NFTs Are Built on a “House of Cards”

An NFT is a collectible digital asset, which holds value as a form of cryptocurrency. Lately, digital NFT artwork has taken off, thanks to plenty of influential sales. The main selling point of NFTs is their scarcity. A hidden benefit is that they will exist forever on the blockchain. Nevertheless, Jonty Wareing´s research shows this may not be the case.

The software engineer examined the blockchain data of two NFTs. He discovered they consist of either a URL address or an IPFS hash. The existence of those NFTs depends on the marketplace seller staying in business.

NFTs Built on Shaky Foundations

Wareing referred to a piece called CROSSROAD by Beeple via the Nifty Gateway marketplace, in the first case. CROSSROADS sold for $6.6mn in February 2021.

Wareing stated that if Nifty Gateway stopped trading, CROSSROADS would also cease to exist. 

“THAT file refers to the actual media you just “bought.” Which in this case, is hosted via a @cloudinary CDN, served by Nifty’s servers again. So if Nifty goes bust, your token is now worthless. It refers to nothing. This can’t be changed.”

An examination of Beeple’s THE FIRST 5000 DAYS refers to an IFPS hash. On the other hand, this refers to a JSON metadata file referencing an IFPS gateway from NFT marketplace Makersplace.

Different View on Non-Fungible Tokens

Both CROSSROADS and THE FIRST 5000 DAYS will both exist as long as each marketplace seller stays in business. There are still doubts that both Nifty Gateway and Makersplace will go out of business one day.

Wareing called this situation a “house of cards.” He also predicts that every NFT sold will be “broken” within the next ten years. However, he emphasized that this is not the case for every existing NFT.

Source: www.newsbtc.com