At the World Blockchain Summit yesterday, there was a good discussion on DeFi, CeFi, alternatives to PoW, even PoS, and of course, NFTs, Metaverse and Web 3.0.

But what started brewing in my mind was the risk of those marketplaces, who use centralised storage for the actual NFTs. These marketplaces must therefore remain solvent for as long as the NFTs they store are actively traded. For if they disappear, what use would be to secure the blockchain address to which the NFT is linked and to demonstrate ownership of? The actual NFT – the underlying asset – having disappeared from the real world, leaving the hash and metadata to live on the blockchain forever like an orphan!

In my view, the possibility of these centralised marketplaces disappearing is not so far-fetched, having seen the fate of some players in the crypto ecosystem in recent times – Axie Infinity (NFT video game), Terra Luna (stablecoin), Polygon (DeFi interoperable protocol) and Three Arrows Capital (crypto hedge fund), just to name a few. No surprise that the Managing Director of the Monetary Authority of Singapore (MAS), called the developing crises a “bloodbath”. Another concern is that some of these marketplaces with multi-billion dollar valuations are still private enterprises.

I brought this up with few speakers and developers during the breaks. They all seem to know and recognise the problem, so that left me more bothered as I left the summit and reached out to one of my expert colleagues who acknowledged the problem as well. Later in the evening, I stumbled on The Sad Truth About OpenSea – the exact problem voiced by Alfredo de Candia, author of Mastering DeFi and NFT, with an example of the largest marketplace, surprising me even more that this problem has not yet become an overriding concern for many, even with the euphoria over everything that encompasses Web 3.0 today.

This begs the question whether decentralised storage should become the norm for NFTs, making them more resilient and for marketplaces simply to broker the transaction?

Yet another related concern is that only a couple of institutional custodians that I am aware of, has made it their priority to support NFT custody by integrating with Metamask Institutional or an equivalent web plug-in. My view is that NFT custody must be available as a default and must therefore become a priority, if we expect small, medium and large enterprises to find ways to incorporate them in their business models.

The optimist in me is hoping for these NFT risks to be mitigated soon, and in the longer term, see decentralised commerce thrive across interoperable distributed ledgers and ecosystems, with a view as clear as Webb’s first images we saw couple of days ago. 🙂

CC-BY Viren Mantri, 2022, licensed under a Creative Commons Attribution 4.0 International License.

Disclaimer: All views expressed here are entirely mine.