Here’s why the path to decentralized marketplaces won’t be linear

On March 3, 2022, NFT marketplace giant OpenSea initiated a large-scale ban and removal of accounts associated with an Iranian IP address in an attempt to comply with US sanctions law. OpenSea had no choice but to obey the federal demand, although many criticized the platform for poorly communicating and executing the move. Several Iranian-born artists who no longer reside in the country were locked out of their accounts or had their collections removed complete.

The move revived a debate as old as crypto itself. “We need a truly decentralized marketplace, NOW,” one Twitter Commenter wrote about the incident. In the wake of the unfortunate news, several NFT community members signaled their support for that very position. How is it, they asked, that in the world of a decentralized Web3, a gatekeeper forbids people from using their 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 to all of Web2’s problems. And no matter how familiar you are with the subject, it’s worth asking what decentralization means, exactly, 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), the open and permissionless nature of the blockchain enables a more distributed model of ownership and control of content. 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 have the private keys to 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 marketplace may decide to limit or revoke the ability to sell or trade the NFTs you own, should they deem it necessary.

Are NFT marketplaces decentralized?

Until recently, this was precisely the case with OpenSea’s Stolen Items Policy, where allegedly stolen NFTs were frozen, unable to be sold or traded on the platform, essentially nullifying the digital asset’s existence on the largest NFT marketplace that exists. OpenSea has since updated its policy in response some pretty sharp feedback from users, but the centralized point remains.

It is also difficult to ignore the criticism surrounding who gets verified on OpenSea and who doesn’t, as the process can at times, seems quite random. Several projects that appear to meet the requirements have either not received their coveted blue tick for months or have not received one at all. Furthermore, have the platform just announced that it temporarily pulled Solana-based projects from its top and trending stats pages to “avoid gaming 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 you condemn the platform too harshly, it’s important to note that decentralization can be a difficult thing to approach and execute. While speaking with nft now about the aftermath of the Ethereum merger, SuperRare co-founders Jonathan Perkins and John Crain noted that it is almost impossible to implement full decentralization right away when starting a new Web3 project.

“There have been projects that promise and attempt to complete decentralization on day one,” Perkins said. “And it often doesn’t work because of coordination issues. We were about three and a half years behind us when we officially became a DAO. […] We are increasingly trying to delegate important parts of the power structure to the community.”

This slow approach reveals that decentralization is a work in progress. SuperRare is highly curatorial and accepts artist applications on a rolling basis. The resulting exclusivity has helped establish the marketplace’s place as a major contributor to the NFT world, following centralized decision-making. To help balance the weight, SuperRare introduced Spaces, independent galleries in the marketplace that curate, promote and sell art. SuperRare DAO members vote on galleries, giving them free roaming to curate 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 present 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 types of moves still take place under the banner of a centralized Web3 entity, they matter quite a bit in the bigger picture of moving the decentralized needle forward.

Controversial NFT Marketplace Tools

Magic Eden, the marketplace for Solana-based projects, has also made some decisions that have recently sparked a renewed fervor in the decentralization and royalty debate. After introducing MetaShield in September, a tool that allows creators to exclude their NFTs from being listed on marketplaces that don’t respect royalties, the company has apparently backtracked on its staunch 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 huge ramifications for the NFT ecosystem it helps support. But what may look like a heavy-handed, centralized move from the outset 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 marketplace users to decide whether or not to pay for royalties.

Decentralization is a means to an end

NFT marketplaces appear to be largely exploring what decentralization means for their business models, their users, and their goals for the future. The fundamental Web3 ethos is an expanding conversation that fosters its unique development and binds it to the common sense, flexibility, humility and openness to change of its most prominent speakers.

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 must be wary of serious violations of the idea of ​​decentralization—the ecosystem deserves no less diligence—the space needs more than harsh condemnation combined with vague advocacy.

Not all gradients ranging from centralized to decentralized that fall on the territory of the former should be demonized. In the same way, decentralization must be seen for what it really is: a means to an end. Web3 may become the most inherently democratic and egalitarian internet culture and infrastructure society has yet seen, but counterintuitively some level of centralization will play an important role in getting there. We should be open to it.