NFTs (non-fungible tokens) are a revolutionary new blockchain technology that makes it possible to buy, store and sell digital assets on the Ethereum network. NFT marketplaces, such as Nifty Gateway, Mintable and OpenSea make it easy to find and purchase NFT art, crypto collectibles such as “cryptopunks” and trading cards, as well as other types of digital assets using Ether (ETH), the cryptocurrency with which smart contracts are implemented on the Ethereum network.
Whether you are new to the crypto world, or just want to gain a deeper understanding of how NFT storage works, this article aims to explain the process in depth.
Where Do NFTs Go After You Have Bought Them?
Newcomers to the world of NFTs frequently ask, “Where do my NFTs go once I’ve bought them?”. Although NFT platforms provide ways to view the NFT collections that you own, it’s important to understand where they are actually located.
A common misconception is that NFTs are stored on the blockchain. This is not entirely accurate — depending on which part of the NFT you are referring to. The NFT itself actually refers to the digital signature that is created during the minting process, i.e. when an NFT is created. This unique digital signature (also known as a “certificate”) is a token that includes a traditional web address that links to the digital item, e.g. a digital artwork, file or other form of digital asset.
The digital signature itself (i.e. the token) is actually the part that is stored on the blockchain, whereas the file, which it is associated with, is stored on the platform where you purchased it.
The NFT (remember, this is actually the non-fungible token) is thus a way to prove ownership of the item you have bought, but the image itself lives somewhere on the web, usually the website of the marketplace where you bought it.
Metamask – One Wallet to Rule Them All?
Now the question you are probably asking yourself is “Which crypto wallet should I use to store my NFTs?” There are a number of options out there, and which one you use is basically a matter of preference. However, the most popular wallet at the moment is without a doubt MetaMask, the reasons being as follows:
- You can use MetaMask to explore dApps on the Ethereum network
To put it simply, this means that you can essentially use your MetaMask wallet like a browser for decentralized apps without having to run a full Ethereum client or node. This is extremely convenient as it enables you to interface with platforms on the Ethereum blockchain, such as OpenSea, Axie Infinity and Rarible, seamlessly. By doing this, MetaMask essentially doubles as a login verification tool, meaning that you don’t have to create a separate account with any of these platforms, which is really convenient once you get the hang of it!
- You can buy funds directly in MetaMask
With MetaMask, you don’t have to buy Ether or ERC20 tokens via a separate application since the wallet provides features to easily buy Ethereum using a credit card or debit card inside the dApp.
- You can use MetaMask to easily swap any tokens from within the wallet itself
Yes, that’s right! You can exchange your tokens right from within MetaMask. There are two ways of doing it: Either you can use the built-in Swaps feature within the MetaMask wallet (both the browser extension version as well as the mobile app version have this feature) or manually by using a DEX (Decentralized Exchange), such as Uniswap.
MetaMask is also really easy to use, even if you are a complete beginner. If you would like to learn How to Buy NFTs using MetaMask, feel free to read our detailed tutorial on the topic.
Hardware wallets, or “cold-storage wallets” as they are often referred to, are physical devices which make it possible for you to store your tokens offline.
Hardware wallets can also be used as “hot wallets” (like MetaMask) if they are connected to the internet, meaning that they are also very convenient in addition to being secure.
Companies like Trezor and Ledger provide different types of hardware wallets depending on how many features you want. But most hardware wallets are protected by a device password and come with a unique personal ID. There is generally also the option to restore device content if it’s lost or stolen.
Advantages of hardware wallets
- Hardware wallets often store private keys in a protected area of the microcontroller. This means that private keys cannot be transferred out of the device in plaintext format.
- Hardware wallets cannot be infected with viruses.
- With hardware wallets, it’s never necessary for your private keys to interface with any potentially vulnerable software.
- Hardware wallet manufacturers often make their software open source, meaning that any user can validate all the device’s operations if they wish to do so.
There have so far never been any verifiable reports of tokens being stolen from hardware wallets, which is something to keep in mind considering that access data has been breached many times via hacks and password theft in the case of hot wallets.
Comparing “Hot” and “Cold” Wallets
Needless to say, cold wallets are definitely the most secure option when it comes to security.
However, deciding whether to use a hot wallet or a cold wallet depends on a number of factors, such as:
- How often you trade NFTs
- How valuable your NFTs are (i.e. how big of a risk it is to lose them)
- Whether convenience or security is more important to you
If you are trading NFTs frequently, it’s probably more convenient for you to store your NFTs in a hot wallet, but if you plan to hold on to your NFTs for a long time, then a cold wallet is just fine since you won’t be accessing it that often anyway.
If you are the proud owner of a limited-edition NFT by Beeple, or a super rare “NBA moment” worth millions of dollars, then you obviously want to do everything you can to ensure that you remain the owner until you decide to sell it at some point in the future. Even if you own NFTs that may not be that valuable right now, but you believe that they will go up in value in the future, there is no harm in using a hard wallet to secure your investment.
If you are really serious about security, or own very valuable NFTs, hardware wallets are definitely a good idea. However, always make sure that you only purchase hardware wallets from the manufacturer’s official website, and ideally stay away from lesser known brands.
Other ways of storing NFTs
There are alternative, albeit currently not quite as well-known, ways to store your NFTs. Here are the most popular ones:
InterPlanetary File System (IPFS)
The Interplanetary File System is one of the most exciting new technologies in existence today. Basically, it completely changes the way the internet works by making files available without the need for servers. This means that any form of digital data can be accessed using IPFS, without the need for a single physical location for the data to be stored. Think of IPFS as a decentralized internet!
Of course, NFTs storage is a perfect use case for IPFS. The reason for this is that when an NFT is minted, it’s only the digital signature (i.e. “certificate of ownership”) that is stored on the blockchain, not the file (digital artwork, etc.) itself. Basically, blockchains are really good at generating and storing small bits of data forever, but very bad at storing large amounts of data, such as images, animations, 3D models, etc.
With platforms like Pinata, and the Filecoin system, it’s now possible to store your own NFTs on the IPFS, meaning that there is no longer any danger of the file that is associated with the NFT (proof of ownership) you have bought to ever be lost, e.g. in the event that the marketplace which stores it disappears, etc.
In other words, blockchains + IPFS are the perfect solution to storing NFTs — and the files they are associated with — forever in a decentralized way, meaning that with this combination you can store NFTs forever and will never have to worry about losing your NFT assets or the files associated with them, regardless of whether you are an NFT owner or a digital artist.
Frequently Asked Questions
This is indeed a concern among owners of NFTs. The good news is that the NFT itself (i.e. the token or certificate of ownership) can never cease to exist. However the file which it is associated with (e.g. digital art, etc.) would technically no longer be searchable via the web address that the certificate points to. There are currently a number of new technologies, such as IPFS, being developed to overcome this potential problem, but none have been officially settled on for now.
Although it is possible to copy the file that an NFT is associated with, the NFT itself (i.e. the digital signature that proves you own and NFT) cannot be stolen or duplicated in the same way that digital images or source code can just be copied on the internet.
Since nobody else knows the private key or password required to access your assets on the blockchain — or at least they shouldn’t — there is no way for anyone to gain ownership of your NFTs, unless of course they gain access to both your recovery phrase (the long string of words you are given when you first create your crypto wallet) as well as your password.