On March 3, 2022, NFT market giant OpenSea began a large-scale ban and removal of accounts associated with an Iranian IP address in an effort to comply with US sanctions legislation. OpenSea had no choice but to comply with the federal requirement, although many criticized the platform for poorly communicating and executing the move. Several Iranian-born artists who no longer reside in the country have locked themselves out of their accounts or removed their collections entirely.
The move revived a debate as old as crypto itself. “We need a truly decentralized market, NOW,” one Twitter commenter written about the event. In the wake of the unfortunate news, several NFT community members have indicated their support for just that position. How could it be, they asked, that in the world of a decentralized Web3, a gatekeeper forbids people from using its services?
What is decentralization?
Critics are right to ask the question, but the answer is more nuanced than it might first appear. Decentralization is a complicated dynamic that should not be confused with a quick fix for all of Web2’s woes. And no matter how familiar you are with the subject, it’s worth asking what decentralization exactly means and what role it plays in the future of Web3.
The concept of decentralization is simpler than it sounds. Rather than having a centralized authority that owns users’ data (as Meta or Google do in Web2), blockchain’s open and permissionless nature enables a more distributed model of content ownership and control. In this model, groups of users, not a single entity, manage data storage and movement.
But beyond this definition, there is little agreement on how much decentralization there should be in Web3 or where it is or is not present. Even measuring it is not always a simple process. For example, if you hold the private keys of your crypto wallet, you undoubtedly own the digital assets in it. But the waters are darkening around Web3 companies, such as NFT marketplaces, that offer services based on blockchain technology. For example, a market may decide to limit or revoke your ability to own the NFTs you own, should they deem it necessary.
Are NFT marketplaces decentralized?
Until recently, this was exactly the case with OpenSea’s policy on stolen items, in which allegedly stolen NFTs were frozen, unable to be sold or traded on the platform, essentially ending the digital asset’s existence on the largest NFT marketplace. that existed, brought to nothing. OpenSea has since updated its policy in response some pretty sharp feedback of users, but the centralized point remains.
It is also difficult to ignore the criticism of who is verified on OpenSea and who is not, as the process can sometimes, seems rather random. Several projects that seem to meet the requirements have either not received their coveted blue tick for months or none at all. Furthermore, the platform just announced that it temporarily pulled Solana-based projects from its Top and Trending statistics pages to “avoid playing off those rankings.”
Given the above, it would be easy to say that decentralization seems to exist more in name than anything else when it comes to OpenSea. But before condemning the platform too vehemently, it’s important to note that decentralization can be a difficult thing to approach and execute. Speaking to nft now about the aftermath of the Ethereum merger, SuperRare co-founders Jonathan Perkins and John Crain noted that it’s nearly impossible to implement full decentralization right away when starting a new Web3 project.
“There have been projects promising and trying to complete decentralization on day one,” Perkins said. “And it often doesn’t work because of coordination issues. We had about three and a half years under our belts when we officially became a DAO. […] We are trying to delegate more and more important parts of the power structure to the community.”
This slow approach shows that decentralization is a work in progress. SuperRare is highly curatorial and accepts artist submissions on an ongoing basis. The resulting exclusivity helped establish the market’s place as a major contributing force in the NFT world, riding on the back of centralized decision-making. To help balance the scales, SuperRare launched Spaces, independent galleries on the market that curate, promote and sell art. SuperRare DAO members vote on galleries, giving them free rein to compile as they see fit.
Nifty Gateway recently did something similar when it launched Publishers, its Shopify-like storefront that gives users registered on the platform access to the same tools the marketplace has used to offer its Curated Drops over the years. These storefronts also allow NFT collectors to partner with artists to promote artwork that might otherwise go under the radar. While these kinds of moves still happen under the banner of a centralized Web3 entity, moving the decentralized needle forward matters a lot in the bigger picture.
Controversial NFT market instruments
Magic Eden, the champion market of Solana-based projects, has also made some decisions that have recently sparked a renewed fervor in the debates about decentralization and royalties. After launching MetaShield in September, a tool that allows creators to block their NFTs from being listed on marketplaces that don’t honor royalties, the company seemingly backtracked on its strong pro-artist stance, claiming that royalties will now be optional on its platform.
The Magic Eden team claims they made the decision after “having discussions with many creators”. It’s a choice regarding an almost hyperbolically sensitive issue that will have enormous ramifications for the NFT ecosystem that helps support it. But what may appear from the outset to be a heavy-handed, centralized move is deceptively challenging to condemn or praise in black-and-white tones. There is an argument to be made that the decision delegates power to the market users to decide whether they want to pay for royalties or not.
Decentralization is a means to an end
NFT marketplaces seem to be largely exploring what decentralization means for their business models, their users, and their goals for the future. The foundation of Web3 ethos is a growing conversation that promotes its unique evolution and binds it to its most prominent speakers’ common sense, flexibility, humility and openness to change.
Repeated calls for truly decentralized marketplaces or social media platforms mean little without potentially viable ideas for alternatives to what we see today. And while Web3 denizens should be wary of serious violations of the idea of decentralization—the ecosystem deserves no less zeal—the space needs more than harsh condemnation coupled with vague advocacy.
Not every gradient from centralized to decentralized that falls within the former’s territory should be demonized. Similarly, decentralization should be seen for what it really is: a means to an end. Web3 could become the most inherently democratic and egalitarian Internet culture and infrastructure society has ever seen, but counterintuitively, some degree of centralization will play an important role in getting there. We have to be open to it.