Does eBay’s NFT marketplace KnownOrigin shut down raise storage concerns?

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

KnownOrigin gives up

KnownOrigin, since its inception in 2018 in Manchester, England, has been a major player in the digital art space. It has offered an avenue for artists to mint, sell, and trade NFTs.

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

The deal was expected 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 is closing its doors.

Signs of the NFT market’s troubles emerged on February 20, 2024, when it laid off 30% of its staff, as reported by crypto.news. The layoffs followed a cooling of 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 via a series of X posts that it would be shutting down its on-chain and miner marketplaces. It also redirected users to secondary marketplaces, including Open sea and Magical Eden.

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

While the full impact of KnownOrigin’s closure is still unknown, one thing it has caused is to question 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, took to X following KnownOrigin’s announcement to voice her concerns. In her post, the artist stated, “Is eBay going to pay 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 still has its limitations. For example, if the entity responsible for hosting the IPFS node goes out of business or stops maintaining the node, the data could become inaccessible, effectively rendering the NFT worthless.

Understanding What You “Own” with an NFT

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

His findings were eye-opening. According to him, when you buy an NFT, you are essentially buying a token that points to a URL on the internet or an IPFS hash. In many cases, that URL points to a JSON metadata file that includes information about the media. That file, in turn, links 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. Now, according to him, if Nifty Gateway were to shut down, the token would point to a non-existent file.

IPFS storage is not completely safe for NFTs

The technologist also stated 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 on 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, 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: “At the moment, NFTs are built on a house of cards built by the people selling them,” said the digital researcher.

He further stated that every NFT sold so far will likely be broken within the next ten years. This stark warning highlights the fragility of current NFT storage solutions.

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

However, you should note that not all NFTs face this issue. Some projects are entirely on-chain, meaning they have a decentralized system for storing 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 for the use of storage solutions such as Arweave. Unlike 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, theoretically guaranteeing its availability for as long as the network exists. This makes it a more reliable option for storing digital art in the long term, although it still relies on the health and continuity of the underlying network.

What is the next?

KnownOrigin’s closure 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 be critical for NFT platforms, artists, and collectors to advocate for and adopt more secure and sustainable storage solutions for digital art.

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

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

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