Your NFTs aren’t decentralized
In 2023, decentralization might be one of the most misunderstood, misused, and misappropriated words on the internet. Somewhere between today and 1794, when the French post-Revolutionist’s began using the term to describe a new government structure, the meaning has really gotten lost in translation. And even though its Google search popularity peaked in November 2004, I'd reckon the mishaps began around the recent popularity spike in March 2022, after Bitcoin, Ethereum, DeFi, and NFTs had all come along and taken the world by storm.
With these innovations seeking to do something as paradigm-shifting as changing the internet, it makes sense why the term is being used so much today, considering it’s the foundation of it all. However, the problem isn’t ‘why’ that word is being used, it’s ‘how’—which is often misled and misleading. A fact that’s causing problems for people inside and outside the industry. But before we get into that, let’s take a moment to define what decentralization actually means.
According to Merriam-Webster, it has to do with the distribution of functions and power. For example when a government is run by regional and local authorities. It’s a fine definition for the real world, where decentralization can be seen as a spectrum of how far something deviates from traditionally centralized systems. However, it doesn’t quite cut it in the blockchain world, where it’s not as much a way of doing things as the way of doing things; at least at the most basic level.
Screenshot from Merriam-Webster.
The blockchain commands a more stringent definition of the word. For the sake of this discussion, and my own exploration in understanding, I’ve made an attempt at it below:
The meaning of decentralization is that many control, any can access, and those numbers are equal.
This is a first principles approach to defining the term. A necessary prerequisite in attempting to comment on how it should interact with the creations it has manifested.
One of the most important details within this definition is that decentralization can never be a spectrum. Thinking it can is possibly the most common mistake people make when defining and discussing the term. But it’s not the most damaging. The most widespread and dangerous misunderstanding people commit is thinking the decentralized properties of the blockchain a protocol was created upon are transitory. A fallacy that’s seemingly most common amongst NFT collections.
NFT collections often create an illusion of decentralization in order to borrow some marketing capital from the idea of it all. They say holders are ‘owners’ of the membership, IP, art, and sometimes even the profits of the project. When in reality, the only thing they own in a decentralized way, is the token data. The IP is protected by lawyers, the art is an image uploaded to a centralized server (where it can be changed anytime), and any sharing of anything like profits is typically privy to the whims of the managing team. It’s an outright lie to call an NFT collection that acts in this way ‘decentralized’.
Why do people buy into it then? If it's so clear, how is it so unclear? I suspect it has to do with the fact that the blockchain these projects are built on is truly decentralized. Like Ethereum, for example, where anyone can buy it, anyone can sell it, anyone can use it, anyone can build on top of it, and everyone has access to it. And nobody can control any of those things at the chain level.
Ethereum is a completely decentralized model for creating on-chain internet protocols. It’s a permissionless, trustless, and distributed network. Even the way it runs relies on many individuals from all around the world to secure the transactions; however, none of these properties can be expected to naturally carry over to anything created upon it. In fact, they only really compare in contrast to your typical NFT project.
I’m not saying there’s anything wrong with operating a business or ‘project’ or ‘collection' in a centralized way. However, we ought to be clear about what’s happening. Decentralization is the north star for the best version of a world built on blockchain technology. If we lose it, I’m not sure we’ll like where we end up. It’s an idea worth protecting.