Does the shutdown of eBay’s NFT marketplace KnownOrigin raise storage concerns?

KnownOrigin has announced its imminent closure, sparking renewed debate about the reliability and longevity of NFT storage solutions.

KnownOrigin bows out

Since its creation in 2018 in Manchester, England, KnownOrigin has been a major player in the field of digital art. It offers artists a way to create, sell and exchange NFT.

The platform seemed poised for even bigger things when eBay bought in June 2022 for an undisclosed amount. At the time, many industry observers saw it as a strategic move for the e-commerce giant to enter the booming NFT market.

The deal was supposed to leverage eBay’s vast user base and KnownOrigin’s platform to create a new marketplace for digital collectibles. However, less than two years later, KnownOrigin closed shop.

Signs of the NFT market’s problems surfaced on February 20, 2024, when it laid off 30% of its staff, reported by crypto.news. The layoffs follow a slowdown in the NFT frenzy that characterized the crypto space from late 2020 to mid-2022.

Months later, on July 17, things came to a head, with KnownOrigin announcing in a series of posts on X that it would be shutting down its on-chain marketplaces and miner. It also redirected users to secondary marketplaces, including OpenSea and Magic Eden.

The IPFS Debate: On-Chain or Off-Chain Storage

While the full impact of KnownOrigin’s shutdown is still unknown, one of the things it has caused is a questioning of the longevity and security of digital assets.

The news also raised concerns about the sustainability of the InterPlanetary File System (IPFS) as a storage solution for NFTs.

Digital artist Ella, also known as BrightLightArt, reached out to X following KnownOrigin’s announcement to express her concerns. In her message, the artist said: “Is eBay going to foot the IPFS storage bill forever? If they stop paying, art will eventually die.”

Ella’s sentiment highlights a critical issue in the NFT ecosystem: the misconception that NFTs and their associated media are entirely on-chain.

The reality, as detailed by tech experts, is more complex and less reassuring. According to them, most NFTs are not stored directly on the blockchain. Instead, they contain metadata that points to an off-chain file stored on platforms like IPFS.

While IPFS is a distributed file storage system that aims to be more resilient than traditional web servers, it does have its limitations. For example, if the entity responsible for hosting the IPFS node goes bankrupt or stops maintaining the node, the data could become inaccessible, rendering the NFT effectively worthless.

Understanding What You “Own” With an NFT

In a previous post on X, Jonty Wareing, a vocal critic of the current state of NFT storage, shared the results of an in-depth analysis of how NFTs reference the media they represent.

His findings are revealing. According to him, when you buy an NFT, you are actually buying a token that points to a URL on the internet or an IPFS hash. In many cases, this URL points to a JSON metadata file that includes information about the media. This file, in turn, points to the actual media hosted on a server controlled by the NFT platform.

Jonty used the example of a Beeple artwork that sold on Nifty Gateway for $66,666. The NFT points to a JSON file hosted on Nifty’s servers. However, according to him, if Nifty Gateway were to shut down, the token would point to a non-existent file.

IPFS storage is not fully secure for NFTs

The technologist also said that even NFTs that use IPFS hashes for storage are only partially secure. While IPFS is a distributed file system, it only serves files as long as there is a node in the network that intentionally continues to host the file.

If the startup or entity responsible for pinning the file to IPFS goes bankrupt, as is the case with KnownOrigin, the file could disappear from the network, similarly leaving the NFT pointing to an inaccessible file.

This reliance on third-party platforms for the longevity of NFT data is a significant vulnerability that needs to be addressed.

Jonty’s assessment was blunt: “Right now, NFTs are built on a veritable house of cards built by the people selling them,” the digital researcher said.

He also claimed that all NFTs sold so far will likely be destroyed within the next ten years. This stark warning underscores the fragility of current NFT storage solutions.

Sam (@cloudonshore), an Ethereum engineer with extensive IPFS experience, acknowledged the criticisms raised by Jonty, saying that the technology is still evolving and the industry needs better tools and practices to ensure the security and permanence of NFTs.

It should be noted, however, that not all NFTs face this problem. Some projects are entirely on-chain, meaning they have a decentralized system for storing both NFT metadata and their visual media.

Unfortunately, the biggest obstacle to more projects adopting such measures is the fact that full on-chain storage is not cheap, especially for projects with larger media files.

Potential solution and future considerations

The closure of KnownOrigin has sparked a wave of introspection within the NFT community. In response to these concerns, some artists and collectors are advocating the use of storage solutions such as ArtistUnlike IPFS, Arweave is a blockchain-based storage solution that aims to provide permanent data storage for a one-time fee.

When you store a file on such platforms, it is stored on a decentralized network of computers, which theoretically guarantees its availability as long as the network exists. This makes them a more reliable option for storing digital art in the long term, although it still depends on the health and continuity of the underlying network.

And after?

The shutdown of KnownOrigin should serve as a wake-up call for the NFT community. It highlights the importance of understanding how NFTs are stored and the risks associated with current practices.

Additionally, as technology evolves, it will become imperative for NFT platforms, artists, and collectors to advocate for and adopt more secure and sustainable storage solutions for digital art.

The use of off-chain storage solutions and the risk of data loss if these services go offline pose significant risks to the value and integrity of NFTs.

We hope that the discussions sparked by this event can lead to significant improvements in how digital art is stored and preserved, ultimately benefiting the entire crypto art community.

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