Does Ebay’s NFT marketplace KnownOrigin shutdown raise storage concerns?

As someone who has closely followed the development of Non-Fungible Tokens (NFTs) and their growing popularity in the digital art world, I cannot help but be concerned about the current state of NFT storage solutions. Having witnessed the closure of KnownOrigin, a popular NFT marketplace, I have come to realize that the security and sustainability of storing digital art is not as straightforward as it seems.

NFT marketplace KnownOrigin has made an unexpected announcement about its upcoming closure, reigniting discussions on the trustworthiness and durability of platforms for storing Non-Fungible Tokens.

KnownOrigin bows out

Since its establishment in 2018 in Manchester, England, KnownOrigin has become a significant force in the digital art sector. Artists have had the opportunity to create, list for sale, and exchange NFTs (Non-Fungible Tokens) through this platform.

In June 2022, eBay acquired the platform at a yet-to-be-disclosed price, positioning it for greater potential developments in the eyes of many industry observers. This transaction was widely perceived as a strategic move by eBay to establish a foothold in the rapidly expanding NFT market.

It was anticipated that the partnership between eBay and KnownOrigin would capitalize on eBay’s large user community and KnownOrigin’s platform to establish a new marketplace for digital collectibles. Sadly, within just under two years, KnownOrigin has announced its closure.

On February 20, 2024, reports from crypto.news indicated that the NFT marketplace faced internal troubles, as they announced the unfortunate dismissal of 30% of their workforce. This decision came after the NFT market’s excitement had noticeably waned since its peak period from late 2020 to mid-2022.

Approximately five months after the initial event, on July 17, KnownOrigin made a significant announcement via X’s platform. They revealed their intention to shut down their on-chain marketplaces and minter. Simultaneously, they directed users towards alternative marketplaces such as OpenSea and Magic Eden.

Based on thorough examination and assessment, we can verify that KnownOrigin will gradually shut down its on-chain marketplaces and minter during the forthcoming weeks, redirecting users to alternative secondary marketplaces.
— KnownOrigin.io (@KnownOrigin_io) July 17, 2024

The IPFS debate: on-chain vs off-chain storage

The closure of KnownOrigin has raised queries about the durability and safety of digital assets, with the long-term implications still to be determined.

As a researcher exploring the potential use of InterPlanetary File System (IPFS) for storing Non-Fungible Tokens (NFTs), I’ve come across some valid concerns about its sustainability raised by recent news reports. Let me rephrase that in another way: The latest developments have made me ponder over IPFS’s long-term viability as an NFT storage option based on the discussions I’ve encountered in the news.

Digital artist Ella, famously called BrightLightArt, expressed her worries on X following KnownOrigin’s announcement. In her message, she raised the question: “Will eBay continue covering the IPFS storage costs indefinitely? If not, the artwork could eventually disappear.”

It appears that Known Origin, the platform, is shutting down. As for your question, Ebay does not bear the perpetual responsibility of funding IPFS (InterPlanetary File System) storage fees. Consequently, if they cease payment, the associated art could gradually fade away. We were misled by these platforms as the artwork on IPFS doesn’t truly reside on-chain; instead, the NFTs represent mere pointers to external files.
— E L L A (@bright_lightart) July 18, 2024

As a crypto investor, I’ve come across Ella’s perspective which underscores a significant misunderstanding in the NFT (Non-Fungible Token) community. Contrary to popular belief, not all components of NFTs and their related media reside on the blockchain. Instead, most of them are stored off-chain, typically on decentralized or centralized platforms. This misconception can lead to confusion and incorrect assumptions about the true cost and security implications of owning an NFT.

Tech specialists paint a more intricate and less comforting picture of reality. They explain that most Non-Fungible Tokens (NFTs) don’t actually reside on the blockchain itself. Instead, these digital assets consist mainly of metadata which directs to an external file saved on platforms such as IPFS.

As an analyst, I’d put it this way: IPFS is a promising distributed file storage system with the ambition to surpass traditional web servers in terms of resilience. However, it comes with its own set of limitations. For example, if the individual or organization managing the IPFS node decides to shut down their operation or ceases to maintain it, the data stored on that node could become inaccessible. Consequently, any associated NFTs may lose their value.

Understanding what you “own” with an NFT

In a previous article on X, Jonty Wareing expressed his concerns about NFT storage and presented findings from a thorough investigation into how NFTs link to the media they symbolize.

I became deeply intrigued by understanding the underlying connection between NFTs and the media they represent, and my eyebrows have reached new heights in surprise.
— Jonty Wareing ⍼ (@jonty) March 17, 2021

His discoveries were astonishing. He explained that when you buy an NFT, it’s like obtaining a token directing you to a URL or IPFS hash location on the internet. Frequently, this URL leads to a JSON metadata file containing details about the media. This file subsequently connects to the genuine media stored on a server managed by the NFT marketplace.

Jonty gave a illustration using a Beeple artwork that was purchased for $66,666 on Nifty Gateway. The ownership of this artwork is represented by an NFT. However, as per Jonty’s explanation, if Nifty Gateway were to cease operations, the token would become redundant since it points to a JSON file that would no longer exist on their servers.

IPFS storage is not entirely secure for NFTs

A technologist noted that NFTs relying on IPFS hashes for storage still have limitations when it comes to security. Although IPFS operates as a distributed file system, its ability to serve files is contingent upon a node in the network actively choosing to keep the file hosted.

If a startup or the entity managing the IPFS pinning of a file goes out of business, like what happened with KnownOrigin, the file may disappear from the network and leave the associated NFT pointing to a file that can no longer be accessed.

The reliance on external platforms for the long-term preservation of NFT data poses a substantial risk that requires proper resolution.

“Jonty frankly expressed his viewpoint: “Currently, NFTs rest on a shaky foundation erected by those marketing them,” the technology analyst remarked.”

He additionally asserted that the vast majority of NFTs currently purchased may not survive the next decade. This grim prediction highlights the vulnerability of existing NFT preservation methods.

Sam (@cloudonshore), an experienced Ethereum engineer with a strong background in IPFS, responded to Jonty’s criticisms by acknowledging the ongoing development of the technology and emphasizing the importance of enhancing tools and best practices to ensure the security and durability of NFTs.

As an experienced Ethereum engineer with a solid background in IPFS technology, I can confirm that the technical assertions put forth in this discussion are accurate. The field is still evolving, and we’re continuously refining our methods and establishing best practices. Constructive criticism is highly valued as it contributes to our ongoing improvement. We acknowledge the need for enhanced tooling to effectively leverage IPFS and NFTs together.
— sam (@cloudonshore) March 17, 2021

Taking this into consideration, it’s essential to mention that not every NFT encounters this challenge. In fact, some initiatives operate entirely on the blockchain, ensuring a decentralized infrastructure for storing both the NFT metadata and their associated visual media.

Regrettably, a significant barrier to wider implementation of similar initiatives is the high cost associated with using full on-chain storage, particularly for projects dealing with larger media files.

Potential solution and future considerations

The closure of KnownOrigin has sparked deep reflection among members of the NFT community, leading some artists and collectors to propose the adoption of alternatives like Arweave. This decentralized storage platform distinguishes itself from IPFS by offering everlasting data storage for a single payment through its blockchain technology.

Just as with NFT .storage shifting towards a paid model, we employ IPFS, Arweave, and Datalayer, among others, to ensure our NFTs’ data storage. Additionally, we remain open to incorporating further links for novel data storage methods that may emerge in the future. Avoid relying solely on one option 🧠
— 🌱Monkeyzoo🌱 (@monkeyzoo) July 18, 2024

Storing files on such platforms means they’re distributed among a network of computers that operate independently. In theory, this setup ensures the file’s accessibility as long as the network remains functional. As a result, it presents an attractive choice for preserving digital art over the long term, although its dependability ultimately hinges on the condition and durability of the underlying network.

What’s next?

The shutdown of KnownOrigin marketplace is a stark reminder for the NFT community about the significance of grasping the intricacies of NFT storage and acknowledging potential hazards in existing methods.

As technology advances, it will be increasingly important for NFT platforms, artists, and collectors to champion and implement safer and eco-friendly methods for storing digital artwork.

Relying on external, off-line data storage for Non-Fungible Tokens (NFTs) comes with substantial risks. If these storage services experience downtime, there’s a chance that valuable NFT data could be lost, compromising both their worth and authenticity.

It’s my hope that the ensuing conversations initiated by this occurrence could yield substantial advancements in the way digital art is archived and safeguarded. In turn, this would bring about positive changes for the larger crypto art fraternity.

2024-07-19 21:05