Delayed response but anyway...
There isn't any physical item however, unless you produce it, slap a signature on it and sell it at physical auction with the private keys attached (or transfer it to new address etc). The physical format is mere novelty, not relevant.
I think its relevant. I can pull up a collection of NFT baseball trading cards I have, press the phone screen to flip the card to the reverse side and read the stats for the player.
By physical format I was meaning something you can touch, but I realise you were specifically referring to the non-physical attributes only. For example with digital music there is no need for the physical disc or tape, having ownership and ability to access this media appears to be more than enough for most buyers. Not the greatest comparison I know, but more to elaborate on why I don't believe NFT's require a physical format beyond their digital media format. Of course at an auction house, IRL, showing a smart contract of 0s and 1s isn't going to sell as well as a physical copy of that NFT itself
If the host server for the image were to go down and never come back up, and that image wasn't backed up elsewhere, indeed all the NFT would be is a collection of ones and zeros.*
If you only need an NFT to express the concept of ownership, then yes all you need is ones and zeros.
I'm not entirely sure about this. When Pondware went offline, and thus it's cat collection was considered "lost", the felines were extracted into an unofficial rescue contract and the collection was able to be accessed again via markets such as opensea. Maybe I misunderstood what occurred, and there were still the basic attributes accessible via Pondware's servers that were therefore able to be reconstructed, and only the market was unavailable. If this was the case then for sure, if the entire server went down, even rescuing a collection based on it's smart contract data wouldn't be enough to restore the collection's full attributes.
That said, NFTs are still in their nascent stages. It might seem like the industry is 4 years old already due to some punks that are worth than bitcoin now, but really it's only been this year that the ball has got rolling and they have become a billion dollar industry. Over time I imagine there will be ways to preserve the full representation of NFTs, and already decentralized markets are assisting with this it seems. For example many collections appear to be more popular on opensea than they are from the server they were created from, even if for example the digital punks are still mainly sold via larvalabs it seems. When a collection becomes available on a handful of decentralized markets, to me it already seems enough to avoid losing the original server data, even if the developers shut down their interface.
I agree that a lot of NFTs are waaay over-valued and over-hyped, and the NFT market could be somewhere in the first phase of a giant bubble. But what remains standing after that will be of all the more value going forward.
*there is a solution to this and its to upload the image to a Creative Commons library or some other distributed library service like
IPFS.
It's true that decentralizing the content of the NFT is somewhat important. Many are becoming animated and so fourth, with only a basic representation of this in it's 0 and 1s format.
