Hidden Risks: The Centralization of NFT Metadata and What It Means for the Market

• URL: http://arxiv.org/abs/2408.13281v1
• Date: Thu, 22 Aug 2024 14:29:29 GMT
• Title: Hidden Risks: The Centralization of NFT Metadata and What It Means for the Market
• Authors: Hamza Salem, Manuel Mazzara,
• Abstract summary: The rapid expansion of the non-fungible token (NFT) market has unveiled critical challenges related to the storage and distribution of associated metadata. This paper examines the current landscape of NFT metadata storage, revealing a significant reliance on centralized platforms. Decentralized storage solutions, particularly the InterPlanetary File System (IPFS), were identified as a more secure and resilient alternative.
• Score: 1.4886278504056065
• License: http://creativecommons.org/licenses/by/4.0/
• Abstract: The rapid expansion of the non-fungible token (NFT) market has catalyzed new opportunities for artists, collectors, and investors, yet it has also unveiled critical challenges related to the storage and distribution of associated metadata. This paper examines the current landscape of NFT metadata storage, revealing a significant reliance on centralized platforms, which poses risks to the integrity, security, and decentralization of these digital assets. Through a detailed analysis of top-selling NFTs on the OpenSea marketplace, it was found that a substantial portion of metadata is hosted on centralized servers, making them susceptible to censorship, data breaches, and administrative alterations. Conversely, decentralized storage solutions, particularly the InterPlanetary File System (IPFS), were identified as a more secure and resilient alternative, offering enhanced transparency, resistance to tampering, and greater control for creators and collectors. This study advocates for the widespread adoption of decentralized storage architectures, incorporating digital signatures to verify ownership, as a means to preserve the value and trustworthiness of NFTs in an increasingly digital world. The findings underscore the necessity for NFT platforms to prioritize decentralized methodologies to ensure the long-term sustainability and integrity of the NFT

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