penOpen up the $69 million NFT that Beeple sold at Christie’s, and you won’t find much. The name of the artwork isn’t there. The name of the artist is missing. And crucially, you won’t even find the actual piece of art.
That’s not a flaw in Beeple’s NFT — it’s just how the system works.
It turns out, the house of cards that is the NFT system is even more precarious than it first appears. NFTs are fundamentally built on trust — trust that a seller won’t screw you over, trust that these tokens magically have value — and that holds true even at the deepest level of the system. Ultimately, you’re buying a collection of metadata defining what you own.
But there’s one significant gap in the system ensuring that an NFT is held together: NFTs use links to direct you to somewhere else where the art and any details about it are being stored. And as anyone who has browsed the internet before should know, links can and do die. So what happens if your NFT breaks down and points to nothing?
“That’s an awfully expensive 404 error for buyers of these NFTs,” Aaron Perzanowski, a law professor at Case Western Reserve University and co-author of The End of Ownership, wrote in an email to The Verge
NFTs are digital tokens used to buy and sell digital art. But unlike a painting, which can be placed in a buyer’s home, an NFT is more like a piece of paper saying you own something — generally, a digital illustration or a video. Sometimes, a weird-looking cat.
The system usually relies on the Ethereum blockchain, which ensures a few things: it keeps an unalterable record of everyone who has owned the NFT, and it keeps the NFT from ever changing. That means someone who buys an NFT and then resells it can’t misrepresent what they own. It’s all there in the NFT, just how it was when they bought it. You can think of it like the papers that authenticate a thoroughbred: they’re not the horse, but they certify the provenance and history of one.
Very little data is stored directly inside an NFT, though. The NFT includes information on where you can find a description of the artist’s name and the title of the work, but that information is not typically on the blockchain itself. NFTs include information on where you can find the artwork they represent, but the actual artwork is still a link away.
Traditional URLs pose real problems for NFTs. The owner of the domain could redirect the URL to point to something else (leaving you with, perhaps, a million-dollar Rickroll), or the owner of the domain could just forget to pay their hosting bill, and the whole thing disappears. The animation that Grimes sold for $389,000 is primarily sourced to a pair of traditional URLs, which could break down if either of the two different companies (Nifty Gateway, the auction site; or Cloudinary, the web host) went under. As the buyer, this is something you’d have no control over, unless you’re wealthy enough to buy out the entire domain and pay to keep it online.
To solve that problem, many NFTs turn to a system called IPFS, or InterPlanetary File System. Rather than identifying a specific file at a specific domain, IPFS addresses let you find a piece of content so long as someone somewhere on the IPFS network is hosting it. Grimes’ NFT uses this as a backup, and Beeple’s NFT uses this primarily. That means a multitude of hosts, rather than a single domain owner, could be ensuring these files remain online. This system also gives buyers control. They can pay to keep their NFT’s files online. They still have to remember to pay the hosting bill, but they can host it anywhere in the IPFS network…Read more>>