Massive Pirating of Ethereum/Solana NFTs Highlights Value of Running Them On-Chain

By Stan Peterson
Published December 6, 2021 Updated December 11, 2021

Massive Pirating of Ethereum/Solana NFTs Highlights Value of Running Them On-Chain

By Stan Peterson
Published December 6, 2021 Updated December 11, 2021

“OMG WHO RIGHT CLICKED ALL OF THE #NFTs?” boasted Geoffrey Hunte as he unveiled a massive torrent of nearly 18 terabytes holding all of the NFTs on Ethereum and Solana — a.k.a. The Billion-Dollar Torrent.

“Did you know that an NFT is just a hyperlink to an image that’s usually hosted on Google Drive or another web2.0 webhost?” he asked in the release notes. “The image is not stored in the blockchain contract.”

He was illustrating a big issue with NFTs built on Ethereum and many other blockchains: The NFT only holds the smart contract that binds and controls the asset, while the asset itself is hosted off-chain — for example, the image or media file is hosted by a provider like Amazon Web Services, Cloudflare, or IPFS. This means that the actual asset has been given a cryptographic hash providing a unique fingerprint tying the token to that specific picture, song, video, or whatever. The hash is on Ethereum, while the actual asset typically lives in conventional cloud servers.

As NFTs grow beyond their initial role as a format of digital ownership for media — primarily collectable images ranging from artworks to avatars — developers are enthusiastically exploring the ways that NFTs can change the entire idea of ownership and online experiences. But in order to realize this potential, NFTs and associated dapps will need to scale on-chain.

The basic concept of an NFT, or non-fungible token, is pretty straightforward. It’s a type of token that’s unique, “non-fungible” in the sense that each one has qualities unlike any other. So while any bitcoin can be exchanged for identical bitcoin, each NFT is a particular unit of data that has no identical equal.

Classic examples are the CryptoPunks and CryptoKitties collections, featuring NFTs whose rare or desirable characteristics make them many times more valuable than others that are relatively commonplace. CryptoPunks with alien or zombie characteristics have sold for millions of dollars.

As those collections and other NFTs have boomed on Ethereum, the platform’s skyrocketing cost of computation has left users and developers facing costly gas fees to mint and transact NFTs. The cost for simply signing up for OpenSea’s NFT marketplace can be as high as $300. This, combined with the pitfalls of keeping only the hashes on-chain while the NFT’s asset exists on conventional web hosts, limits the possibilities of their application and damages the user experience.

OpenSea.io is itself hosted by Cloudflare. Outages and service disruptions from these providers can knock the assets offline, resulting in frustrated reactions.

NFTs running on-chain

 The blockchain development studio Toniq Labs is facilitating an exciting new era in NFT applications by building its products on the Internet Computer blockchain, which allows them to run entirely on-chain.

“That means that the image is hosted on-chain,” says Bob Bodily, chief product officer at Toniq Labs. “The smart contract is on-chain, the whole asset is on-chain. Even if it’s an audio file or a video, it’s the same thing — 100% on-chain.”

Toniq Labs has built the Entrepot NFT marketplace and a variety of breedable, upgradeable NFTs called Cronics, along with an accompanying play-to-earn Cronic gaming platform that will soon be unveiled. NFTs hold great potential, Bodily insists, but we’ve only seen the tip of the iceberg.

The fact that NFTs created on the Internet Computer are running on-chain makes them “distinct and unique when compared to NFTs on other chains,” he notes, enabling interoperable features such as Cronic Wearables, a set of NFTs Toniq Labs created that can be purchased and integrated with a Cronic NFT to accessorize and evolve it.

An NFT is, at its core, a means of storing any data on a blockchain, Bodily explains, which means that the data could

“be an entire video file or an entire website. You could have HTML, CSS, JavaScript, all packaged up into an NFT. There’s a ton of really, really fun things you can start to do when you reimagine what you’re saving as an NFT.”

Toniq Labs and a variety of other NFT and GameFi projects have been free to experiment with different integrations and approaches owing to the low cost of building their platforms on the Internet Computer. Bodily put his hosting costs at about $5 per gigabyte per year, calling it “vastly better priced than other blockchains.”

That isn’t hard, since Ethereum gas prices have put the cost of minting a run of NFTs at anywhere from $20 to several hundred dollars, depending on network congestion at the time. Toniq Labs is seeing minting costs of fractions of a cent, Bodily said.

“I know someone who minted 10,000 NFTs and facilitated thousands of marketplace transactions, and only paid $3,” he remarked.

Interactive NFTs

Cronics are in some ways very similar to the avatar and avatar-based blockchain games that have been growing in popularity since Dapper Labs introduced its breedable CryptoKitties NFTs in 2017. Since then, sales have soared, with Ethereum-based games like Axie Infinity and Gods Unchained accounting for four of the five top NFT lines by number of transactions, according to NonFungible.com.

NFT-based games have a varying degree of complexity, with breeding in CryptoKitties to create an NFT that mixes traits of both parents on the simplest end. Others like Axie Infinity combine breeding with a game in which players can level up their characters by adventuring or engaging in player-versus-player combat. Players can earn Smooth Love Potions, which are tokens that are used for breeding more Axies and are also tradable. They can be sold on exchanges for a profit.

There’s a lot of interest in expanding the way that gaming NFTs interact — for instance, letting owners buy and sell NFTs that add functionality to a given player character NFT. A warrior NFT could be equipped with a separate NFT of a prized sword, affecting the visual and combat attributes of the character within the game.

That’s more complex than it sounds, since the character NFTs would have to incorporate wallets of their own to hold the add-on NFTs. Incorporating artificial intelligence would also allow those NFT characters to “spend” them in-game, creating other interesting dynamics. But exploring this potential can seem prohibitive, given that the fees required to mint and trade NFTs on Ethereum are very pricey.

The thing is, Toniq Labs is already doing a lot of that with Cronics, Bodily says, noting that individual Cronics have five design slots. “They have a design slot at the head, eyes, mouth, side (for pets), and necks (for accessories),” he explains. “You can actually send little wearable NFTs to those Cronics and dress them up.”

These “wearables” range from things like hats and other fashion accessories to pets that can be attached to a Cronic.

“Lots of people in the Ethereum community are talking about these right now,” Bodily says. “They say, ‘Once you can do wearable stuff, it’s going to explode.’ But we’re already doing it on the Internet Computer because it’s more affordable.”

Three dimensions

 Beyond NFT interoperability and upgradeability, designers are also trying to expand what NFTs can do. One particularly interesting area of experimentation is 3D media.

Supporting 3D art and avatar NFTs are prime objectives, with the emergence of 3D-game projects and metaverse projects like Decentraland offering prime settings for their use. But creators have found that blockchains like Ethereum and Solana can’t handle the size of 3D NFT files, so they have simply created looped videos of the NFT instead.

A project called NFT Studio led by developer Lukas Merville is changing this, giving everyone the ability to mint 3D NFTs that exist on-chain. NFT Studio uses WebAssembly, a code format for executing software in web browsers, for minting NFTs on the Internet Computer, and has built a 3D voxel engine and a pixel engine.

“You can turn images around, there are interactions, sounds, and these 3D objects have all the NFT features,” Merville recently told The Daily Coin. “With Ethereum, for example, there’s just an image, jpeg, or mp4. But here, we can mint the 3D objects, interact with them, and even play games.”

NFTs designed and minted in 3D can be applied in metaverses — the development of spatial internet platforms whose potential has lately drawn increased public attention. But there are plenty of other uses, from bringing celebrity-headlined events into metaverses to modeling fashion and selling virtual clothes for personal avatars, to creating NFTs that hold both a 3D image and instructions that let a 3D printer produce a real-world version.

“You can imagine sitting at your computer and taking a selfie of yourself — a picture of your face and getting an avatar generated in real time,” Bodily says. “And that avatar is an NFT.”

Some NFT projects are already working on interoperable NFTs that can be used across platforms — in-game items, for example — but in what Bodily called “one vision of the future,” he noted that real benefits come with broader interoperability of blockchain-based projects.

An NFT avatar could be “plugged into any number of different games and or online experiences,” he says.

“You could go to the Cronics game and play with your avatar and then jump into a metaverse where you could interact with other people. You can chat, you can go to different rooms. You now have this digital identity which is  persistent across applications to the point where it’s interoperable. And then the line between applications starts to fade a little bit — the internet just becomes you and your identity… across all of these different systems.”

That said, interoperability is still blockchain-specific, with NFT avatars only usable across different chains by approximating the “wrapped Bitcoin” process of parking one token with a trusted third party that creates a version of it on a different blockchain’s protocol — and burns it when traded back.

Bodily noted that the Internet Computer community is actively discussing direct integrations with the Bitcoin and Ethereum networks — with the latter giving smart contracts on both chains the ability to call one another. After all, creating interoperability on a mass scale like that is far more achievable with on-chain infrastructure.

Disclaimer The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
Stan Peterson
756 Articles
Being an active participant in the Blockchain world, I always look forward to engage with opportunities where I could share my love towards digital transformation.