KnownOrigin Shutdown Sparks Debate Over NFT Storage Reliability

KnownOrigin has announced its imminent shutdown, reigniting debates about the reliability and longevity of NFT storage solutions.

KnownOrigin Bows Out

Since its inception in 2018 in Manchester, England, KnownOrigin has been a significant player in the digital art space, providing artists with a platform to mint, sell, and trade NFTs. The platform seemed poised for greater success when eBay acquired it in June 2022 for an undisclosed amount. Industry watchers viewed 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 trouble surfaced on February 20, 2024, when KnownOrigin laid off 30% of its staff, as reported by crypto.news. The layoffs followed a cooling off of the NFT frenzy that had characterized the crypto space from late 2020 to mid-2022. On July 17, KnownOrigin announced via posts on X that it would be winding down its on-chain marketplaces and minter, redirecting users to secondary marketplaces like OpenSea and Magic Eden.

The IPFS Debate: On-Chain vs. Off-Chain Storage

The full impact of KnownOrigin’s shutdown is yet to be determined, but it has already prompted questions about the longevity and security of digital assets. Concerns have also been raised about the sustainability of the InterPlanetary File System (IPFS) as a storage solution for NFTs.

Digital artist Ella, known as BrightLightArt, expressed her concern on X following KnownOrigin’s announcement. She questioned, “Are eBay going to pay the IPFS storage bill forever? If they stop paying, the art will eventually die.” Ella’s sentiment underscores a critical issue in the NFT ecosystem: the misconception that NFTs and their associated media are entirely on-chain.

In reality, most NFTs are not stored directly on the blockchain. Instead, they contain metadata pointing 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 limitations. If the entity responsible for hosting the IPFS node goes out of business or stops maintaining the node, the data could become inaccessible, rendering the NFT effectively worthless.

Understanding NFT Ownership

Jonty Wareing, a vocal critic of the current state of NFT storage, shared the results of an extensive analysis on X about how NFTs reference the media they represent. His findings were eye-opening. When purchasing an NFT, you essentially buy a token that points to a URL on the internet or an IPFS hash. This URL often leads to a JSON metadata file containing information about the media, which is hosted on a server controlled by the NFT platform.

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

IPFS Storage Is Not Entirely Secure

Even NFTs using 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 keeps hosting the file. If the entity responsible for pinning the file to IPFS goes out of business, the file could vanish from the network, leaving the NFT pointing to an inaccessible file.

This dependency on third-party platforms for the longevity of NFT data is a significant vulnerability. Jonty’s assessment was blunt: “Right now, NFTs are built on an absolute house of cards constructed by the people selling them.” He further claimed that every NFT sold so far will likely be broken in the next ten years. This stark warning underscores the fragility of current NFT storage solutions.

Potential Solutions and Future Considerations

The KnownOrigin shutdown has prompted a wave of introspection within the NFT community. In response to these concerns, some artists and collectors advocate for using storage solutions like Arweave. Unlike IPFS, Arweave is a blockchain-based storage solution that aims to provide permanent data storage for a one-time fee. Files stored on such platforms are distributed across a decentralized network of computers, theoretically ensuring their availability as long as the network exists. This makes it a more reliable option for storing digital art long-term, though it still relies on the health and continuity of the underlying network.

What’s Next?

The closure 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. 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 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. The discussions sparked by this event may lead to significant improvements in how digital art is stored and preserved, ultimately benefiting the entire crypto art community.

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