What is Decentralization and Why Does it Matter in NFTs?
Author: Rachel Martin
Image: CC0. Author: Voytek Pavlik
The biggest argument in favor of the digital art market and cryptocurrencies is that it offers a space that is “decentralized” and “democratized”. Without knowing what these two words inherently mean nor what the implications are for the crypto-world, it is difficult to see why they matter in terms of NFTs and digital art.
From decentralized storing and ownership to democratized opportunities for purchasing and accessing digital art, this blog will break down the terms in regards to NFTs.
What is democratization?
In other blogs, we have discussed that “democratization” generally involves opening up opportunities of ownership (essentially democratization of ownership). To learn more about this, see the blog titled “Rethinking Value And Economics: Can NFTs Democratize the Art Space?”
What is decentralization?
In terms of blockchain markets, decentralization refers to the nature of cryptocurrency in which investors work directly with one another as opposed to through a centralized exchange. This means that buyers and sellers of cryptocurrency communicate, buy, sell, and display ask prices all directly between one another in real time without needing to be in the same place.
And why does this matter in terms of NFTs?
In order to ensure authenticity and security, the decentralized marketplace offers buyers and sellers both a new opportunity to trade. Virtual markets are typically not regulated, which users see as a benefit, but decentralized currencies and trading offers the same users the security and trust needed in order to continue using these markets.
In terms of NFTs, peer-to-peer transactions on a decentralized market attempt to democratize the art world. This means that rather than needing to go to an auction house and dealing with chains of command and trading that may not always be evident, you can buy a work of art directly from the artist or seller securely.
As more cryptocurrencies and online marketplaces join the NFT boom, more opportunities for further decentralization arise. In recent news, Filecoin storage services became integrated with the Flow Blockchain. The idea is to connect content on a larger scale and create a more even opportunity for NFT creators and purchasers to securely access and store these digital works. Coinbase, an online exchange, is offering its own NFT marketplace as well.
Decentralization plays a major role in all these marketplaces, where the aspect of peer-to-peer trading makes digital art purchases, among other online transactions, more secure and controlled.
