Reservoir has opted to sunsetting its NFT API just two months after raising $14 million in a Series A round. Even so, this move appears to be a symptom of bigger problems than a thoughtful, new strategy. Investors such as Coinbase Ventures, Union Square Ventures, and others flooded in, allegedly to help Reservoir grow. Now? The NFT infrastructure they were ostensibly supporting is now being dismantled. The question is not merely why Reservoir is doing this. It uncovers critical lessons about the broader NFT ecosystem and the future that Web3 promises.

Strategic Pivot Or Writing On The Wall?

Is this a clever pivot to Relay, a more general token infrastructure play. Perhaps. The NFT market has been volatile. Maybe Reservoir sees the writing on the wall: diminishing returns in a niche that's struggling to achieve widespread adoption. Disinformation aside, hammering out the kinks with token swaps and cross-chain bridges seems the more sustainable future. Indeed, the pipes become worth more than the water if the water evaporates.

Let's be real. Something isn't adding up. You don’t get $14 million just to downsize your company two months after receiving it. You raise it to grow. Sure, they’re open-sourcing their whole new codebase, but that feels like a disappointing giveaway to clients like Coinbase and MetaMask. It’s a “here, make it yourself” add-on.

This is a crack in the foundation. So far, the NFT market—even with all of the hype—has failed to fulfill its promise of drastically changing digital ownership. We’ve all experienced the Bored Apes, the CryptoPunks…of course they made all that money… but what’s really next? Outside of speculation and some forms of digital collectibles, the use cases are yet to be fully realized. Is the demand just not present to support a vibrant infrastructure as complex as Reservoir’s?

Investors Running For The Exits?

Coinbase and NFTs It’s critically important for Coinbase to have NFTs succeed, for NFTs to be a core part of their Web3 strategy. So, the question becomes: what did they know, and when did they know it? Were they not experiencing the same obvious red flags that Reservoir was? Are they counterfactually doubling down and quietly reshuffling behind the scenes their whole NFT strategy?

This isn't just about Reservoir. It's about investor confidence. When the smart money begins to pull back, that’s a signal. And that one signal can set off a domino effect. Imagine it as the very beginning of that dot-com bubble bursting. One bad actor goes down, then another, and before you know it, the entire industry is facing the harsh spotlight of news headlines. Are we at that point with NFTs? It's too early to say definitively, but Reservoir's retreat deserves serious attention. This isn’t the Last Mile Delivery Company, Inc., this is an Amazon — a well-capitalized company that is delivering our essential infrastructure.

The Coinbase & MetaMask Dilemma

They need to find alternatives, and fast. Alchemy and Sequence are being introduced as the animating transition partners, but can they really slide into that gap without missing a beat? The disruption would be severe, with potential downstream effects on user experience and the general efficiency of NFT trading on these marketplaces. This is no small task. Implementing a new back-end infrastructure is an intensive and lengthy process.

  • Coinbase: Will they double down on building their own in-house solution, further committing to the NFT space? Or will they scale back their ambitions, focusing on other areas of Web3?
  • MetaMask: As a browser extension with limited resources, will they struggle to find a suitable replacement, potentially hindering their ability to offer a competitive NFT experience?

This situation highlights a critical vulnerability in the Web3 ecosystem: reliance on centralized infrastructure providers. While decentralization is a major part of the promise of Web3, it’s ironic that many applications still rely on centralized services such as Reservoir. This lossy single point of failure introduces a chilling concern in regards to the actual decentralization of the space.

Ultimately, Reservoir's shutdown is a wake-up call. It serves as further warning that the NFT space is still nascent, volatile, and a long way from established. It might be a strategic pivot, a long overdue course correction. Or, perhaps, the beginning of what will someday be seen as the first wave of cracks in a foundation based on hype and speculation. Only time will tell, but one thing is certain: the future of NFTs is far from guaranteed. We should be monitoring, yes this is true, but not just the floor price of JPEGs, but literally, the infrastructure that JPEGs sit on top of. Because with a failing infrastructure, when the pipes break, the whole system starts to cave in at once.