The non-fungible token is essentially a digital asset. While this concept may seem trivial, NFTs can be worth thousands or even millions of dollars, so storage is essential.
While some people think of NFTs as just digital collectibles, businesses are figuring out how to use NFTs for business. For example, some organizations have started using NFTs as part of their customer loyalty program and as a tool to track purchases. Others see NFTs as an alternative to physical documents such as property deeds.
Why NFTs are valuable
NFTs differ from other types of digital files in that they are linked to the blockchain, thus making it possible to prove whether a file is an original or a copy. An asset that can be proven to be unique has value, whether digital or physical.
For example, think of an art museum with a painting on display. In the gift shop, a print of the same painting costs $20. Although the print is worth little more than the paper it is printed on, the original painting is priceless.
Whether NFTs are an opportunity to invest in digital artwork or a tool for more meaningful customer interaction, consider the best place for NFT data storage.
The same concept applies to NFTs. Artists, musicians and others have begun releasing digital works as NFTs, some of which have sold for tens of millions of dollars. However, almost any type of digital asset can be converted into an NFT. For example, Jack Dorsey sold Twitter’s first ever tweet as an NFT for nearly $3 million.
The best places to store NFTs
Whether NFTs are an opportunity to invest in digital artwork or a tool for more meaningful customer interaction, consider the best place for NFT data storage.
Remember that an NFT’s value stems from its uniqueness. As such, an organization that loses, accidentally deletes, destroys or otherwise compromises an NFT will incur real financial losses. Likewise, NFTs need protection against hackers trying to steal them and monetize their value.
The bottom line is that NFTs need safe storage. There are three top locations for NFT data storage:
A software wallet may sound strange, but remember that the organization stores a digital key. This key provides access to NFT on the blockchain network. A software wallet can store NFT and cryptocurrency keys. The wallet acts as an encrypted vault protected by a password and a seed phrase.
The Interplanetary File System (IPFS) is probably more secure than a software wallet because the file system uses Content Identifiers (CIDs). These CIDs are hashed; the hash is stored locally on an organisation’s own device. To access an NFT, the CID hashes are required as a form of verification, proving ownership of the asset.
A hardware wallet is generally considered to be the most secure option for NFT data storage because it remains offline unless the organization actively uses it for access. Typically, the contents of a hardware wallet are encrypted and protected by a password or biometrics.
Concerns and risks
There are risks associated with every NFT data storage method.
Software wallets are considered the least secure because they are often browser-based and tied to cloud services, making them vulnerable to attacks by hackers or malware.
Although IPFS may be more secure than a software wallet, it also has risks. The CID hashes are stored on a computer, meaning that if the hard drive fails or ransomware encrypts the CID hashes, the organization may lose access to its NFTs.
A cold storage wallet can malfunction or be damaged, for example by accidental spillage. A physical wallet can also be vulnerable to theft. Some manufacturers offer a feature that allows an organization to recover keys to another wallet if there are problems with the primary one.
