Published Apr 11, 2022
By Qredo Team
NFT Custody on Qredo
The crypto world has served up its fair share of innovative, and at times controversial, ways of redefining how we think about investments, assets, and money in the digital era.
From initial coin offerings to smart contracts and decentralized autonomous organizations, the cryptoasset industry has revolutionized traditional financial structures and relationships and opened the door to novel means of trading and investing.
However, of all the innovations, perhaps none have attracted such a degree of interest, backlash, and eyebrow raising sums of investment as Non-Fungible Tokens (NFTs).
The concept behind NFTs is relatively straightforward. These assets are unique cryptographically protected tokens which exist on a blockchain and cannot be replicated.
They can be a representation of any digital or physical assets, and the asset is connected to the token using smart contracts mostly based on the Ethereum ERC721 standard.
Qredo has also recently jumped into the world of NFTs, after we completed the first QRDO burn in preparation for minting the first set of Validator NFTs, of which 40 will be offered as part of the Equinox Collection.
The pioneering new method of validating transactions on the network will involve validators sending a number of QRDO tokens to a burn contract, in return for which they will receive an NFT.
If that validator opts to end their involvement on the network, they can then sell on their NFT and right to process transactions to a new user.
Hitting the mainstream
The most popular and widely known use case for NFTs has emerged as digital art, with assets such as the Bored Ape Yacht Club pictures attracting investment sums in Ether which range into the millions, or even tens of millions, of dollars apiece.
While some have balked at the amount of investment being directed towards the sector, NFTs for many represent the next stage of the cryptoasset market, where investors can mint, hold, and trade a unique token on the blockchain which is equivalent to real-world assets such as fine art.
NFTs have also made their way into growing areas like play-to-earn gaming, with users able to acquire unique assets within the world which are tradable.
They may have started out as a niche concept, but NFTs are now attracting the interest of more and more institutions and other big-ticket investors and are being bought and sold at mainstream international auction houses such as the world-famous Christies as well as crypto-native platforms like OpenSea.
Far from being solely the preserve of retail investors, NFTs are set to become a core part of institutional investment strategies in the years to come.
With surging activity and valuations in the market, how are NFTs being stored?
How can you store NFTs?
As with all cryptoassets, owners have several options when it comes to how you can store NFTs, with varying levels of ease of access and security.
With the significant valuations attached to many of these irreplaceable assets, it has become imperative for investors to find secure solutions for storage which meet institutional-grade standards for security and governance.
At a fundamental level, NFTs are stored on the blockchain, with the address of the smart contract referencing the token normally attributed to the holder’s crypto wallet.
Given its prominent position as the most popular Ethereum wallet, MetaMask is frequently used as a means of holding NFTs.
For institutional users, Qredo’s integration with MetaMask Institutional means NFTs can be held through our network secured by decentralized multi-party computation, safe in the knowledge that your asset is stored on a platform with protections against loss.
The Qredo/MMI network is compatible across multiple EVM chains, with the benefit of fully decentralized custody in a single crypto wallet which is usable across the entire Ethereum ecosystem.
There are also alternative options available such as using a hardware wallet to hold your NFTs in a similar fashion employed by many investors in other cryptoassets such as Bitcoin.
However, this solution brings with it the risk of losing the device on which the NFTs are held, or a lost password which could orphan the assets with little recourse available.
Popular NFT exchanges such as OpenSea also use an InterPlanetary File System (IPFS) which holds the media files or content linked to the token in a peer-to-peer network using cryptographic hashes stored on the blockchain.
While the solution solves the issue of ‘link rot’, where a URL referencing the NFT data gets corrupted or lost, it doesn’t address problems with off-chain storage such as the risk of servers hosting the data going down or becoming permanently inoperational.