Blog – Investing in Pinata | Pantera

Investing in Pinata

August 9, 2022 | Lauren Stephanian, Nathan Russell, Franklin Bi

 

The Web3 Hosting Problem

 

As NFTs surged in popularity during the Summer of 2021, creators and blockchain developers quickly recognized a need for a robust file hosting service that could easily integrate into Web3 applications. The problem was that they were seemingly forced to choose between relying on decentralized (expensive and difficult to use) or centralized (censorable and potentially mutable) infrastructure.

 

First, blockchains are incredibly inefficient at storing data. For example, a calculation done in June estimated storing 1 GB of data on Ethereum Mainnet would cost a whopping $79 million. Nearly $80 million to store a file the size of a smartphone picture is far from ideal for NFT projects minting thousands of high-definition pieces. Luckily this is not necessary, as NFTs can just point to a link hosting the file in its metadata. Extracting this is what makes it possible to view an NFT, but the data still must be stored somewhere off-chain.  

 

For off-chain storage, people explored using centralized cloud-based storage options like Dropbox or AWS, but they found these services are not ideal for NFTs because they don’t guarantee authenticity and can be taken down. First, centralized services use location-based addressing, meaning that they store a file at a particular URL, but that URL has no relation to the actual content being hosted. This means that if someone uploaded a new image with the same name to that URL it would appear exactly the same. For an NFT project this issue is important, as it means your NFT can be changed without your knowing and isn’t guaranteed to be authentic. Second, in a centralized system one can simply remove images from hosting services or these services themselves could shut down or decide to stop hosting a particular file.

 

The Magic of IPFS

 

Given the above problems, the InterPlanetary File System (IPFS) became the obvious choice and industry standard for hosting NFT projects as it both verifies authenticity and uses a decentralized model that ensures the service doesn’t go down. When a file is uploaded to IPFS, it is given a unique content identifier (CID) in the URL. If the content of the file changes, so does the CID, making the system easy to detect fraud or tampering – this CID can also be used to verify the authenticity of the linked file in the NFT. Second, because IPFS is a distributed system it is almost impossible for it to go down, and files will be available so long as even one node has the file pinned. The behind-the-scenes is slightly more complicated and a file being on IPFS doesn’t guarantee it will be there forever, but this more decentralized model has still emerged as a far superior option to traditional hosting services for Web3 companies. Despite these benefits, IPFS still ran into the issue of being difficult to use. It is rather complicated to upload files directly, and the service requires running your own node in addition to lots of other backend work.

 

The Opportunity

 

Pinata co-founders Kyle Tut and Matt Ober saw the potential to make this technology far more accessible for Web3 media all the way back in 2018, and created what is now the industry-standard tool for blockchain companies and NFT projects to host and manage off-chain data using IPFS. Pinata originally launched as a very simple IPFS API, but they have since added dedicated gateways, submarining, custom previews, and even a URL shortener. Still, Pinata’s greatest appeal comes from its simplicity and ease of use both for casual users and serious developers at large blockchain companies – uploading and managing files in IPFS is now as easy as using Google Drive.

 

Why we’re investing in Pinata

 

Pinata has seen incredible traction: since January they have more than doubled their users and YoY increased revenue 42x. Their clients range from individual users on their free plan to some of the biggest companies in the space like OpenSea, Yuga Labs, Sorare, and Autograph. While the NFT market has slowed slightly in the recent bear market, Pinata’s growth and popularity among developers has been astounding. We are confident that Pinata will continue its strong growth and cement itself even further as a staple of Web3 infrastructure.

 

We are proud to co-lead Pinata’s Series A alongside Greylock, with participation from Offline Ventures and others to continue building the leading NFT media hosting management and distribution platform.

 

Explore open roles at Pinata here and find opportunities across the entire Pantera network here.

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