NFTs have taken the digital art collecting world by storm.
A few short years ago, the general public regarded digital collectibles as little more than a ridiculous trend, another novelty of the internet age. It’s now clear that NFTs are here to stay—as of July 2021, the industry is estimated to be worth a staggering $2.5 billion and climbing.
Skyrocketing price points mean that collectors with enough capital or trading savvy have the potential to amass small personal fortunes in assets. But they also mean that these same collectors have far more to lose by not keeping their scores off-limits to bad actors.
Security is of paramount importance to NFT collectors, what with so much opportunity for theft, fraud, and other malicious activity in online spaces. Fortunately, the fear of some hacker swiping your hard-earned portfolio doesn’t have to haunt your dreams at night.
Whether you’re looking to compile an epic NBA Top Shot scrapbook or play mother to a menagerie of Cryptokitties, the following storage solutions will help you lock your NFTs down like the Crown Jewels.
How NFTs Are Stored
NFTs, or non-fungible tokens, are a type of digital collectible. As their name suggests, these collectibles are one-of-a-kind. Unlike cryptocurrencies, they can’t be traded in for or replaced by other collectibles of comparable value for the simple reason that there are no other collectibles of comparable value.
Transactions on non-fungible tokens are tracked via blockchain, a secure information recording system that’s also used to keep up with the ongoing exchange of popular cryptos like Bitcoin and Ethereum. Blockchain records show who bought or sold what from whom, when, and for how much. They’re protected by top-level encryption protocols that effectively prevent any kind of intrusion or manipulation from outside.
As ingenious as blockchain technology is, it’s not perfect. Many novice collectors have the mistaken notion that blockchain is sufficient for safeguarding digital assets like NFTs. The truth is that blockchain offers very little actual asset security.
While blockchain’s fortresses of complex code are tough for hackers to crack, they’re not impregnable. Furthermore, blockchain is only the ledger in which NFT trades are documented. The files themselves—or, more accurately, the unique private keys used to verify the legitimacy of individual tokens—must still be stored in some virtual location. Unfortunately, virtual locations come with exploitable weaknesses.
That said, certain kinds of locations are less exploitable than others. When it comes to keeping their prized digital art under lock and key, collectors have a trio of options, which are listed here in order from least to most secure: crypto wallets, IPFSs, and cold storage hardware wallets.
If you’ve ever bought or sold Bitcoin, Ethereum, or another cryptocurrency, you’re probably already familiar with the concept of crypto wallets. Essentially, crypto wallets (also known as “software wallets”) are online repositories for digital assets like crypto and NFT art.
These programs offer collectors a convenient way to organize and display their non-fungible tokens while also connecting them with crypto exchanges and certified NFT marketplaces like OpenSea and Rarible. They ordinarily rely on two-factor authentication, prompting users to enter a password and a 12-24-word custom seed phrase to access their collections.
MetaMask, a third-party NFT platform built around the Ethereum blockchain, is one of the most well-known and widely used crypto wallets, though there are many others, such as AlphaWallet, Trust Wallet, Pillar, and Enjin.
Crypto wallets can be handy for managing small NFT collections in a convenient, centralized hub. Because of their web-based format, however, these solutions provide the lowest levels of security overall. They’re a bit like a stash drawer in the real world—a decent place to stow valuables temporarily, but ultimately a relatively defenseless hiding spot that anyone could stumble upon.
As such, crypto wallets are best suited for casual collectors who primarily deal in low-value assets or don’t expect to hold onto any particular token for long.
InterPlanetary File Systems
InterPlanetary File Systems, or IPFSs for short, is another way to store NFT assets, one that’s safer and more effective on the whole than crypto wallets. What makes these solutions so secure is that they’re partially “off-chain”—in other words, they store data outside the blockchain infrastructure.
Here’s how IPFSs work in a nutshell: when you commit an NFT to an InterPlanetary File System like Pinata and Filecoin, the program creates a log for the entry. It breaks the relevant information into encrypted “hashes” of content identifiers (CIDs).
These CIDs are stored on the collector’s computer rather than on the program itself, putting them out of the reach of hackers. Anytime you access an NFT through your IPFS, the system scans its nodes for the associated CID and “rehashes” it, confirming that it’s the same one found on your computer.
This means that even if someone were to hack the IPFS, you’re using, they would only be able to acquire the hashes contained in the online system and would have no way of getting to those on your end.
All in all, IPFSs are a great way to defend your digital assets and will likely be good enough for the majority of NFT collectors. If security is a top priority for you, though, you still have one more storage solution available to you, and it’s the strongest of them all.
Cold Storage Hardware Wallets
Cold storage hardware wallets are practically airtight in terms of security.
Why? Because they take your NFTs offline altogether.
Hardware wallets are physical devices made to store non-fungible tokens, cryptocurrencies, and other digital assets in a format that’s completely independent of blockchain, third-party apps, or web-based holding sites. You simply buy the device, load it up with your beloved NFTs, and put it away somewhere that only you will know to look for it.
The term “cold storage” refers to the fact that sensitive pieces of NFT data like private keys are kept off the internet. Premium hardware wallets, including best-sellers Trezor and Ledger, also give collectors the option of using “hot wallets” that enable online trading actions similar to software wallets.
The difference is that if your hot wallet was somehow compromised, you would be able to rest easy knowing that all your high-dollar source data remained untouched and untouchable.
What’s more, premium hardware wallets can restore stolen content, along with assets lost through less nefarious means like device malfunctions. They’re the only NFT storage solution that comes with a built-in insurance policy.
For someone to filch NFTs stored on a hardware wallet, they would have to know where you keep your device, gain entry to that place, and carry it off by hand. It could happen, but it’s a heck of a lot less likely than a mass data breach or targeted hacking job.
These are just a few of the many reasons that cold storage software wallets are the superior digital asset storage strategy. When it comes to your NFTs, there’s no better alternative.
What’s the Best Hardware Wallet for NFTs?
Pound for pound, Trezor, Ledger, and KeepKey (an imprint of ShapeShift) are generally considered the top purveyors of platforms for storing digital artwork and other assets. These brands come highly rated by users in need of unmatched security and reliable ‘round-the-clock support, and all of them offer devices for around $100 or less.
One more thing: if you’re considering picking up a hardware wallet for your growing NFT collection, make a point of ordering it directly from the manufacturer instead of going through a third-party vendor like Amazon. Otherwise, it’s possible to receive a device that’s been tampered with, leaving you vulnerable to the exact sorts of exploits you’re trying to avoid.
Trading crypto assets is an inherently risky practice, but digital art collectors don’t have to take the threat of online theft sitting down. All of the three types of NFT storage solutions detailed here are formidable enough to keep your collection from falling prey to hackers and swindlers eager to take advantage of the internet’s latent security limitations.
If you’re mostly interested in trading NFTs for fun, any reputable crypto wallet will get the job done. The majority of open-source software wallets are free to use, flexible, and designed with user-friendliness in mind.
If, on the other hand, you own certain rare or valuable assets and want to fortify them against force attacks, it will behoove you to look into InterPlanetary File Systems that will allow you to store your crucial NFT data off-chain.
If you’re sitting on a goldmine of in-demand tokens and your goal is to keep them out of circulation to drive up their price, your best bet is to invest in a good cold storage hardware wallet. It will insulate your collection from tech-savvy opportunists entirely.
Regardless of the option you choose, you can think back to high school and take your Sex Ed teacher’s giggle-inducing advice: always make sure you’ve got some protection in your wallet.