Metadata simply put is data that describes data. Although it has become an NFT buzzword, metadata within computing is certainly not new. For instance, an HTML document may hold data but the <header> is its metadata.
In the non-fungible token world, metadata and token attributes are key elements that make each token unique and collectible. It can be data that describes a token’s image, origin, author, quantity, and a multitude of other elements.
Each NFT has its own smart contract which points to its metadata which makes up the asset. A loose example is that we ourselves are non-fungible, each with our own set of properties and characteristics which could be classed as metadata making up who we are as individuals.
Although a relatively simple concept in itself, token metadata are an integral part of the accessible value behind any non-fungible token offering authorship, provenance, and rarity including many other complex attributes which can add value to a token.
Platforms and marketplaces also read token metadata enabling them to display a rich version of the token and a correct version of the NFT on their platform. For instance, an Axie’s token metadata would describe its color, shape, gene pool, and other attributes such as its name and image.
On the other hand, token metadata can also describe actioned attributes that can power such things as licensing agreements, intellectual property rights or perpetual royalties to the author, rights that are cryptographically linked to legally enforceable agreements, and much more.
The early days of tokenizing digital collectibles such as CryptoPunks and CryptoKitties were a precursor for the start of a whole universe of digital and physical possessions being described by its metadata, with verifiable ownership and traceability backed by cryptography. The potential for many different types of assets backed this way is immense with many use cases as of yet unexplored. From complex legal agreements to gaming assets, art, and financial products, it remains to be seen how integrated NFTs and their metadata become into our physical lives in the future.
There have been different metadata standards that have been proposed for specific applications. Metadata standards establish a common way of structuring and understanding data, including the standards principles, implementation methods, and likely issues.
The first non-fungible accepted standard was ERC-721, which itself evolved from the ERC-20 fungible token standard. ERC-721 ensures the absolute ownership and uniqueness of digital assets. Tokenized non-fungible digital assets are interoperable across multiple ecosystems, including digital marketplaces and environments where they can be used such as games, virtual worlds, and financial systems.
ERC-721 standard does not restrict the addition of extra functions and therefore developers are free to build complex descriptions into their tokens. Both the ERC-20 and ERC-1155 require the deployment of an entirely separate contract for each token type and collection.
Building on the ERC-721 established framework the ERC-1155 standard focuses on contracts that can manage multiple token types, one standalone contract could include endless combinations of both fungible and non-fungible tokens and can also contain other configurations such as semi-fungible tokens.
As mentioned above the ERC-20 and ERC-1155 require a separate contract for each token type which can be limiting for certain functions. With the development of new use cases for tokenization, there is a need for a new type of flexible standard which can support thousands of token types.
Where token metadata is stored is of some controversy in the NFT world, with both off and on-chain solutions having pros and cons, with their own cost, security, and interaction implications. It is certainly one of the first decisions any developer will have to make when creating a token.
The tokens’ smart contract points to the metadata and some of that data can be held on-chain and is included with the token smart contract and some can be held off-chain.
Storing data on-chain is currently costly but very secure whereas storing some of the data off-chain can greatly reduce costs but can mean that data can be lost over time and is not able to change in line with on-chain logic updates.
The risk of the token and its metadata becoming separated in the future is particularly true when centralized servers are used to store a part of an NFTs data, if the server goes down or the company goes out of business then the NFT will no longer function or vital parts of its information, such as the image file, will be lost forever.
Currently, there are compromises to be made in regards to which solution is best. For example, OpenSea marketplace has implemented a centralized server to host certain files for their NFT service. On the other hand, Known Origin, utilizes the InterPlanetary File system (IPFS) which is a distributed peer-to-peer file sharing system that works well in partnership with blockchain technology.