longer discoverable online. It exists only on a centralized provider, and if that business were to go bust, the album would disappear entirely.
On top of this, in September of this year, a bug in the OpenSea token market caused the destruction and sudden disappearance of 42 NFTs, worth at least $100,000.
So why some NFTs are disappearing?
Before understanding how NFTs get lost you must understand how NFTs work. A non-fungible token can be anything ranging from jpeg images to digital artworks and short videos, and their value depends on the interest that people have in them. When a person buys an NFT, they are not getting anything an actual image, or even the rights to an image, but rather a digital code that points to a piece of media located somewhere on the internet.
The digital artworks themselves are not located or registered on the blockchain. Rather, when an NFT artwork is purchased, the buyer gets a cryptographic signature, or certificate, that points to an image hosted elsewhere. The actual item could be located anywhere on the internet, and the NFT effectively serves as a digital pass for that internet address where the media file (image, video, etc.) is stored.
Of course, the buyer also hopes that the NFT they are purchasing has some value, that there are other people out there who will pay for that cryptographic signature. In this way, the value of the NFT may rise.
NFT markets like OpenSea, Rarible, Foundation, Nifty Gateway, and many others also do not store the images themselves, they only display the media file linked with the code on the blockchain, therefore, they are just platforms for the display and trading of NFTs.
Ed Clements, a community manager for OpenSea explained how this works in an interview in Vice, saying that, "I use the analogy of OpenSea and similar platforms acting like windows into a gallery where your NFT is hanging,” he said. “The platform can close the window whenever they want, but the NFT still exists and it is up to each platform to decide whether or not they want to close their window.”
In case the media file for which you bought an NFT is deleted from the actual source or the URL to that source gets changed or broken, you may not be able to access your NFT. According to experts, this could also be the reason why some investors have been facing the “404, file not found error” while they look for their NFTs in their digital wallets.
In addition to being suppressed by a marketplace, an NFT can also be removed at source, if they violate the platform's terms of service, such as for copyright infringement. In this case, it would not display no matter where you looked for it. NFTs may also disappear if they are issued in an unreadable standard.
On top of this, if an exchange that sells NFTs shuts down, its files will disappear along with the company, and its bye-bye NFT.
Is there a solution?
Some tech enthusiasts believe that the distributed data sharing network IPFS (InterPlanetary File System) can solve the problem of NFT media storage. They suggest that through IPFS multiple users are able to host the same content, so the risk of losing NFTs in such a decentralized system is lessened. Instead of pointing to one location or file, IFPS points to a number of different copies of that artwork around the world.
Popular digital creators including Beeple who recently sold an NFT artwork for $69.3 million have already started to mint their NFTs via IPFS. However, tech experts argue that since IPFS is a content-addressing system, it does not ensure the permanent storage of user data. There is no guarantee a file can’t go missing on IPFS.
UK-based software engineer Jonty Wareing recently tweeted that, “IPFS only serves files as long as a node in the IPFS network intentionally keeps hosting it," adding in a follow-up, "Which means when the startup who sold you the NFT goes bust, the files will probably vanish from IPFS, too.”
Check My NFT, an open-source NFT tracking service has recently reported that NFTs have been found to have failed to load multiple times even on IPFS. This can also happen in case you uploaded some NFT media files and no one in the IPFS network finds them interesting enough to host. In such a scenario, your files will not be replicated on the network and they can go missing at any time.
In order to overcome these issues, some companies have introduced paid services that allow IPFS users to pin and keep their NFTs always available on the internet. Sam Williams, CEO of Arweave (a blockchain-based data storage company) claims that the paid hosting services for IPFS create a secure and sustainable system where users can put large amounts of data into a blockchain and have it replicated, essentially indefinitely.
However, despite such impressive claims, it is yet to see how IPFS and other NFT-related decentralized services prove to be effective against the storage-related issues that NFT users encounter.
Impact on NFT market
The disappearance of NFTs is a serious problem but the number of such cases is almost negligible in comparison to the number of NFT investors around the globe. So far, the bulk of NFT sales remain unaffected by any such issues. In fact, NFT sales continue to rise in a bubble-like fashion, reaching an all-time high figure of $10.7 billion in the third quarter of 2021.
Many crypto users believe that because the NFT market has just started to expand, it is likely to witness some glitches or problems, such as the sudden disappearance of some NFTs. However, with time, people will expect an improvement in the security features of the NFT blockchain.