NFT “rug pulls” can be a serious risk when the file is stored on a centralized platform.
Aleph.im, a decentralized filesharing platform, has launched a decentralized application, or DApp, that lets users automatically back up the data underlying their nonfungible tokens, or NFTs, on a censorship-resistant, decentralized network.
The concept of NFTs has generated considerable buzz in the last weeks due to their application for buying and selling digital art. The immutable token stands in as the unique and non-counterfeitable representation of a specific piece of art, even if the specific art piece is fully digital and could be copied by anyone. While this issue is often highlighted by NFT critics, sometimes the opposite problem exists.
Generally, NFT files are created and hosted on the InterPlanetary File System, or IPFS, a decentralized storage network. Files stored on IPFS are immutable and uncensorable, making it a great location for storing the underlying art of an NFT. However, the tokens sometimes point to centralized file storage solutions, including Amazon S3.
Centrally stored NFTs is where Aleph comes in with its DApp, allowing anyone holding such an NFT to easily back it up on the distributed network. Jonathan Schemoul, founder of Aleph, told Cointelegraph that this system protects the owner of the NFT if the underlying file is deleted or modified. The DApp takes a snapshot that persists no matter what happens to the original file.
Storing the underlying file of an NFT on centralized storage systems means that its creator could always choose to modify or remove the digital art item. The file’s longevity can also be a cause of concern, as the hosting provider’s account may be closed by the platform due to a number of issues.
The file storage contradiction was exemplified by James Prestwich, co-founder of Summa, who is responsible for what could be the first “NFT rug pull” back in December 2020. Eli Krenzke, a researcher at Polychain, had purchased an NFT of one of Prestwich’s tweets, which Prestwich promptly deleted. While the particular episode was seen as a joke aimed to prove a point, the issue could be serious for much more expensive NFTs.
Aleph’s app currently does not support saving tweets, Schemoul said, “But we could add it if there was a need.” The hosting solution would work by referencing the tweet’s link, and “It’d be pretty easy to add, as all the backend is there,” Schemoul added.
Compared with storing via IPFS, the Aleph team said that its solution is more resilient, as content on the IPFS network would need to be “pinned” to be always accessible, a service usually provided by centralized platforms. The Aleph platform supports NFTs from SuperRare, Rarible and OpenSea, though the tokens must effectively exist as NFTs, and not as gasless mints tracked internally by the platforms.