Jason Bailey: James, the majority of folks who are interested in NFTs probably entered the space in 2021. What inspired you to start the NFT marketplace, KnownOrigin (KO), back in 2018?
James Morgan: It’s a funny story, really. One of the other co-founders, David Moore, approached us with the idea of doing a physical gallery, wanting to sell stuff for crypto. Andy Gray and I had recently got into crypto art following the rise of CryptoKitties. We figured: “Why don’t we try and tokenize some of these works?”
One of the problems that David was trying to solve at the first pop-up was that a lot of the artists he was friendly with in Manchester were digital artists. They didn’t really have a way to monetize their craft. So we created a little one-page app, tokenized some stuff, and on the night of the pop-up the light bulb went on.
From that moment on, I was down the crypto art rabbit hole, and it was that subculture that kept me going for such a long time when there were really no users. In 2018-19, the user base was super small, but the community was still very vibrant and welcoming. For someone who’s not native to the art world, being exposed to such creativity was super interesting. The technical challenges were also interesting, but, as a builder and engineer who was hacking around evenings and weekends, it was that small, cohesive, and cliquey community that really kept me going.
JB: It’s funny, many people have a hard time imagining those first few years. I get a lot of questions like: “How did you buy an XCOPY for $1?” Was there ever a time in those lean years where you guys questioned what you were doing?
JM: I definitely did question it all. At one point we had about three to six months worth of money to pay people’s wages. But it worked out in the end. It’s been interesting to see it turn 360 degrees.
JB: I’ve always viewed marketplaces as playgrounds for artists, creators, and collectors to use as spaces for exploration. Sometimes people are a little harsh with the marketplaces, viewing them as bad guys or faceless corporate entities. But without the people who build these marketplaces we wouldn’t have this vibrant culture, which goes all the way back to Rare Pepe Wallet and projects like that.
JM: I think people often don’t realize just how small it was. Right now I’m looking at an NFT that was minted on KO back in October 2018 to commemorate 100 people joining our Telegram group. Many members of that group have gone on to become really big in the NFT space.
JB: One thing that became a part of KnownOrigin’s identity early on was the sale of multiple editions as opposed to one of ones. What prompted that decision?
JM: We’ve always seen editions as another tool in the arsenal for an artist.
There’s no real reason why the concept of digital scarcity can’t go beyond the one of one. Just because something is digitally rare doesn’t mean you can’t have five rare things instead of one.
A lot of artists use editions to gain new collectors. You could do an edition of ten and have ten amazing new collectors instead of one. That always stuck with us as an obvious path to enable and, to this day, the vast majority of stuff that sells on KO is still edition-based work. I’ve always been a big fan of more affordable collectible art. As someone who is not from a traditional art background and quite new to collecting art in general, I’ve enjoyed collecting art that’s worth $50 just as much as buying a one of one worth $5,000. Rejecting pure scarcity and speculation can actually be an enjoyable relief — just collecting for the sake of collecting instead of collecting for the sake of investment.
JB: Reducing the cost of participation through editions has also expanded the market for NFTs.
JM: It still blows my mind that almost every country in the world has touched KO at some point. But that’s actually one of the best things about crypto art. You can be from any background and have admirers or collectors of your craft in literally any corner of the world.
JB: If I may I’d like to get a bit nerdy in order to help folks understand IPFS (InterPlanetary File System). What is it and why is it so central to KnownOrigin?
JM: IPFS is a distributed file storage network. As it’s not backed by a coin, you don’t have to put forward economic value to use the network. Anyone can run and host an IPFS node. It has some very interesting factors which make it very good to use with NFTs. Depending on what you store, you generate a unique hash that’s representative of a piece of data. So you can embed that inside a token to provide a level of confidence and provenance that the thing you’re looking at is actually the thing stored on the network.
At KO, we use IPFS to store the metadata for a piece of art, but also the raw assets themselves. So for an image, it’s just the image, but for a video, it might be the cover image and the video. We store the hash inside the contract, and every time we mint something we actually pin it to Infura and Pinata. These are both paid services but, in theory, anybody could also pin and download these images. You can back up anything you buy on KO.
JB: One of the questions we get a lot is: “Why not simply store all the artwork and metadata on the blockchain?”
JM: Unfortunately, Ethereum is not designed to store large pieces of data but to come to consensus on things. Indeed, it’s not viable to store anything above a couple of kilobytes, and even that would cost you a lot of money. So it wouldn’t work to store any rich mixed media there. There are other blockchains that are more focused on block storage. But it’s preferable to use something that’s good for storing data, like IPFS, and then create an immutable link to the token that’s good at storing things like ownership and value transfer.
JB: Part of what ClubNFT is helping people to understand is that a significant portion of NFTs are only stored on marketplace private servers.
JM: That definitely is a simpler solution. But it has a lot of downsides to it, the main one being that you’re relying on the marketplace to maintain a copy of it. This might cause issues with access; the server might not load; or they might flip out the media that the token points to for something different. IPFS allows you to participate in the network supporting these files, and to prove that the thing you’re looking at is actually the thing it says it is. So while it would be cheaper and easier to store something on a private server, I think it creates a much poorer quality token in the grand scheme of things.
JB: In the early days, crypto folks were very coin-centric or token-centric. For many, the image was just what the token looked like. But the massive influx of collectors that we’ve seen in the past year or so hardly know what a token is. They don’t go into marketplaces looking for a sexy token ID, they spend hours looking at the media, which is where they have the emotional attachment.
JM: That’s especially true now with the proliferation of metaverse worlds which give one the ability to put something on display.
I really view NFTs as just a vehicle for delivering ownership of a thing, an item, or a good. But actually for crypto art what you’re delivering is ownership of the medium.
As a collector, I care less about the token ID and more about the actual media you’re looking at and the emotions it draws from you as you consume it.
JB: Can you speak a little bit about one of the magical properties of IPFS: if you’ve got a local copy of a file, you can regenerate the original content by reuploading it to IPFS?
JM: If you have the original chunk of data — the image or video, whatever it is — downloaded on your machine, because it uses content-based addressing, it generates the same hash and the same lookup resource. So once it’s back on the network, it’s then available for everyone to consume. That’s why we’re very keen on initiatives like ClubNFT — to give that extra confidence to collectors on KO to be able to download a copy of everything they own. This is so that, in the worst-case scenario of our providers and internal backups disappearing, users would be able to push it to the network themselves and everything would just magically work again. Just putting it on the IPFS network would bring the token back to life.
JB: What was it that made you guys decide to partner with ClubNFT?
JM: Back in the very early days of KO, it was a big stress of mine as the engineer to manage this stuff that we’re not actually managing. That’s when we introduced internal backups and double pinning and all that sort of stuff. For me, it is a missing piece of the ecosystem. So I was really happy when I saw you guys launching this as a product. Not only did it tick a big box for us, I actually think it will be a big win for our collectors and artists as well — to be able to get hold of all the stuff that they’re minting and back it up. You can envisage a future where there’s a network of people backing stuff up, which gives you some confidence in the longevity of an asset. That’s really what excited me the most, the fact that it’s a missing piece of the puzzle and no one else is having a go. Also, obviously you’re a great guy with a great team and solid engineering. The reality is: why wouldn’t we do it
JB: We appreciate that KnownOrigin has been doing things the right way for four years when, chances are, most of your users didn’t realize its value. In my view, probably the biggest benefit of IPFS is that, if a company goes out of business, its collectors aren’t screwed.
There are plenty of very large NFT marketplaces that don’t necessarily follow best practices. It’s easy to imagine them saying: “Well, no one’s even going to understand this stuff, so we’ll just go ahead and put everything on private servers.”
JM: I envisage a time in five or ten years when a bit of a rot sets in with people losing access to NFTs and NFTs going missing. People are going to become hyper-aware about the fragility of not doing things differently. Just as a physical painting can degrade if it’s left in warm, wet conditions, or if it’s exposed to the sun, there is a time frame for poor-quality tokens to live.
JB: Pretty much everyone thinks their stuff is on chain, but fewer than 10% of NFTs are fully on chain. People also assume that an NFT is just one single image sitting on a blockchain, but pieces of an NFT often live off chain.
JM: NFTs are composable pieces of logic. You can build them on top of each other, creating dynamic NFTs that change over time, but all of it is encapsulated in the smart contract logic. The core parts of an NFT, in my mind, are the ability to mint them; the token URI — the thing the token is pointing to — which, as you say, can be on chain but often points to a third-party resource; and then, inside the hash, different types of media and variable amounts of metadata. These might include a name, image, or description of a work, but marketplaces also add a lot of extra information in there about when it was created and who created it, as well as hashtags and attributes that are associated with it.
The other major component of an NFT is royalties which, when combined with the ownership, the minting, and the media all build into that token. As you know, I’m a big proponent of royalties and one of the authors of the EIP-2981 NFT Royalty Standard. Having on-chain royalties and the ability to look them up actually adds quite a lot to the value of a token. When I see things selling off chain — although there are reasons for it — it does upset me a little bit because you lose the provenance of the sale. You can imagine historians looking back in fifty years and there being nothing on chain to prove anything.
JB: That’s fascinating. I was also wondering, given your technical background, if you might give a high-level overview of “The Merge” which has just taken place?
JM: So I am not an expert on this, but I have been following it for many years.
A typical analogy for The Merge, which I quite like, is switching out the engine of a car from a petrol engine to an electric engine while it’s running at 100 miles an hour.
So it’s super risky and it’s taken years worth of research, design, and iteration. It’s a monumental occasion for the Ethereum community to switch out the consensus engine from proof of work to proof of stake. In proof of work, you’re rewarded for solving computational tasks — so lots of machines around the world are crunching numbers to win an algorithm to then get a block reward. Proof of stake uses a different concept whereby many more participants — approximately 420,000 validators — stake some amount of token, putting their name in a hat to attest that what is going on is truthful.
Now, instead of one person winning a single reward for mining a block, (though there is a slightly higher reward for a block proposer) huge numbers of validators are rewarded a very small amount. It also uses a slightly different game theory whereby if you try to be malicious against the network then you are penalized and slashed, so it scares away bad actors.
JB: Are there any other advantages of The Merge, which I’ve heard described as one of the most complex engineering operations of all time?
JM: There are two main advantages really. The one which the press is running with heavily is the reduction in the carbon footprint. As of last week, if the statistics are right, Ethereum uses 99.95% less energy than it did with proof of work. It also sets the network up for different scaling solutions. With The Beacon Chain now providing the consensus layer, it means that Ethereum will be able to introduce things like sharding, which allows for exponential scalability. The Merge enables these changes to be made in the future.
JB: Right now, on crypto Twitter, one of the fears is that every NFT will now have two copies, which would have big implications for the economy. How much of that fear is justified and how does KO look at the situation?
JM: So, as of last week, the proof-of-stake chain took its own path.
As to whether there are two NFTs now, that is true because, at the point of the fork, the state also lives on the proof-of-work chain. But the reality is that there’s no social uptake of this at the moment, or not that I’ve seen, so marketplaces are not supporting it.
I expect that, like all past forks, it will generally trend to zero. So even if your assets are somewhere else, there’s no social uptake, no marketplace support, and I personally would try to avoid that chain in general unless you really know what you’re doing, because you don’t want to get scammed.
JB: In the community and across the marketplaces, the dominant opinion is that the new fork is the one that people will respect and want. Of course, there may be a small subculture or subgroup that sees more value in propping up the other version of the token, but not necessarily anything for collectors to freak out about.
JM: No, all marketplaces that I’ve seen have come out publicly and said they’ll support the proof-of-stake chain. The other interesting thing is that big stable coin providers have said they’re gonna use proof of stake. So, in essence, if you had USDC on proof of work, it’s in essence worth zero. I don’t think there will be a huge amount of adoption of that because it is not being supported and social consensus on it is poor. So I wouldn’t be too concerned.
JB: Is there anything that collectors need to do as a result of this?
JM: I don’t think you have to do anything, especially if you’re not going to touch the new Proof-of-Work chain. If you are going to go over there, just be careful about what you do. I would generally be very cautious interacting with something that’s not the Ethereum Mainnet as we know it today.
JB: Fantastic. And finally, is there anything else that KnownOrigin is working on that you’re excited about that you can share beyond our exciting partnership and integration?
JM: We’re on the cusp of launching two new features. One is a much richer, self-sovereign creator-owned contract solution so that if you want to launch your own collection, you can mint directly on that instead of on shared contracts. We’re also rebuilding our indexers to be multi-chain, going beyond Ethereum in the next six to twelve months. Tezos and one other [blockchain] are front and center in our minds.
There are also a few other areas I’m personally interested in relating to where and how you sell your NFTs. Without saying too much, we’re working on ways to make KO a much more liquid market so that, in the future, you’ll be able to buy and sell the assets you create pretty much anywhere from KO.
James Morgan is an engineer, crypto enthusiast, and co-founder of KnownOrigin, a digital art marketplace and one of the earliest and fastest-growing art platforms on Ethereum. Morgan co-authored the EIP-2981 NFT Royalty Standard and is an organizer of Blockchain Manchester. Building crypto-powered products since 2017, Morgan previously co-founded BlockRocket, an engineering and blockchain-focused consultancy.
Jason Bailey is the creator of the art and tech blog Artnome.com and founder of GreenNFTs and ClubNFT, where he serves as CEO.