- The popular NFT project CryptoPunks is highly centralized, a new study has found.
- Popular NFT database NonFungible has revealed most tokens are owned by a handful of holders
- NFT decentalization has become detrimental to the industry
YEREVAN (CoinChapter.com) — A new research conducted by NonFungible, a database of blockchain gaming and crypto collectible markets has revealed an alarming result. It turns out, one of the most popular Non-Fungible Token (NFT) projects, the CryptoPunks, is everything a decentralized app should not be. It grapples with toxic centralization.
CryptoPunks took the NFT space by storm
CryptoPunks entered the NFT space in June 2017 as one of the first NFT on the Ethereum blockchain. New York-based Larva Labs created the project well before anyone anticipated they would become this popular.
In May 2017, Larva Labs announced it will give out 10,000 different NFT cartoon characters to anyone with an Ethereum wallet for free.
Despite the scorns at the hideous characters, people claimed them within hours. After all, they did not seem like special art by any stretch of the imagination. Plus, the fact that the creators were giving them out for free made it seem even more worthless.
After claiming them for free, owners now started trading these artworks among themselves on the Larva Labs platform.
A few years down the line, however, the NFT revolution kicked in. Platforms like the OpenSea emerged and CryptoPunks got to ride the new wave.
In May this year, a CryptoPunks collection sold for nearly $17 million at Christie’s. For a set of characters that began as a giveaway, the sale grabbed a lot of attention.
In another major sale, one of the punks of the project fetched over $7 million.
Dylan Field, the CEO of Figma, sold his CryptoPunk #7804, for $7.57M. He had called his pipe-smoking alien the “Digital Mona Lisa”. After fetching that amount of money, one can hardly question the title.
NonFungible’s findings on CryptoPunks
According to the detailed observation by NonFungible, a few wallets hold a large number of the 10,000 CryptoPunks. This is indicative of a very strong centralized control.
“100 largest holders are holding 71.88% of the supply in circulation,” .the study claims
The top 10, owners, on the other hand, hold 27.08% of the total supply in the market. The database website alleges “a very strong dominance by a small number of players.”
In addition, according to the revealed data, 36.34% of CryptoPunks have never moved from their initial wallets.
NonFungible claims the data raises questions about potential market control in the space.
“The CryptoPunks market is therefore becoming more and more centralized but above all, completely inaccessible to ordinary mortals.”the study concludes.
The problem with NFT centralization
One of the major fears of the NFT centralization is the risk involved in losing the Non-Fungible Tokens overnight.
With most major projects connected to a centralized URL, one’s ownership of an NFT is at stake. If the domain fails to function, you essentially lose control of your NFT.
There is also the potential fear that one stands to lose all of their NFTs if the company that minted them stops operations.
Additionally, some NFT companies like Nifty Gateways hold all tokens in a single wallet. With a single point of failure, any attack on the wallet will result in a loss of the NFTs.
If the companies that mint the NFTs or the domains that host them can even temporarily hinder your trade, it raises a question. Do you truly own the NFTs?
Hence, decentralization is key to any application in the future, including the NFTs.