The owners of masterpieces and expensive art works always look for the best choice to store their precious assets in security. With the recent hype on NFTs, or digital assets, artists and collectors are also asking about the best way, instead of the best place for physical assets, to store their NFTs which can cost thousands of dollars.
As you already might know, non-fungible tokens are not only artworks. They can represent anything from an artistic image or a music video/audio to digital personal identity documentation, academic titles, car ownership, house ownership, etc. Before the introduction of blockchains, digital assets were essentially worthless if their origin was not clearly known since they could be replicated and distributed easily.
However, blockchain allows artists to create and validate original NFTs so that they can manage their assets without intermediaries in such a trustless environment. This was a significant step in digital asset ownership since it solved the problem of authentication and ownership through providing an immutable digital ledger.
Recently, non-fungible tokens have become high-valuable rare assets attracting both investors and hackers who are looking to steal digital artworks or credit card information to buy more. Therefore, as digital ownership expands into valuable assets, it becomes vital to store NFTs properly to avoid theft and other scams in the digital world.
Types of storage of NFTs
Basically, there are 3 main ways to store NFTs. Though, they do not provide the same levels of security.
1. Software Wallets
It is relatively easy to set up an online software wallet. All new comers to NFT world and less technical users can definitely manage it. As you see, software wallets are user-friendly interfaces which makes them the most popular choice when it comes to storing digital assets.
Several software wallet options are introduced in the NFT space, and most of them have both mobile and web applications. Famous software wallet such as Metamask provides users with standard security for NFTs. Further, Metamask transactions are encrypted and secured by a password and a 12-24 word phrase. It supports DeFi and Ethereum which highly improve the security.
Notice that software wallets like Metamask are online and, as the result, vulnerable to hackers’ attacks. They have already been hacked and can indeed face the situation again in the future. Always watch out for the original and approved application, as many fake apps, even for Metamask, have tricked users previously. Other examples of suggested software wallets may include Enjin wallet and Math wallet, which could help to store crypto and create, distribute and integrate NFTs. They also supports Defi and Ethereum.
Coinbase also has recently announced the creation of a peer-to-peer marketplace that supports NFT holders to mint, purchase, showcase and manage their assets.
2. InterPlanetary File System (IPFS)
An IPFS is a peer-to-peer hypermedia protocol that provides the opportunity for users to store their decentralized NFTs off-chain and decrease the likelihood of being hacked.
IPFS changes the way information is distributed across the world using content-based addressing instead of the standard location-based addressing. When a file is added to IPFS, this file is split into smaller pieces, cryptographically hashed, and given a unique fingerprint which is called a content identifier (CID).
Content identifiers are hashes directly connected to a user’s NFT content not an HTTP link which can be modified and hacked; this allows for significant security. This CID acts as a permanent record of an NFT file. Therefore, if you create a new version of your file to IPFS, its cryptographic hash is different, so it gets a new CID.
This suggests that files stored on IPFS cannot be tampered with or censored, and the changes cannot be overwritten to the original file. If a hacker node ever produces a CID hash, you will be notified on your end of the false data.
The added benefits of an IPFS provides a more secure storage option for NFTs. Besides, this type of decentralized and distributed architecture for storage is in line with blockchain principles; in particular, IPFS makes intermediaries not unnecessary.
Pinata is an IPFS-based NFT wallet which was created in 2018. Although it seems almost young in functioning, it already contains over 45 million files and has over 70,000 users globally. Even though it’s not the most popular storage solution, it has the potential to grow, especially among developers, due to its enhanced security.
3. Cold Storage Hardware Wallet
If NFT holders plan to improve to the highest possible security of their assets, a hardware wallet may be a good option to consider. This wallet allows for cold (offline) storage and provides private keys that enable users to access their digital assets which are held in an unhackable hardware wallet device and not on the web where they are vulnerable to hazards. The hardware wallet provides extra security since two-factor authentication is always enabled and required. Therefore, it is impossible to hack and steal the content without physically holding the wallet device.
The most popular hardware wallets are Trezor and Ledger. You should know that the wallets do not physically contain the artwork or any crypto. However, they store the private keys that give users access to holdings or digital assets that they have stored on-chain.
Further, you can use hardware wallets as hot wallets. Hot wallets can be connected to the Internet via a device’s mobile connectivity. These hot wallets are still secure when connected to the Internet which allows users to transact without the fear of being hacked or obtaining a virus.
Always remember that it is much safer to only purchase hardware wallets from the manufacturer’s official website. If you aim to purchase from Amazon or other online shops, keep in mind that you do risk buying a hardware wallet that has been compromised. It means that your precious wallet contents could be hacked.
What is the Best way to store NFTs?
It has always been difficult to choose the best way to store NFTs specially when it comes to collecting NFTs. Since each storage way has its own weakness and strength, NFT holders should be aware to decide on the best option for storing their assets.
According to the discussion above it seems that the best way to store an NFT is by attaining a cold storage hardware wallet and transferring digital assets there. Hardware wallets ensure that tokens will remain offline and safe against hackers and keyloggers. Also, every hardware wallet comes with its own personal ID and password for added security. If you wish to choose hardware wallets to store your NFTs, remember to get your wallet from the official sites of the producers.
How to keep your NFTs safe during storage?
Wherever you decide to store your non-fungible tokens, the following tips could be helpful for keeping your NFTs as safe as possible during storage.
- Never give out your 12-24 word seed phrase.
- Create complex passwords that include phrases, numbers and symbols.
- Don’t allow anyone access to your login credentials.
- Store all your passwords and phrases in physical form, locked away safely (not on your computer).
- Avoid visiting sites which may have malicious intentions (watch for no SSL).
- Always store your long term digital assets offline completely.
- Consider using a virtual private network (VPN) which hides your IP address and encrypts your internet traffic.