NFTs ：( 1 ) Challenges

11 min readDec 27, 2021

Written by MIDDLE.X
Reviewed by Shawn Lin
Translated by Eunice Feng

Note: The initial publish date of this page was 08/08/2021

Since the DeFi boom in 2020, the concept of NFT has taken off. With rapid development of technology of NFT in 2021, related token prices soaring, individuals and institutions rush into the market. Accompany with a pure digital artwork created by Beeple sold for a surprising $69 million on March 11 , the technical form of NFT received mainstream media attention by the first time.

On June 1, Clive Thompson, a reporter for the New York Times, wrote an article titled “The Untold Story Behind NFT’s Rise” after interviewing several crypto artists, detailing the process of NFT’s rise. By July, as market sentiment dropped, the irrational fanaticism of NFTs began into a rational way.

As features with provable owner, provable issuer, and provable scarcity (limited number), NFT widely used on in the art and collectibles so soon, also in the game props, digital tickets as well.

NFTs solve the problem of creating irreproducibility in a network world where everything can be copied, enriching virtual assets types and showing people the possibility of creating an on-chain world as thriving as the off-chain world. At the same time, it as an asset mapping method is expected to bridge assets off-chain to on-chain. However, there still has some inescapable problems need to solve, including: insecure storage of resources, lack of display scenarios, unclear description of rights & interest, and piracy and plagiarism problems.

1. Insecure resource storage

Humans build pyramids, Mayan temples and the Great Wall in stone, believing they can travel through longer spans of time, also build sculptures for heroes, burn inscriptions on stele, compile biographies and ballads to ensure the eternal survival of the sparkling spirit.

Interestingly, the popularity of NFT artworks is partly due to their “eternity” attribute. Supported by secure, permanent storage technology, the content carried by NFTs can be valued. If Beeple’s artwork “Everyday: The First 5000 Days” cannot be securely stored, a hard drive crash could result the artwork vanish into nothing, then, is it still worth the price?

Simple images with small resource size, like Avastars and Aavegotchis, can be minted and stored on-chain, which means NFTs eternity could be guaranteed as long as the chain existence. However, for NFTs with large resource sizes, storing them on-chain is impractical.

Some NFT issuers store resources on their native or cloud servers and index them to the NFT with a URL address, which puts NFTs eternity attribute at great risk, as the issuer can tamper with or delete NFTs resources at any time, and with the possibility of servers failure and resources loss.

A great majority of NFT issuers choose to store resources on IPFS. IPFS is a file storage system addressed by a hash that is functionally equal to a fingerprint of a file, it allows the stored files to be tamper-evident, which is an advantage over URL addressing via HTTP format. A well-know project Filecoin is the incentive layer of IPFS, and NFT.Storage is one of the application layers of IPFS. IPFS is free for the time being, and Filecoin pays for the storage cost by inflation, like a subsidy model.

But the NFT resources also at risk if the specific IPFS node responsible for storing it goes offline or malfunction. For higher controllability, NFTs issuers often choose to become an IPFS node themselves and store the resources of the issued NFTs to their own nodes. However, regardless of the node to which they are stored, NFT resources are at risk of going offline and being lost as long as they are stored on a single node. Here’s an example: the resource that is an NFT album issued by musician 3LAU sold on NiftyGateway for $11 million in March has lost, which was stored in IPFS.

Arweave is also a decentralized file storage system, unlike IPFS, Arweave encourages users to store NFT resources in perpetuity through a specific blockchain structure and a special incentive model. Arweave stores files within blocks, and each node must store previous blocks if it wants to get block-ouput opportunities and rewards. One node store more amount and greater variability of blocks than other nodes do, the greater chance of getting block-output opportunities and rewards. Arweave claims that pay once then store forever.

Nevertheless, this “probabilistic storage” approach has been questioned as it is against the laws of economics. For Arweave nodes, as the amount of data increases the expected revenue of per unit for storage decreases, and when touching the threshold to make ends meet is reached such an economic model cannot be maintained, and eventually let some blocks unstored. While this is based on the assumption of static storage costs existence, if Moore’s Law can continue to work in the future, it may not be a necessarily.

To make the storage of NFT resources more secure, the following two aspects should be considered in our point of view.

One is Redundant Storage

Issuers could choose to store multiple copies of a file in IPFS. Storj could be one of the choices. It is a distributed storage platform that automatically maintains 2.7x redundancy, but the downside is that Storj is established in enterprise services and only supports private storage, which means that the resources stored therein must be accessed through private keys and cannot be accessed by the public. If this point can be improved, Storj will be able to become a secure platform for storing NFT resources. Moreover, issuers could store NFT resources on multiple platforms, such as IPFS, Arweave, Crust, Sia, and other platforms to achieve redundancy that greatly increasing the security of the resource storage. In fact, the storage platform Sukhavati already support users to back up files stored on it to IPFS and Arweave. The more redundancy means more secure storage but increases the cost of storage. There need some trade-offs.

Another one is diversified the storage rights

Generally speaking, NFT issuers bear the obligation and the cost of storage, but what if the issuer is unwilling or unable to store the resource? Could the storage rights be surrendered to the owner of the NFT or other third parties, or let the NFT owner always have the right to store a copy of the resource? Pinta has taken this line of thinking into practice, arguing that the ultimate custodian responsibility for NFT resources lies not with the publisher or the platform, but with the holder himself. As Pinta explained in a blog post in April, with Pinta, the owner of NFTs can place copies of resources into IPFS nodes under his control and keep a copy even if the publisher deletes it.

2. Lack of display scenes

Although NFTs provides provability for ownership, no one will go out of his/her way to access your wallet address to appreciate the artwork you own. an NFT artwork are more important to be used as a social currency to express collectors’ preferences and ideas not just for self-appreciation and edify sentiment, resulting in NFT needs various social arenas.

Metaverse would be a good use for NFTs. While the widespread utilization of Metaverse still need time to break through the technology singularity to led Metaverse to be a highly immersive platform that appeals to a wide range of people and make strong social ties, not just like a “virtual exhibition hall” for showcasing NFTs.

On the view of the present situation, excepting Metaverse, some gameplay can be designed with the help of existing social platforms to realize the display and social interaction of NFT. Bored Apes is a good example. Someone on Twitter claimed to follow all the people with ape avatars, and others compiled an inventory of all the ape avatar users for others to follow.

What is more interesting is that a portion of users are also grouped by different apes appearance, for example, all apes with leopard grain appearance could join “BAYC Cheetah Gang” community in Discord.

The spread of Bored Apes makes good use of Twitter, Facebook, and Discord to achieve a high level of community activities. The popularity of Bored Apes is also related to many other factors, including the affordable initial price, the boredom but inducing emojis, the celebrities in the community, etc.

Although there are someone who don’t own Bored Apes NFTs but with Twitter apes avatars to blend in with the community, which is innocuous. There are also with expectations that social platforms will support accessing to an Ethereum or other blockchain address to support displaying one’s own NFTs as exclusive avatars, or even building communities for users who have the same series of NFTs. Before Metaverse, we need a “Twitter or Facebook” that devote to the crypto era.

SubSocial is an encrypted social platform that does not require users to register with their phone number or email address, but to log in with their Kusama address, then they can post articles, follow others, and “liked” articles, which is correspond to an encrypted version of Medium. Now, SubSocail support the display of NFT in RMRK format, like RMRK 2.0.

If existing social platforms don’t began to take their actions to follow crypto trends, there will be increasing pressures from new rivals continuously. In addition, Twitter CEO Jack Dorsey is a big fan of crypto assets, and it’s possible that Twitter will support the NFT display one day.

3. Piracy and plagiarism

Pirated NFTs can be searched on Opensea. In addition to blatant piracy and identity impersonation, it is even more difficult to guard against plagiarizing other’s ideas and image elements to generate a slightly tweaked version. On January 25, 2021, a case of plagiarism was reported on CyberVein’s newly developed platform called CROSS, where a total of 58 plagiarized works from the BCAEX platform appeared. Complaints also on Twitter about people who did not know each other making NFTs of their own tweets and putting them up for sale.

Artist Derek Laufman has been involved in such. An account with certification mark masqueraded him on Rarable and shelved his NFTs artwork. It wasn’t until a fan reported it that he found out and then complained to Rarible to pull the artwork off. But before that, the pirated artwork posted by the impostor had been sold out. The up-raising star RMRK also pays a lot of attention on plagiarism.

This leaves the NFT art market with only a small number of active head artists going to be trustworthy and worth investing in, Which creating a Matthew effect that need to be avoided by the efforts from both platforms and issuers.

For platforms, mark out the NFTs with copyrights unauthenticated and prompt users to verify the copyrights by themselves when they place orders. Furthermore, incentive mechanism may play a role on motivate users to report plagiarism, and a real-name mechanism could be introduced for issuers that expose those who publish pirated and plagiarized works to legal risks.

For issuers, publish the address they use to release NFTs in a timely manner and place it prominently on their social platform pages for ease of verification by users. On the other hand, it is user’s obligation to check whether the publishing address is copyrighted when placing orders.

4. Unclear description of rights & interests.

What does owning NFTs actually mean to own what? If I buy an NFT of a piece of music, for example, does it means I own the copyright? Obviously not. The NFT neither a specific physical object nor a digital file, but a string of code that implicate the unique connection between me and this work of art.

Descriptions of an NFT should be clear with the rights & interests accompany with the NFT, if not so lead to misunderstandings. Each NFT should have a specific description, which means the rights and interests adjoint one NFT to another are not necessarily same and need to be carefully understood by the buyer.

Institutional issuers generally give clear descriptions when issuing NFTs, such as the Bored Apes Yacht Club series NFTs, which states on its Terms&Conditions page that the NFT allows the holders to develop peripherals for Bored Apes.

Screenshot of Terms&Conditions Page from Bored Apes Yacht Club Official Website

For individual issuers (artists), it is necessary for the platform to help them to make clear descriptions of the rights & interests the NFT offering.

We have listed four typical problems that plague the development of NFTs, of course these are not all, its technical standards and the public chain it used could be more perfect and environmentally friendly respectively, and use-cases should be more extensive, etc.. Those problems are “engineering problems”, which will be solved gradually over time by the technological development.

Conclusion: greater NFTs use-cases

on a conservative estimate, NFTs market may account for 5%-10% of the total market capitalization of crypto assets in the future. Radicals believe it will eventually exceed that of FT (fungible token). However, given the current situation, it is even less than 0.5%, maybe there is a huge space for growth.

NFT’s future comes with the influx of money and talents, it will not only overcome the current shortcomings, but is also expected to develop richer application scenarios and bring changes to more industries.

We believe that NFTs can be even used for greater things, such as preserving the world’s cultural heritage, encouraging public donations, storing important documents of human civilization and the gene database of endangered species, and bringing some public issues to attention through NFT deals, and NFT’s royalty revenue with potential to be used to fund these public causes as mentioned above. For example, NFTmart gives a help on inheriting the culture of Beijing Opera Facial Masks in the form of NFTs.