Accidental deletion or loss of access are obvious risks for NFT holders. However, there are greater challenges to future-proof NFTs. Credit: Noam Galai Getty Images.
Crypto research firm Messari wrote in 2022 that NFTs are “cool because they represent verifiably scarce, portable, and programmable pieces of digital property.”
NFT use cases include art, gaming, ticketing, tokenizing shares, access rights, and more.
Nonetheless, the biggest liquidity inflow happened during the PFP (profile picture) mania, when traders spent millions purchasing “blue chip” NFTs for use as profile pictures on social media.
At the height of the last NFT hype cycle, digital artist Beeple sold an NFT for a record-breaking $69 million worth of ETH while Paris Hilton was flaunting her Bored Ape on prime-time TV.
As with every hype, it eventually cooled down, and the floor prices (the price of the cheapest NFT in a collection) started plummeting.
The NFT space has certainly been quiet over the past two years. Enthusiasm for this asset class has been hampered by closures, such as Nike shutting down its NFT studio RTFKT and exchanges like Kraken shuttering their NFT marketplaces.
Nevertheless, since the end of 2024, signs of recovery have been accumulating.
Trading volumes on leading NFT marketplaces reached new highs on December 17th, settling at higher levels than at any point during 2024.
In addition to increased trading activity, blue chip NFT projects from the previous cycle have continued shipping new features and products.
Azuki, an anime-themed PFP collection, delivered the first episodes of an anime produced alongside a community watch party and an airdrop of their Anime token.
Around the same time, Pudgy Penguins – a team that excelled at bringing their IP to the masses via Instagram and plushy toys in Walmart – launched their own blockchain, Abstract Chain.
All the above hints at NFTs getting ready to make a comeback. Yat Siu, Founder of Animoca, is particularly optimistic, foreseeing that they’ll surpass even prior levels of adoption.
His main thesis about the future growth of NFTs is that they’ll serve as a status symbol, similar to wearing a Rolex watch or running around with a Birkin bag.
However, especially when considering NFTs as status symbols, the actual image or artwork associated with the token must be incorruptible.
The problem is that the artwork files for most NFTs are stored as a link in NFT metadata, which is defined through the smart contract property tokenURI.
Except for Bitcoin Ordinals and a handful of Ethereum NFT projects like Art Blocks or CryptoPunks, most NFT projects’ actual art is stored off-chain. There are three reasons for this:
That’s why, when choosing off-chain storage solutions, projects often choose the path of least resistance—centralized providers.
While the immediate risk of accidental deletion or loss of access for centralized providers is obvious, a more insidious challenge exists: links are not incorruptible.
That means that the file that a link points to can be swapped out, essentially rendering the purchased NFT worthless.
In an attempt to expose this vulnerability, an artist going by the pseudonym NeitherConfirm launched an NFT collection in 2021 and later changed the images to rugs, a nod to the notorious DeFi scam signifier “rug pull.”
The logical response to the problem of centralized storage is to use a distributed storage provider like IPFS (InterPlanetary File System).
IPFS is a peer-to-peer storage network where files are uniquely identified by content hashes, ensuring that a specific file always corresponds to the same hash.
This prevents file-swapping when the hash is used directly. However, IPFS relies on nodes actively hosting (or pinning) the data to ensure availability. Since there is no built-in incentive structure and storage space is expensive, nodes can simply stop running.
In an attempt to fix the incentive structure of IPFS, Filecoin launched an infrastructure that would reward storage providers, but not all node runners opt-in. To avoid deletion and access issues, projects often turn to pinning services.
While this is a more fail-safe set-up than centralized providers, it still hinges on the project’s ability to continue paying for their subscription.
Nevertheless, to future-proof NFTs and ensure their longevity, it’s crucial to adopt storage solutions that are permanent.
During the first NFT hype cycle, IPFS and centralized providers were the most widely supported, reliable options.
As NFT storage solutions improve, they’ll be able to stand the test of time, enabling adoption as outlined by Yat as status symbols or as a backbone for digital identity systems – and beyond.
Permanence will enable a new wave of NFTs that are, this time, built to last.
