What Do You Actually Own When You Buy an NFT?

You Bought an NFT. Where's Your File?

During the 2021 NFT boom, JPEG images were trading for hundreds of thousands of dollars. Critics sneered: "Just right-click and save. What are you actually buying?"

NFT supporters shot back: "Ownership is recorded on the blockchain. A copy isn't the same as the original."

Both sides had a point. Both sides were also missing something. The truth is more complicated.

What an NFT Actually Stores On-Chain

An NFT (Non-Fungible Token) is a token recorded on the blockchain. Under the ERC-721 standard, what's actually stored looks something like this:

{
  "name": "Bored Ape #1234",
  "description": "A bored ape",
  "image": "https://ipfs.io/ipfs/QmXoY...abc"
}

Notice what's there — and what isn't. The image itself is not stored on-chain. Only a link (URL) to the image is.

Most NFTs don't store image files directly on the blockchain because it's prohibitively expensive. Storing 1 MB of data on Ethereum mainnet could cost hundreds of dollars. Instead, the image lives on an external server or IPFS, and the blockchain holds only the pointer.

What Happens When the Link Dies?

Here's the problem.

If the NFT metadata points to a centralized server, and that server goes offline, the image is gone. All that remains on the blockchain is a broken link.

This has already happened. In 2021, multiple NFT projects shut down their servers, leaving owners with tokens pointing to empty URLs — NFTs worth nothing displaying nothing.

[Permanently recorded on blockchain]
tokenId: 1234
owner: 0xABC...
metadata: "https://api.coolnfts.com/token/1234"  ← what if this returns 404?

IPFS: A Better Approach

To address this problem, many projects use IPFS (InterPlanetary File System).

IPFS is a distributed file system that addresses files by their content hash rather than their location. The address of a file is derived from what the file contains, not where it's stored. If the file's contents change, the address changes — making content-addressed files tamper-proof by design.

IPFS address: ipfs://QmXoYzh6... (content-based hash)
vs.
HTTP address: https://server.com/image.jpg (location-based, contents can change)

Because IPFS distributes files across multiple nodes, the file remains accessible even if individual nodes go offline — as long as at least one node is "pinning" (actively hosting) the file. That's the catch: if nobody pins the file, it can eventually disappear. IPFS is more durable than a centralized server, but it's not guaranteed permanent storage.

For truly permanent storage, some projects use Arweave, which is designed as a pay-once, store-forever network.

Fully On-Chain NFTs

A smaller but significant category of NFTs stores everything directly on the blockchain.

CryptoPunks originally stored images off-chain, but in 2022 Larva Labs embedded all 10,000 Punk images directly into Ethereum's state. As long as Ethereum exists, those images exist.

Projects like Autoglyphs and certain Art Blocks collections store the generative algorithm itself on-chain rather than a static image. The art is computed from the on-chain code every time it's rendered — no external dependency at all.

Fully on-chain NFTs are the gold standard for permanence, but they remain rare because of the storage cost.

What You Actually Get When You Buy an NFT

Honestly:

What you do get:

A record in a smart contract linking a token ID to your wallet address — cryptographically verifiable proof that the blockchain considers you the owner
Whatever utility or rights the project explicitly grants (community access, commercial licensing, etc.)

What you typically don't get:

Copyright over the image (unless the terms explicitly say so)
The exclusive right to display or copy the image (anyone can still screenshot it)
Protection if the project shuts down (the token persists, but the community and market value may not)

Some projects, like Yuga Labs' Bored Ape Yacht Club, grant commercial rights to holders — meaning you can use your Ape to build a brand, sell merchandise, or license it. That is substantive ownership with real-world implications.

Most NFT projects, however, grant no such rights.

How to Verify What You're Buying

Before buying an NFT, check:

Where is the metadata stored? Look at the tokenURI by calling the contract directly on Etherscan. Does it point to a centralized domain, an IPFS hash, or is it on-chain?
Is the image on IPFS or Arweave? An IPFS link starting with ipfs:// is better than https://some-company.com. Arweave links (ar://) are even more permanent.
What rights does holding grant you? Read the project's terms of service, not just the marketing copy.
What happens if the team disappears? Fully on-chain projects survive without the team; off-chain projects may not.

The speculation has faded, but the underlying technology — verifiable digital ownership with programmable rights — remains genuinely useful for gaming, event ticketing, digital licensing, and more. The key is understanding exactly what you're buying.

To understand the ERC-721 token standard and how smart contracts implement NFT ownership, visit the NFT interactive module.