If you are into cryptocurrencies, then you’ve heard the saying “Not your keys, not your crypto,” or “Not your keys, not your coins.” Have you ever considered that the same principle should apply to NFTs? Yes, the saying “Not your keys, not your NFTs” should be an obvious principle. In fact, NFT marketplaces like Opensea could save a lot of trouble if they could just apply this very simple principle to NFTs.
What Does Not your Keys, Not Your Crypto Mean?
I am going to assume that if you are reading this article you already know the basics of what this means. In short, if you don’t have the private keys to your own crypto wallet, then most likely you are relying on someone else to keep custody of these keys. The most common situation is that you are relying on a third party (i.e. most cryptocurrency exchanges like Binance, Coinbase, Gemini, etc.) to handle the keys to your crypto.
The problem with this is, the said third party also has full custody of “your” crypto. Obviously, that party could take all of your assets, without your consent.
To learn more about what not your Keys, Not your Crypto means, watch the video below.
Crypto is Supposed to Remove Trust and Centralization
Satoshi Nakamoto said “I’ve been working on a new electronic cash system that’s fully peer-to-peer, with no trusted third party.”
Perhaps the two most important key elements of the Bitcoin experiment is that BTC aims to remove trust and centralization. Yes, Satoshi’s goal was to create a system where you and I could exchange crypto without having to trust in a third party.
So, why do millions and millions of users continue to trust in centralized third parties? I don’t claim to have the answer, but a few reasons come to mind:
- Lack of education – Many users don’t understand the risk they are taking when they rely on custodial third parties.
- Convenience – Many users understand the risk, yet they don’t want to be bothered with the hassle of keeping track of their keys.
- Crypto is too complex – It may be that managing crypto is still too complex for the average user.
Regardless of the reason, the fact is too many people let others handle custody of their keys.
Not Your Keys, Not Your NFTs
When it comes to NFTs, the problem is much larger and complicated for two main reasons. Firstly, most NFTs are unnecessarily more complex than crypto. As such, users have a higher difficulty recognizing the risk of not owning their keys. In fact, most NFT users don’t even think about keys. Secondly, most NFTs are created using smart contracts and in said cases the party controlling the smart contract has full control of the NFT.
Collectors buying an NFT on Opensea don’t hold the keys to anything. Rather, they rely on a smart contract that tracks ownership of the NFT. Ultimately someone else has control of the NFT.
The Solana Banana Fiasco
Allow me to illustrate this problem with a real life example. Recently, a Twitter user reported a situation where collectors bought HotSpringMonkey NFTs and woke up one day to find out that their NFTs had been converted into images of bananas.
How could this happen? Fairly easily actually, if someone else controls the contract for those NFTs. My understanding of the situation is that HotSpringMonkey had a DAO (Decentralized Autonomous Organizaion) managing the contract. And the DAO voted to convert any HotSpringMonkey NFT that was listed for sale for less than 1 Sol to a banana.
The idea was to force the market to raise the floor price of these NFTs. But that’s beside the point. The point here is that someone else had full control of the NFT. And this was possible because the smart contract permitted all of this.
Smart Contracts Are The Wrong Tool for Handling NFTs
The biggest problem with trying to apply the Not Your Keys principle to the NFT market is that most NFTs are created using smart contracts. And as we’ll discuss below, smart contracts are the wrong tool for handling NFTs.
Think of how simple a bitcoin transaction is. You give me your receiving address, I enter it in the sending section of my wallet, I enter the amount, and then click send. And that’s all. Within minutes, the transaction is completed and recorded on the blockchain, without the need of a smart contract.
Sending a digital image shouldn’t be more complicated than that and it shouldn’t require smart contracts. Smart contracts may be a good solution for other problems, like decentralized finance (DeFi), but not for NFT sales. The fact is smart contracts are just too complex to be used for simple transactions. These complexities introduce unnecessary risks into the NFT space.
See article best crypto for asset tokenization – 9 Most Common Smart Contract Vulnerabilities, which include:
- Indirect execution of unknown code
- Reentrancy
- Incorrect calculation of the output token amount
- Interface / naming issues
- Dependency on the order of execution
- Time component
- Using the blockhash function
- Incorrectly handled exceptions
- Incorrect work with ERC20 token
Most people use smart contracts to mint NFTs, because that’s what Ethereum did and Ethereum led the way. But this precedence doesn’t mean that smart contracts and NFTs are the best fit for each other. The bottom line is smart contracts are the wrong tool for handling NFTs.
What If You Could Mint and Trade NFTs Using Bitcoin, Without Using Smart Contracts?
You can! Please allow me to elaborate. Bitcoin has been forked to create multiple other currencies. For the most part, these cryptocurrencies utilize major portions of the Bitcoin code, and modify other parts of it. In doing so, developers can create cryptocurrencies aimed at more efficiently solving specific problems. These cryptos could be faster, have bigger blocks, higher supply, etc. One such example of said cryptos is Ravencoin (RVN).
Ravencoin was forked from Bitcoin and modified specifically for the purpose of minting and transferring assets. Ravencoin’s developers modified Bitcoin’s code in order to handle asset creation and transfers at the base layer. RVN doesn’t rely on smart contracts. However, it can be integrated with smart contracts, but that’s not necessary, especially when dealing with simple things like NFTs. The bottom line is that transferring Ravencoin NFTs is as easy as transferring Bitcoin. All you really need is an asset aware wallet.
When you buy an NFT minted on Ravencoin the NFT can be sent to your wallet, just like Bitcoin can be sent to your wallet. The important part is that once the NFT is in your wallet and you have the keys to your wallet, then no one can touch your NFT.
The solution to the Not Your Keys, Not Your NFTs challenge is simple. When you wrap your brain around it you’ll wonder what in the world we were thinking using smart contracts for minting NFTs.
If you are interested in learning how to mint Ravencoin NFTs, this video shows you how using the Mango Farm Wallet.
If you are interested in creating a generative NFT collection, then this video showing a website called Ravenmint is a good place to start.
NFT Proof of Ownership And Proof of Authorship
Having said that, the NFT marketplace struggles with two other related challenges, proof of ownership and proof of authorship. When you buy an NFT, how do you know that what you are buying is the original NFT and not some copycat NFT? Or how do you know that the NFT you are buying was created by the artist you believe created it?
If the NFT you are buying was minted using smart contracts, then you won’t be certain of anything unless you can read code and understand what the smart contract says.
However if you are buying an NFT minted using Ravencoin, you can easily confirm the NFT you are buying is an original NFT from the artist you intended to purchase from. This is because when an NFT is minted on Ravencoin, the creator utilizes unique human readable asset names to create collections and NFTs.
For example, I created a collection called CryptoMona. This is an NFT collection based on Davinci’s Mona Lisa. You can go to Ravencoin Asset Explorer and see the name of the NFT, the name of the collection, and the image associated with that asset. And remember, there can only be one CryptoMona collection on the Ravencoin blockchain. And I am the only person that owns the CryptoMona name on the Ravencoin blockchain.
Can you see how Ravencoin solves the proof of ownership and proof of authorship problem?
Don’t Be Fooled! Not Your Keys, Not Your NFTs
In conclusion, if you are buying NFTs from marketplaces like Opensea, Looks Rare, Rarible, etc then you are buying NFTs minted using smart contracts. If you are buying NFTs using smart contracts, then you don’t really own the keys to your NFT. And as I showed you above, Not Your Keys, Not Your NFTs. The Solana Banana example mentioned above tells the story.
The answer to the Not Your Keys, Not Your NFT challenge is to continue to educate people about the inherent risk of not owning the keys. But most importantly, this challenge would be so much easier to overcome if people stopped using smart contracts to handle simple things like NFTs. There are better protocols out there, like Ravencoin, for simple things like minting and transferring assets.
