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

KnownOrigin’s recent announcement of its closure has sparked new discussions about the reliability and longevity of NFT storage solutions.

KnownOrigin is withdrawing

KnownOrigin has been a major player in the digital art space since it was founded in Manchester, England in 2018. It offered artists a way to mint, sell, and trade NFTs.

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

The deal was expected to create a new marketplace for digital collectibles, leveraging eBay’s large user base and KnownOrigin’s platform. But less than two years later, KnownOrigin is closing up shop.

Signs of the NFT market’s troubles surfaced when it laid off 30% of its staff on February 20, 2024, crypto.news reported. The layoffs followed the cooling of the NFT craze that characterized the crypto space from late 2020 to mid-2022.

Months later, on July 17, things came to a head when KnownOrigin announced via a series of posts on X that it would be shutting down its on-chain marketplaces and mint. It also directed users to secondary marketplaces like OpenSea and Magic Eden.

After careful consideration and evaluation, we can confirm that KnownOrigin will continue to phase out on-chain marketplaces and cryptocurrency minting (and redirection to secondary marketplaces) in the coming weeks.

— KnownOrigin.io (@KnownOrigin_io) July 17, 2024

IPFS debate: on-chain vs off-chain storage

While the full impact of KnownOrigin’s shutdown is not yet known, one thing it does do is raise questions about 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, aka BrightLightArt, took to X to voice her concern following KnownOrigin’s announcement. “Is eBay going to pay the IPFS storage bill forever? If they stop paying, the artwork will eventually die,” the artist wrote in her post.

Known Origin is shutting down.

Will Ebay foot the IPFS storage bill forever?

If they stop paying, art will eventually die.

We have been sold a lie by the platforms. Art on IPFS is not actually onchain. The NFT you mint is just a link to an offchain file.

This…

— ELLA (@bright_lightart) July 18, 2024

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

As tech experts have detailed, the reality 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 durable than traditional web servers, it still has its limitations. For example, if the organization responsible for hosting the IPFS node goes bankrupt or stops maintaining the node, the data could become inaccessible, effectively rendering the NFT worthless.

Understanding what you “own” with an NFT

Jonty Wareing, a vocal critic of the current state of NFT storage, previously published a post on X, sharing the results of a comprehensive analysis of how NFTs reference the media they represent.

Out of curiosity, I looked into how NFTs actually refer to media you “buy,” and my eyebrows are now in orbit around the moon

— Jonty Wareing ⍼ (@jonty) March 17, 2021

His findings were eye-opening. According to him, when you buy an NFT, you’re essentially buying a token that points to a URL on the internet or an IPFS hash. In most cases, that URL points to a JSON metadata file containing 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 for $66,666 on Nifty Gateway. The NFT points to a JSON file hosted on Nifty’s servers. Now, according to him, if Nifty Gateway shuts down, the token will point to a non-existent file.

IPFS storage is not completely safe for NFTs

The technologist also noted 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 knowingly hosts the file.

If the startup or organization responsible for pinning the file to IPFS goes bankrupt (as is the case with KnownOrigin), the file could disappear from the network and similarly the NFT could point to an inaccessible file.

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

Jonty’s assessment was clear: “Right now, NFTs are built on an absolute tower of cards built by the people who are selling them,” the digital researcher said.

He also claimed that every NFT ever sold will likely be corrupted within the next decade. This stark warning highlights the fragility of current NFT storage solutions.

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

As an Ethereum engineer with a lot of IPFS experience, all of the technical claims made in this thread are true. The technology is new and we are still iterating and creating best practices. Criticism is welcome! It will make us better. We need better tools around IPFS and NFTs.

— sam (@cloudonshore) March 17, 2021

However, you should note that not all NFTs face this issue. Some projects are completely on-chain, meaning they have a decentralized system for storing both NFT metadata and visual media.

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

Potential solutions and future considerations

The closure of KnownOrigin has sparked a wave of introspection in the NFT community. In response to these concerns, some artists and collectors are advocating the use of 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.

The same goes for NFT .storage switching to a paid model.

We use IPFS, Arweave, and Datalayer (maybe add Onchan too 😉) for all our NFTs, and we may add more connections to whatever data storage solutions come up in the future.

Don’t put all your eggs in one basket 🤓 picture.twitter.com/t8Df3Y6R7i

— 🌱Monkeyzoo🌱 (@monkeyzoo) July 18, 2024

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

What’s next?

KnownOrigin’s closure should serve as a wake-up call for the NFT community, demonstrating 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 reliance on off-chain storage solutions and the potential for data loss if these services go offline poses significant risks to the value and integrity of NFTs.

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