Creators have long been hindered by the existence of intermediaries that own the copyright to their work. However, the advent of Non-Fungible Tokens (NFTs) has transformed the creative economy and allowed for a direct relationship between artists and their audiences. With this new paradigm, artists are able to mint their work, turning it into a digital collector’s item that can appreciate in value.

The NFTs Marketplace

NFT Marketplaces are platforms where you can create, buy, sell, and store NFTs. They are decentralized, which means that they are not controlled by any one person or organization.

Typically, NFT marketplaces have certain features, such as a dashboard that gives users all the information they need about a listed asset, like the asset’s owner, bids, value history, and a preview of the digital collectible. More advanced marketplaces also have a function for advanced token search, which lets users get complete information about listed NFTs with a simple search. In addition, NFT marketplaces let users place bids, buy recorded digital assets and crypto collectibles, and create and list their own.

Streamlined and Augmented Market Places

A marketplace is categorized as an augmented marketplace if it focuses on a particular type of NFTs and provides more sophisticated services to sellers such as storage and display of digital collectibles. NFTs marketplaces can be broadly categorized into two types: Streamlined Marketplaces and Augmented Marketplaces. Streamlined Marketplaces offer a broad range of digital collectibles as NFTs, and provide sellers with fewer, more generic services. These marketplaces are mostly concerned with facilitating efficient transactions, such as providing a payment infrastructure to enable the sale and purchase of NFTs. They also enjoy a broader base of users because they offer a more diverse collection of NFTs for sale. Augmented Marketplaces, on the other hand, focus on a particular type of NFT and provide more sophisticated services to sellers, such as storage and display of digital collectibles.

An augmented marketplace is a specialized marketplace that provides a variety of value-added services to a smaller group of users. These services can include creating NFTs, marketing, curation, price recommendations, and portfolio tracking, among others.

The Plague of Centralization

NFTs are cryptocurrency assets that are not controlled by any central authority, which allows individuals to own and control the distribution and monetization of their work. Although many NFT platforms claim to be decentralized, this is not necessarily the case, as many of these platforms are actually more centralized than users realize.

A centralized platform is one where a central authority is in control of the data and functions. Social media platforms are examples of centralized platforms because they exercise control over who can join the platform, what can be posted, and who controls and handles user data.

Nevertheless, with the current market development, it is expected that more NFT marketplaces will be powered by decentralized platforms in the future. The reason that NFT marketplaces prefer to be powered by centralized platforms is because they are more high-performing and easier to implement. These marketplaces are also assured of data integrity since the entire database is stored at a single location. This ensures that data is managed in the most consistent and accurate way. Further, NFTs marketplaces know that since data is stored on a single centralized platform, data redundancy can be controlled since data is not stored or distributed on other platforms. It is therefore easier to ensure that the data stored are not duplicated, thus controlling redundancy. Decentralized systems are expensive to build as they require more computational resources and are more complex to implement. Nevertheless, with the current market development, it is expected that more NFT marketplaces will be powered by decentralized platforms in the future.

NFT platforms that rely on centralized storage servers for storing art, metadata, or media that the token correlates to are at risk of losing the data forever if the centralized platform stops operating.

In a twitter thread, Jonty Wareing noted that an NFT token references a media file that is not stored on a blockchain (off-chain), but is referenced by an HTTP URL or an IPFS hash.

Jonty discussed the record-breaking sale of Beeple in a previous thread. The token references metadata that is stored on a public IPFS gateway. However, the image is stored on MakersPlace’s private gateway. If MakersPlace were to shut down, the collector of Beeple’s “Everydays: The First 5000 Days” would be left with an image that can no longer be accessed.

Another risk associated with NFTs marketplaces that use centralized platforms is that those platforms can censored accounts that post anything deemed inappropriate according to their terms of service. Additionally, the centralized platform storing all the data makes it more vulnerable to hacking and system failure. In March 2021, the NFTs Marketplace Nifty Gateway experienced the first digital NFT theft when a user reported losing over $150,000 worth of collectible tokens.

On December 7, 2021 Amazon Web Services (AWS) experienced an outage in its key US-East-1 region. This affected a number of websites hosted on the platform, one of which is dYdX, a decentralized exchange platform. In its official report via Twitter, the platform acknowledged that there are still some parts of the Exchange that rely on centralized services. The downtime was a result of the AWS outage, which has impaired its operations.

Making a case for complete Decentralization of NFTs Marketplaces

Transaction are safe and will not be tampered with.

An NFT marketplace that is fully decentralized ensures safe and secure transactions between users. By being fully decentralized, the NFT marketplace avoids the need to broker user data through web 2 centralized platforms, which increases transaction security and builds trust and confidence in customers.

NFT Portability

The decentralization of NFT marketplaces would allow creators and collectors to mint and move their NFTs from one marketplace to another. This would ensure the continual existence of the NFTs.

Artistes and collectors are in full control of transactions

Artist looking to sell and collectors looking to buy NFTs have complete control over their transactions. Users are able to initiate transactions without any approval from a centralized authority. The process of verifying transactions is free of third party interference as cryptography ensures that the data is properly validated and secure.

Smart contracts and the future of human collaboration

The crypto community has been debating the merits of Web3 and the metaverse, with no clear consensus emerging. However, it is evident that smart contract-based protocols are having a major impact on the crypto ecosystem.

The Nasdaq Crypto Index (NCI) added Axie Infinity and The Sandbox in March, which increased the status and visibility of metaverse- and Web3-related gaming. Hashdex launched their Web3 ETF, WEB311, at the end of the month on Brazil’s B3 stock exchange. This ETF allows investors to access the protocols that represent the future of the internet. This month’s letter contains the views of the smart contract infrastructure powering this future.

A lot of activity related to cryptocurrencies occurred in March. President Biden released an Executive Order on digital assets, the European Parliament rejected a proposal that would limit Proof-of-Work protocols, and several US Representatives sent a letter to the SEC asking for more clarity around the agency’s agenda for crypto businesses.

The first quarter of the year was busy for the crypto market, and there are no signs that this activity is slowing down. We are here to answer any questions you might have about these markets.

Market Review

The cryptocurrency markets opened the month of March on a high note in comparison to other risk assets, but this positive trend was quickly reversed. The index measuring the performance of digital currencies fell by more than 10% early in the month, with Bitcoin dropping to around $37,000. However, the cryptocurrency markets responded favorably to the news of President Biden signing an Executive Order, which caused earlier losses to be reversed.

The market trend in the second half of March was positive, with rumors that Russia might accept bitcoin as payment for exported oil and gas. Late in the month, the Luna Foundation Guard announced the purchase of bitcoins to back its stablecoin UST, which boosted the market. However, crypto markets retreated in the last few days of March, resulting in an overall positive return of 13.5%. Stellar Lumens was the top performer, rising 23.2%.

Top Stories

President Biden signs executive order on digital assets

The crypto community generally welcomed President Biden’s Executive Order, which takes a balanced approach and expresses optimism about the industry while recognizing its importance. The order covers a range of topics, including consumer protection, financial stability, combating illicit and systemic risk, US leadership, equitable access, supporting technological development, and the possible development of a digital dollar backed by the US Federal Reserve. There is no immediate regulatory impact from the order, but it directs government agencies to develop a more coordinated approach to regulating the market for crypto assets. Industry experts are hopeful that this unified approach will result in greater regulatory clarity, which in turn could attract more investors to the digital asset industry.

European Parliament rejects provision to limit Proof-of-Work protocols

The European Parliament’s Committee on Economic and Monetary Affairs voted against a proposal to restrict services for Bitcoin and other cryptocurrencies that use the Proof-of-Work (PoW) consensus mechanism. The vote was taken on March 14th, and was based on environmental concerns regarding the electricity usage of Bitcoin. Ethereum also uses the PoW consensus mechanism, but is in the process of shifting to Proof-of-Stake, which would exempt it from this proposed restriction. The EU Parliament will continue to discuss the environmental impact of digital assets, which could still impact Bitcoin and other cryptocurrencies.

Congressional Blockchain Caucus questions SEC’s “burdensome” crypto reporting requirements

In 2021, members of the Congressional Blockchain Caucus sent a letter to Securities and Exchange Commission (SEC) Chair Gary Gensler expressing concerns about the SEC’s attempts to obtain information related to cryptocurrency and blockchain firms. The letter sought clarification to ensure that the SEC’s inquiries would not become overburdensome, unnecessary, or stifle innovation. This was in response to Chair Gensler’s enforcement approach for the industry, which has been critiqued by the crypto community. Since November 2021, the SEC has rejected several spot Bitcoin ETF applications and Chair Gensler has referred to crypto as an asset class “rife with fraud, scams, and abuse,” comparing the market to “the Wild West”.

It is important that the United States remains a leader in the global financial system and in terms of technological and economic competitiveness. This can be done through the responsible development of payment innovations and digital assets.

The dawn of Web3

In the early days of the internet, users could find information through web browsers like Netscape and use financial services and e-commerce platforms like PayPal and Amazon. However, computing infrastructure was mostly decentralized and users could not interact with the web’s content and applications. In the 2000s, the next iteration of the internet—Web2—provided continuous connectivity for everyone in possession of a smartphone. This allowed for a major breakthrough in the way people communicate and interact, which was propelled by the boom of social media companies like Facebook, Twitter, and YouTube. These companies enabled new solutions and business models, allowing users to freely advertise their products and services, monetize their content, and stream news and information in the form of tweets. In turn, these companies’ big data and cloud computing services became the ideal way to ignite the information revolution.

In a decentralized marketplace, users are no longer reliant on centralized companies to advertise, monetize, or sell their digital products and services over the internet. This is the beginning of Web3. In a decentralized marketplace, every content creator has the ability to sell or gain royalties on their songs and videos. Artists can create their own digital gallery and have other blockchain users come and buy some of the fine art they produce. Players have an additional incentive to spend several hours on their favorite video game, where fun in the metaverse is now aided by the possibility of earning rewards and monetizing their in-game collectibles for profits in the real world.

This new web, where builders and users own the tokens, is adding more value to assets than the traditional markets. No matter what country people live in, economic power, or any other factor that could impact people’s lives, smart contracts can turn value, agreements, and ownership into digital form, making assets more secure and allowing them to reach their full potential.