How To Truly Own Your NFTs
Crypto Basics

How To Truly Own Your NFTs

9 months ago

You've just bought your first NFT. You've showed it to all your friends and even changed your PFP. But have you stored it securely so that you truly own that NFT?

How To Truly Own Your NFTs

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Understanding the Basics of NFTs

Non-fungible tokens, or NFTs, have become increasingly popular over the past 18 months. People are spending - sometimes vast sums of - money on these digital artworks, collectibles, and limited editions. However, there is still much confusion as to where an NFT "lives" exactly after purchasing it and how to keep it safe from harm.

A recent thread on Twitter explains the overall confusion regarding the concept of "true ownership". Although many people assume owning an NFT is similar to holding cryptocurrency, there are some subtle differences that everyone needs to consider at all times. Getting the basics right is crucial, and it all starts with grasping how Ethereum works and how token storage works.
For instance, an NFT does not "exist" in your MetaMask wallet, hardware wallet, or on your computer.

These are all tools to track ownership of an NFT, but the asset itself lives somewhere else entirely.

It is crucial to understand the difference between having a tool displaying your NFT or tracking ownership and figuring out where the asset is stored. A wallet merely represents data and holdings associated with a wallet address, but there is nothing in the wallet itself. Instead, NFTs, like crypto assets, reside on the blockchain they are issued on, and they will remain there forever. However, ownership of these NFTs may change over time.

Why Securely Storing Your NFTs Matters

There have been numerous stories of people losing access to a cryptocurrency wallet or device where they store said information. Even if you were to lose your device or wallet, the NFT would not be lost forever. It remains on the blockchain as a "backup", recognized by all network nodes worldwide.

Moreover, when you trade or sell an NFT, no information is leaving your device or wallet. Instead, the blockchain records a change in ownership from one wallet address to the next. A transaction is an entry update on this distributed ledger but does not warrant an actual "data transfer" in the traditional sense.

The image that represents your NFT is stored on a decentralized storage solution. That solution can be the InterPlanetary File System (IPFS) or Arweave, assuming the NFT creator took the necessary precautions to look into decentralized storage. The link between this storage location and the NFT is established through a URI field pointing to the location of the JPG image.

How to Store Your NFTs

Even though you will not store the NFT or its image on your device or wallet itself, there is still a "secure storage" aspect to consider. More specifically, the ownership of an NFT is tied to a wallet address and its private key. The private key lets users move tokens and sign messages to prove ownership of the private key.

Storing that private key is crucial as you cannot access your assets without it. You should never share that information with anyone else, which is why wallets - either software or hardware - exist. Every wallet contains a set of private keys that only you have access to. Moreover, a wallet is a convenient interface to send and receive transactions - including NFTs - through the use of your private keys.

Most wallets will provide users with a seed phrase, from which the private keys to your wallet(s) is/are derived. The seed phrase can be 12-24 words and is a recovery method if you ever lose your wallet or private key. Therefore, keeping that seed phrase secure is of the utmost importance - assuming your wallet provides it - and should never be kept in plain sight.

Ultimately, it comes down to finding the right wallet that suits your needs. Said wallet can be software or hardware, as either option has a diffaerent level of user-friendliness. Popular solutions include MetaMask for a software wallet - on pc or mobile - and Ledger or Trezor for hardware solutions. Depending on your risk appetite and investment amount in NFTs, using a software or hardware solution may be advisable.

Right-Clicking An NFT Image Doesn't Equate Ownership

One often-heard comment is how anyone can right-click an NFT and save the image to their device. That is an incorrect statement, yet users can copy or steal the artwork this way. While they cannot claim ownership of it - only the NFT holder can - they can still use it for nefarious purposes. Storing your NFTs, as outlined above, will not prevent people from saving the NFT images, unfortunately.

However, it is crucial to understand that having a copy of the image does not equate to owning the NFT. As mentioned earlier, the image is tied to the NFT through a URI, yet the asset itself resides on the blockchain tied to a wallet address and its private key. As long as you keep that information safe from prying eyes, there is nothing to be considered about as an NFT investor or enthusiast.

Beware Of Counterfeit NFTs

One potential threat to consider is how counterfeit NFTs are a pressing problem. These counterfeit products will usually come through similar collection names, making it tricky to distinguish between genuine and fake collections. Always make sure you are interacting with the original creation and not a copycat. Most marketplaces will weed out fake copies, but it is always worthwhile to verify the smart contract tied to the collection too.

It is not uncommon for fake collections to copy the original NFT artwork too. Looking beyond the appearance is essential before investing in non-fungible tokens. Unfortunately, there is no convenient solution to prevent this type of behavior or protect oneself from potentially buying copycat NFTs. Careful research and examination is essential.

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