Some NFT artworks are safer than others

NFT owners should start thinking seriously if the art connected to their non-fungible token can survive the death of the company that made it.

Why it matters: The SEC has imposed hefty consent decrees on two different NFT companies already, effectively forcing them to shut down their crypto business.

Context: Most NFTs up to now are just some kind of artwork (usually a graphic). The non-fungible token is a sort of deed to owning that IP.

• In most cases the art itself is not hosted on the blockchain. Instead, the blockchain points to the art somewhere and says: The holder of this token owns THAT ["that" is some web link].

The intrigue: If that artwork is simply held on a server that's run by the company that made the NFT, an owner is in trouble if that company ever shuts down.

• When that happens, its NFTs become a receipt with a pointer to empty digital space.

This is a real concern with agency enforcement action functioning as an existential threat to these companies.

Case in point: A new NFT project, The Captainz (ranked high on NFT price floor), is using its company's own servers (see #1279).

The big picture: The trend is toward decentralized storage models.

• In these models, the address is not a location, but the content itself. Any copy can be a canonical copy if a cryptographic hash of it matches (and it only will if it is digitally identical).

Think of it like this: A library tells you a place to go on a shelf to find a book, but if there are multiple copies there, they are each "the book," right?

• Cryptography provides a way to make a web address that verifies some content is exactly what it should be, so copies of that content can be in lots of places and the link still works.

Most collections that decentralize use IPFS. With IPFS, many copies in many places (including copies stored by the NFT's owner, offline) can be verified as the real deal.

• See for example Bored Apes, Azuki and Pudgy Penguins (technical limitations prevent us from linking to the content — but they are decentralized, all on IPFS).

Of note: A few major NFT collections keep art directly on a blockchain (Nouns and Autoglyphs, for example), but this puts huge constraints on the artists.

• It's cool when it's cool, but it doesn't work for every collection.

Be smart: Anyone who has an NFT they love should follow this guide to see where the art is stored.

• If it's located on IPFS or Arweave, that's decentralized.
• If the address has the company's URL in it, start asking questions.

The bottom line: The good news for Stoner Cats holders is that the collection's DAO might be toast, but the art is itself decentralized on IPFS.

• Download a copy of your cat now and you'll never lose it.

Editor's note: This article was corrected to remove Artblocks as an example of a project whose work was stored in a centralized fashion.

Go deeper: The fight over a shrinking NFT market as marketplaces foresee next big boom