Decentralized NFT Marketplaces: Myth or Reality?

When looking at the current NFT marketplace ecosystem, (de)centralization is a recurring debate.

Yes, DeFi is supposed to mark the shift from the traditional financial system to a new, open and free financial ecosystem without any control. 

Yes, decentralized applications (DApps) are meant to be devoid of an intermediary. Leading many to advocate for and aspire to NFT marketplaces functioning as decentralized, horizontally-run spaces.

But how decentralized systems are supposed to operate and how they are actually working in real life are two (very) different things.

So when it comes to decentralized vs. centralized NFT marketplaces, where do we stand?

Let’s dive in.

A glance at NFT Marketplaces: the case for centralization

Just a quick recap first: NFT marketplaces are platforms where people (mostly creators) can mint, buy, and sell the NFTs they create.

There are dozens of established marketplaces out there.

From Binance NFT to Nifty Gateway, Rarible, Async Art; from MakersPlace, Foundation to SuperRare, Kalamint, and Hic et Nunc, most platforms have their own specialization (generative art, photography, etc.) and preferred token(s). 

But they have one common point: they are considered centralized spaces. Indeed, many are in charge of the content showcased and sold on their platforms, its copyright and ownership, the fees charged, to various degrees.

For certain marketplaces, such as SuperRare, that actually filter the artists that can be featured and curate the artworks that are showcased, centralization (in the form of censorship/regulation) goes even further.

OpenSea: myth vs. facts

In this sea of centralized platforms, OpenSea has emerged as a true disrupter. Why? Because it operates more as a listings aggregator than a gallery.

The benefits of OpenSea, presented as a community-driven platform, are obvious:

  • It allows ownership and copyrights are held by the creators rather than big corporations.
  • With no censorship or curation, every user gets a level playing field where they can showcase their work and talent for people to recognize and invest in.
  • Gas fees can be significantly decreased and the marketplace therefore becomes affordable to all kinds of users.

However, this description of OpenSea being the paragon of decentralization doesn’t really hold when confronted with some events from the recent past.

When a case of insider trading was revealed last September, the platform had to intervene by putting in new employee policies to regulate trading on their platform. And when they found out they were hosting a collection of Hitler-themed NFTs (created using the marketplace’s own template!), they promptly delisted the tokens.

Similarly, when prominent art gallery owner Todd Kramer got his $2.2 million NFT collection stolen from his wallet on the platform, OpenSea responded by freezing the stolen assets.

The fact that they preferred to intervene between the two parties as an intermediary, rather than letting the code be the ultimate ruler, created some backlash. This centralized intervention was indeed proof they did not respect the principles of DeFi. 

Where are we headed?

As of today, at the beginning of 2022, the future of NFT marketplaces seems to be headed in two radically different directions.

On the one hand, we’re witnessing an increasingly visible trend of Decentralized Autonomous Organizations (DAOs) acting as Marketplaces (and vice versa). In such cases, the NFT marketplaces include a “governance feature” such that people holding the native cryptocurrency/token can vote on critical decisions impacting the platform.

For instance, Rarible’s ultimate goal is to evolve towards a DAO, where all decision rights will belong to their users, clearly showing the way for increased decentralization.

On the other hand, the fact that tech giants are launching their own NFT marketplaces seems to indicate that more potential traders will be drawn toward centralized systems.

Shopify’s promise to “take the complexities out of crypto”, it will surely bring lots of new users to NFTs… but is also a real step back from a decentralized ideal.

Similarly, no doubt that Meta’s plans to get into NFT sales with their own platform will create lots of waves and their enterprise will not be anywhere close to a decentralized space.

These two very different paths embody two different philosophies, and may just announce that the liberal philosophy behind web3 may have already disappeared.

Or has it? Let’s live and see.

Credits: Rarible, OpenSea, Binance NFT, Meta, NiftyGateway and Shopify.

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