Before we jump to the main topic, which is "are NFT marketplaces really decentralized?", know first that NFTs or non-fungible tokens already came into existence on May 3, 2014, when Kevin McCoy, a digital artist, minted the first-known pixelated octagon called “Quantum.” However, NFTs became mainstream only in 2021, generating over $23 billion in trading volume,
The popularity of the NFT space did not only attract thousands of investors, creators, and traders, but also some sophisticated hackers.
Recently, there were many attacks on the NFT industry, and Todd Kramer was one of the victims. The art gallery owner had his valuable NFT collection worth about $2.2 million stolen from his hot wallet on OpenSea — one of the popular NFT marketplaces. Kramer then pleaded to OpenSea, which responded by freezing the stolen assets.
Hold up. If an NFT marketplace like OpenSea claims to be decentralized, how come it is able to access the stolen assets and actually freeze them? Something definitely does not add up.
What is an NFT Marketplace?
To bring the uninitiated up to speed, an NFT marketplace is a platform, shop, or boutique where you can hold and trade NFTs easily. In other words, it is a place that allows creators to showcase their hard work so investors or traders can buy and own these digital collectibles.
You can buy or auction these tokens on the NFT marketplace using a crypto wallet to make transactions. It works the same way as an online platform like eBay.
Note that NFTs are associated with photos or images as well as digital files such as videos and audio. As an NFT marketplace works as a public blockchain platform, all transactions are carried out using particular protocols known as smart contracts. These protocols handle the connections between the seller and the buyer, thus it eliminates the need for a middleman or a mediator. This is the genesis concept behind the popular crypto sub-space referred to as decentralized finance (DeFi).
Are NFT Marketplaces Really Decentralized?
DeFi was designed with the goal to shift from the traditional financial system towards an open and free financial ecosystem. This is why it is based on blockchain technology and on smart contracts, creating programmable open protocols and decentralized applications (DApps) accessible to anyone without any intermediary.
Looking at the characteristics and the goal of DeFi platforms, we can question the OpenSea decision to freeze the stolen NFTs. So, are NFT marketplaces really decentralized? Or are they just "the centralized marketplaces"?
As mentioned above, the main goal of DeFi is to give users access to financial platforms without any control from the government or organization. So, if this is the case then OpenSea intervention shows an anti-DeFi action as it interfered between the two parties by freezing the stolen NFTs.
The company should've rather blamed itself for having a poor security system than getting in between the two parties and playing the role of a middleman. Because, on a truly decentralized platform, no one should be able to step in and suspend the buying and selling of any specific items. As a result, it proves the lack of decentralization, which is one of the treasured aspects of the crypto industry.
Although the hack was an unfortunate and evil thing, the code should always be the law, as it is one of the very ideas of cryptocurrencies to the elimination of any possibility of centralized intervention.