Reservoir's sunsetting of its NFT API, just two months after a $14 million Series A, feels less like a strategic pivot and more like a canary in a coal mine. A very expensive canary. Coinbase and MetaMask relied on this infrastructure. You likely did too, indirectly. Now what?
Centralized Reliance: A House of Cards?
We’re all fed the hype and promise of decentralization in Web3. Here we are, with the entire infrastructure world focused on a critical infrastructure provider pulling the plug and leaving major players scrambling. Reservoir gave us world-class, back-end support – indexing data across blockchains, enabling trustless trades – the same exact plumbing that allowed NFT marketplaces to thrive. This is the exact opposite of what Web3 is meant to be, right?
Think about it. Featured on Crunchbase Union Square Ventures, Coinbase Ventures, Delphi Digital – this was serious money betting on Reservoir. Now they’re warming up to “Relay,” and leaving their NFT clients in the lurch. It highlights the flipside of that encouragement — that indeed, venture capital, while financing innovation, brings the instability. Their mandate is ROI, not building a healthy, decentralized ecosystem.
This isn't just about Reservoir. That’s just an example of the inherent risks of putting too much trust in centralized actors, even in a field that prides itself on decentralization. We’ve watched this film before, with a different cast of characters, on centralized crypto exchanges. Are we destined to make the same mistakes all over again, just in the NFT space?
$14 Million: What Went Wrong?
The obvious question is: what happened? Why bother raising $14 million with plans to ramp up NFT infrastructure, just to kill it two months after launch? Was it a lack of market traction? Regulatory headwinds? Or are the underlying economics of NFT infrastructure just not built to last?
The answer, I suspect, is a combination of all three, amplified by a subtle, yet crucial factor: uncertainty. Today, the regulatory landscape surrounding NFTs is a total minefield. I’m not arguing that we should take a totally laissez faire approach either. The continuing threat of regulatory action is an obvious investment and innovation killer. That just creates uncertainty and makes it difficult for businesses like Reservoir to be able to plan long-term.
Imagine building a house on shifting sands. That’s what it feels like for most Web3 companies today. This lack of clarity creates a shaky ground for attracting talent, securing venture capital, and in the end, being able to build sustainable businesses. It's a death by a thousand cuts, and Reservoir's decision may be a symptom of that.
Relay's Pivot: Smart Move or Red Flag?
Reservoir’s pivot to “Relay” – a much larger broader token infrastructure project – could be the right long term play for them. It raises a serious question: is NFT infrastructure a viable business model on its own? Maybe the margins are too slim, the competition too cutthroat, or the regulatory burden too crushing.
While the codebase’s open-sourcing is the silver lining to Reservoir’s dramatic closure, it’s not a panacea. It takes a high level of technical expertise to deploy and upkeep, placing it out of reach for most smaller scale projects. As you can imagine, this isn’t a straightforward “cut and paste” approach.
| Aspect | Implication |
|---|---|
| Reservoir Shutdown | Highlights fragility of Web3 infrastructure |
| VC Funding | Introduces instability due to ROI focus |
| Regulatory Uncertainty | Chills investment and innovation, makes long-term planning difficult |
| Focus on Relay | Questions viability of dedicated NFT infrastructure as a business model |
| Codebase Open-Sourced | A small win for decentralization, but requires expertise to implement |
The answers aren’t simple, but the Reservoir dilemma requires that we begin asking them. The disastrous centrality of this NFT backbone should be a collective wake-up call. If we can’t address these underlying issues, the idealistic dream of a decentralized Web3 may end up just that — a dream. The time to build a more stable foundation is now, before it all falls down.
We need to ask ourselves some hard questions:
- Are we building a truly decentralized Web3, or just a new version of the same centralized internet, controlled by a different set of gatekeepers?
- How can we create more robust and resilient infrastructure that isn't so reliant on venture capital and the whims of corporate strategy?
- What role should regulation play in fostering innovation while protecting users?
The answers aren't easy, but the Reservoir situation demands that we start asking them. The failure of this NFT backbone should serve as a wake-up call. If we don't address these underlying issues, the dream of a decentralized Web3 could become a mirage. The time to build a more solid foundation is now, before the whole thing crumbles.
