Lost NFTs: Let’s Just Admit it Happens, Then Fix the Problem

Lost NFTs: Jonathan Schemoul, founder of Aleph.im, tells us why we need NFT storage and backup more than ever before.

There’s a large elephant lurking in the room when it comes to non-fungible tokens (NFTs) – and that’s the fact that they can be “lost.”

The common assumption is that, because NFTs are ‘on a blockchain’ rather than a centralized corporate environment, they are a more secure and wholly ‘immutable’ way to store digital data. However, this is not entirely the case.

Many NFTs still use traditional “Web 2.0” architecture. The NFT metadata may be stored within a relatively distributed system like InterPlanetary File System (IPFS). But the majority of larger files accessible via NFTs – like the jpeg ‘connected’ to the NFT – are, more often than not, being stored on the servers of a distributed cloud storage provider like Amazon’s AWS. 

In addition, although IPFS is a key part of the way that NFTs exist, it is a relatively centralized system. For instance, your NFT metadata might only exist on a single node in the IPFS network. This makes it vulnerable to being taken down or hacked. In contrast, when data is truly stored on a blockchain, it is distributed and duplicated across many nodes, and thus is much more secure.

In other words, at this point in time, there is a high probability that many NFTs are not entirely ‘on-chain.’ This poses potentially disastrous consequences for NFT holders, who may often assume that NFTs are inherently secure. And many may end up confused by the reality that occasionally, NFTs do end up lost or stolen.

This issue is highlighted by the Twitter account @CheckMyNFT, which conducts random IPFS file audits of the likes of Nifty Gateway NFTs. In a recent audit, @CheckMyNFT found that musician 3LAU’s $11 million NFT album went missing. This incident serves as a sobering reminder of the importance of keeping your NFT data safe and secure.

Lost NFTs: Today’s NFTs are highly centralized

This centralized risk was highlighted in recent articles which pointed out that a staggering 70.5 percent of Ethereum nodes are running on cloud providers maintained by centralized entities like Amazon or Oracle, making them vulnerable to attack or failure.

Using only IPFS is actually far riskier, as it requires someone to physically host your data, rather than the entire state of nodes updating with every new transaction. Every IPFS node is a centralized point of failure, as your data may be hosted on as little as one node; often, centralized third-party pinning services are used to address the issues of persistence or permanence on IPFS.

IPFS has been trumpeted as a silver bullet to the blockchain data storage problem, but this argument vastly underestimates the lack of reliability and permanence when storing NFTs on IPFS. Any time you put your data in the hands of a third party, you are taking on a risk.

This is especially true in a multi-billion-dollar NFT industry, where digital assets are at risk of disappearing if the centralized storage provider (or pinning service) goes out of business or is hacked. While your NFT metadata will remain secure on the blockchain, your asset may be lost forever if the appropriate architecture is not in place.

So what can be done to mitigate the risk of data loss for NFTs?

One solution is to use a blockchain-based storage solution like Aleph.im, which has recently rolled out an NFT backup dApp designed to back up NFTs running on select blockchains. 

Aleph.im is currently integrated with Ethereum, Solana, and Polygon, with more blockchains going online throughout 2022. The backup dApp currently supports Rarible, Superare and OpenSea token contracts, but aims to expand support to all types of NFTs in the near future. 

The network provides a decentralized storage solution, akin to a decentralized AWS or decentralized Firebase, while also offering decentralized computing infrastructure. Considering the fact that many blockchain nodes themselves are still hosted via services like AWS, Aleph was created to combat these centralization risks with blockchain and blockchain developers in mind. 

The recently released NFT backup dApp opens up the network’s decentralized storage nodes to the average NFT holding consumer. This brings Aleph.im that much closer to becoming the de facto distributed storage solution for the entire blockchain industry.

Lost NFTs: Why backups are needed for mass adoption

Every day, over a billion people rely on centralized cloud providers like Google Drive, Dropbox, and Box to safely store their critical data. From personal photos and videos to work documents and client files, these services have become an integral part of our lives. But what happens if one of these providers suffers a major breach, or simply goes out of business? Your data could be gone forever, which is why the likes of Google and Microsoft spend countless dollars to ensure the integrity and security of their cloud storage platforms.

If you were to suddenly lose your life’s work because Google Drive went offline, you’d be understandably upset; this is why backups are critical in the Web 2.0 world. Web 3.0 takes backup just as seriously, but, with the layer of expected decentralization, the full manifestation of Web 3.0 stands to be more reliable and more efficient overall. Backups aside, a single centralized point of failure should not mean the end of anything in an ideal web 3.0 environment. 

Mass adoption is looming on the horizon. The hyped ‘rise of the metaverse’ upon us, and rare NFTs are fetching millions. So it is critical that NFTs and other digital assets are stored in an environment designed to eliminate any potential fear that would come from unexpected loss or breach.

While today’s Internet is largely static and unchanging, the ‘metaverse’ of the future will be a constantly evolving space, with new content and experiences being added continuously. These systems of the future will go beyond simply implementing reliable backup solutions. Ideally, there will be little to no risk and minimal doubt to consider in regards to the persistence and permanence of unique and valuable NFTs. In a world akin to Ready Player One, losing your digital assets could mean a lot more than restarting a game from the top. So it’s crucial that we have a way to safeguard them.

Thankfully, protocols are already solving these issues, beginning with the redundant backup of collectible NFTs. Ultimately, reliable decentralized infrastructure will keep data safe and sound, no matter what.

It’s up to token holders to be aware of the risks associated with centralized storage solutions and to take appropriate steps to protect their assets. By being vigilant and using reputable backup solutions, NFT collectors are already able to ensure that their tokens are permanently secured in a decentralized way.

About the author:

Jonathan Schemoul is the founder of Aleph.im, a cross-blockchain layer-2 network, specifically focused on decentralized applications and their related infrastructure (storage, computing, indexing, and security). Aleph.im aims to revolutionize the web by decentralizing distributed cloud computing and data storage architecture.

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