It is now winter 2018 and the crypto markets have crashed. Bitcoin and Ethereum are down up to 90% from their all-time highs. Projects that had previously launched to much fanfare and with big promises are now shutting down one after another. Your Thanksgiving dinner this year is likely to be quite awkward after your uncle sarcastically asked you how your Bitcoin investment is doing.
Although other projects have failed, OpenSea has persevered and become very successful. It is now the most popular NFT marketplace and is valued at $13.3 billion. This writeup analyzes the factors that have led to OpenSea’s success and discusses where it can go from here.
But first, what’s an NFT?
Non-fungible tokens (NFTs) store ownership of an asset on the blockchain. They can be used for digital assets like pictures or music, or for real world assets like land titles or diplomas. Blockchain is completely decentralized and censorship resistant (at least Ethereum is), so you don’t have to trust a third party to maintain the record of ownership.
OpenSea is a marketplace that built to interact with the blockchain to create and trade NFTs. NFTs are digital assets that can represent pictures, music, and even domain names. OpenSea uses Ethereum to power its transactions.
If you would like to learn more about NFTs, you can find a more complete primer on the subject here.
Is OpenSea really that popular?
The table below compares different NFT marketplaces based on the number of users, transactions, and volume of Eth traded in the last 30 days, according to DappRadar.
OpenSea has done extremely well in the last 30 days, facilitating around $4.5 billion worth of trades. This is much more than any of its rivals and is comparable to what eBay does in a month. Given that OpenSea deals with digital assets on the blockchain, this is a huge achievement.
What Is OpenSea?
OpenSea is a marketplace where people can buy and sell NFTs in a trustless, immediate, and absolute manner.
How Does OpenSea Work?
OpenSea is a platform that allows users to buy, sell, or trade NFTs. This is the first platform of its kind, and it is often compared to eBay. This comparison is accurate, as OpenSea operates like a buying/selling platform such as eBay or Etsy.
This site is only for digital items called NFTs. You can use OpenSea to set fees for your tokens and to create marketplaces for selling NFT art projects and auctions.
OpenSea operates using a decentralized platform, so it trades using self-executing smart contracts. This means that both parties involved in a trade are guaranteed a fair result. If the trade is not fair, then no transaction occurs.
Even though there is no middleman between the buyer and the seller on OpenSea, the platform still charges a 2.5% fee on every successful transaction. This may seem like a lot, but it is actually lower than most other NFT marketplaces, which can charge up to 15%.
The OpenSea network uses the Wyvern Protocol to operate its transactions. The Wyvern Protocol is a decentralized digital asset exchange protocol that runs on Ethereum. It is made to help facilitate the exchange of NFTs.
Getting Set Up
In order to participate in an NFT marketplace, you will need to acquire a web-based, cryptocurrency-enabled wallet. An example of this would be MetaMask. A crypto wallet allows you to interact with blockchains as well as complete transactions that involve NFTs or cryptocurrency.
Whether you plan to buy, sell, or trade NFTs on OpenSea, you will need to create an account with one of the wallets supported by the OpenSea marketplace. OpenSea is compatible with many wallets, so most wallets will likely interface with the site.
The OpenSea marketplace supports the following wallets:
- MetaMask
- Trust Wallet
- Coinbase Wallet
- Portis
- WalletLink
- WalletConnect
- Opera Touch
- Venly
- Phantom
- Glow
- Dapper
- Bitski
- Authereum
- Fortmatic/Magic
- Kaikas
- Torus
Connecting to OpenSea
After creating a wallet, the next step is to link it to the site’s blockchain. After establishing an account on the platform and linking your wallet to it, your assets should display on your account page. For example, if you already own any NFTs in your wallet, they’ll show on your account page for you to trade or sell.
Before you can buy or sell any NFTs, you will need to have some Ether cryptocurrency (ETH). ETH is the default currency used on OpenSea and is also used to pay gas fees.
Searching for NFTs
OpenSea is an online marketplace that is user-friendly, like eBay, Amazon, or any other online marketplace. The Browse page is the main window into the market’s activity, and it is just as user-friendly as the rest of the site. You can scroll through the listings or use the search and filter features to find what you’re looking for. The most popular collections and trending OpenSea NFTs appear at the top of the results by default.
There are six filter categories on OpenSea called “status pills” which can help you to find what you are looking for more easily. They are:
On Sale
- Displays only OpenSea NFTs that are currently for sale
- Many items that can be viewed on the site are not available for purchase.
Has Offers
- Displays OpenSea NFTs that already have offers
Pre-sale
- Filters search for items labeled “pre-sale”
- , or items which are experiencing a decline in interest. This might be items listed for sale before another related item is launched, or items which are experiencing a decline in interest.
- is called pre-loading Pre-loading is when gamers can buy in-game items before the game is released.
Has Bounty
- Shows items that have bounties attached to them
- Bounties are currency earned when users refer others to a particular item or bundle. They can be used to purchase items in the Bounty Store.
Auctions
- This filter shows listings for active English auctions only
Bundles
- Displays bundle listings only
- Listings that include multiple items for sale that are meant to be bought together in one transaction are called bundles.
After you select your initial filters, you can further refine your search by selecting additional filters. You can also sort the results by various criteria, such as “most viewers,” “highest price,” “expiring soon,” and “recently listed.” This will bring items of greater interest to you to the top of the results.
Buying NFTs
OpenSea only works with ERC-721 and ERC-1155 tokens. If you want to buy OpenSea NFTs, you need to use ETH. However, because ETH is not compatible with the tokens OpenSea uses, it needs to be transformed into a compatible currency.
In order to convert ETH to WETH, you must first go to a centralized or decentralized exchange. However, on OpenSea, this is not necessary as you can make the change easily without leaving the site.
How Listings Work
There are three ways that sellers can list their NFTs for sale. These options are fixed price, English auction, or Dutch auction.
Fixed-Price Listing
A fixed-price listing is one where the seller assigns an item a price and the buyer agrees to pay that price. The listing remains available until it is either purchased or the seller cancels the listing.
English Auction Listing
An English auction on eBay is one in which the seller assigns an item a minimum price, in the hopes that more than one person will bid, and pushing the final purchase amount much higher.
Sellers can set a minimum price for their NFTs, which can be zero dollars. They can also set a reserve price, which is the minimum amount they are willing to sell the NFT for. However, the seller can accept a bid at any time if they’re ready.
Dutch Auction Listing
Buyers can see this price decline and are thus more likely to buy the item before it becomes too low in value. A Dutch auction listing is also known as a “declining price listing.” In a Dutch auction, the seller starts with an artificially high price for the item and lets it decline over time. Buyers can see the price decline, which encourages them to buy the item before it becomes too low in value.
The seller must enter a starting price, ending price, and duration for the auction. The purpose of this auction strategy is that once the price reaches an acceptable amount, the buyer will quickly buy it to beat out the competition. In this way, the NFT will theoretically sell for what the highest bidder is willing to pay.
Creating and Selling NFTs
You don’t need any experience with NFTs to create a collection on OpenSea. If you have a digital item like a piece of art or music, or a document available in an accepted format, you can follow OpenSea’s guidelines for uploading the content. The site will then generate an NFT version of it.
To list an NFT for sale, select the Sell button and fill in the appropriate information. Most people choose to sell lower-priced items as fixed-price or Dutch auction listings, and higher-end items in English auctions. If your NFT hasn’t sold yet, you can always change or cancel the listing.
OpenSea’s Features
Atomic transactions
OpenSea’s transactions are called “atomic” because the whole deal happens immediately and completely. This is different from buying something on Amazon, where the buyer pays for the item and then has to wait for the seller to ship it. With OpenSea, since the NFTs are digital, the buyer gets them right away when the deal is made, and the seller is paid at the same time. There is no need for a third party or for trust, because the sales and transfers are done by a series of automated smart contracts, which is a system that has been tested and works well.
Decentralized Control
OpenSea only provides the marketplace for users to buy, sell, and interact with one another. OpenSea’s marketplace is especially notable because it is noncustodial. This means that there is no central authority that controls the market activity on the site. The company that created the platform is responsible for maintaining the infrastructure, but not for managing transactions. Neither does the company own any digital assets at any stage. Wallets “own” NFTs, and the individuals with access keys own the wallets. OpenSea only provides the marketplace for users to buy, sell, and interact with one another.
What Is OpenSea Gifting?
OpenSea’s platform includes an optional gifting function that makes it possible to send an NFT to another user as a gift. You may do so with their username on the site or their ETH address. Recipients will see gifts delivered directly to their wallets.
What Is OpenSea Minting?
OpenSea’s marketplace permits creators and sellers to mint their NFTs. This function is free, but sales and gas fees still apply.
Costs
OpenSea does not charge anything to join its platform or create NFTs; however, it does take a 2.5% sales fee from every transaction. This fee is lower than most other NFT marketplaces, although there are a few that charge less. If you’re using the Ethereum blockchain or trading Ethereum NFTs, you may also have to pay “gas” fees. You can avoid these fees by using the Polygon blockchain instead.
Verifying Sellers
OpenSea’s platform is designed in a way that requires users to connect their wallets to store NFTs, which in turn vet the sellers. This means that users cannot list NFTs for sale that they do not have in their possession, as the platform must recognize the NFT’s existence before it can be listed. The fact that atomic transactions are guaranteed should give all parties involved peace of mind when buying and selling NFTs on the site.
Statistics and Analysis
OpenSea’s platform provides users with an easy way to access marketplace data, statistics, and analysis. All of this information is compiled on the site, making it readily available to anyone.
OpenSea’s Launch to Fame
Open Sea’s founding company was created in 2017 by Devin Finzer and Alex Atallah. They were inspired by the successful Ethereum game Cryptokitties, and conceived of a market that would allow users to buy and sell Ethereum NFTs like those in the game. However, their vision and OpenSea’s capabilities soon expanded well beyond this starting point, as the full potential of digital ownership became evident.
Artists realized they could use the platform to establish and protect their intellectual property. In 2020, the platform only saw $21 million in trading volume, but this increased several fold by the next year, partly due to high-profile investors publicly taking interest in the platform.
OpenSea’s trading volume increased significantly the following year, totaling $12.5 billion and representing almost 88% of all NFTs traded that year. While there are now many NFT marketplaces, OpenSea is still the best option because it has the highest total sales volume and number of unique traders.
OpenSea’s Security Issues
OpenSea has announced that their security has been breached after an employee of their email vendor, Customer.io, gaining access to their system and downloading and sharing email addresses of OpenSea users and newsletter subscribers.
If you receive an email that looks suspicious, please report it to us immediately. OpenSea is working with Customer.io and law enforcement to resolve a data compromise issue that can lead to an increase in email phishing attempts. If you receive an email that looks suspicious, please report it to us immediately.
Ways to Safeguard Yourself
In order to ensure that you don’t fall victim to malicious actors, OpenSea recommends doing the following:
- Always be wary of phishing emails from OpenSea impersonators (OpenSea will only send emails from the domain: ‘opensea.io’).
- Never download any attachments from an OpenSea email.
- Always check the URL of any links included in an OpenSea email (OpenSea will include hyperlinks to ’email.opensea.io’).
- Never share or confirm your passwords or seed phrases.
- Never sign a wallet transaction that doesn’t list the origin of https://opensea.io if you were directed from an email.
Made The Right Choices
Although a good product is necessary for success, it is not the only factor. Every project has to make countless choices, and the choices they make determine whether the project is successful or not. OpenSea made a lot of good choices on their way to becoming successful.
OpenSea was created with the conviction that their mission was important. This conviction was based on the ERC-721 standard, which was being developed by Ethereum’s core developers. The ERC-721 standard dictated the creation and transfer of non-fungible tokens (NFTs) on the Ethereum blockchain. The fact that Ethereum’s developers were creating this standard meant that they considered NFTs to be important enough to warrant their attention. So, OpenSea created a marketplace that would support all future NFTs. This marketplace was more convenient for buyers because it aggregation the supply of NFTs in one place. Previously, each NFT project had to create its own marketplace (for instance, CryptoPunks and Axie both have their own marketplaces).
OpenSea survived the crypto winter of 2018 by running a lean team and charging transaction fees.
Recently, they had to make some difficult decisions when many high-value NFTs were sold for less than their worth because of a bug in the code. They chose to reimburse the users who were affected by this. In some cases, they also froze NFTs that had been stolen. Some people criticized them for this, saying that it goes against the basic principle of crypto, which is that it can’t be censored. However, taking such steps definitely helps them to gain the trust of their users.
What’s Next for OpenSea
After conquering the world sea, you try to crush every competitor that dares to dethrone you and continue your dominance. You achieve this either by becoming #1 in your category by a wide margin or expanding to other use cases, or both.
OpenSea is the most popular NFT marketplace, but they are being challenged by LooksRare. LooksRare has lower fees than OpenSea, a native token, and they share all their fees with token holders. LooksRare is already doing better than all the other platforms and is getting close to OpenSea’s transaction and Eth volumes.
The answer to whether or not OpenSea will launch their own token is not simple. OpenSea, being a US company, wants to comply with US regulations and cannot risk launching a token that would anger regulators and disrupt their operations. Below are some potential options:
- Go mobile. OpenSea already has a mobile app, but it’s very limited and doesn’t even allow trading of NFTs. The app needs to abstract away the process of creating a wallet, storing your seed (with the option to do it for advanced users), and complicated gas estimations. Basically, make the experience seamless enough to onboard crypto-noobs.
- Explore fractionalization of NFTs where the original owner of the NFT can split the ownership into multiple smaller tokens, that other people can then buy. This allows for shared ownership of the NFT. The chance to get exposure to blue-chip NFTs like BYAC and CryptoPunk which most just can’t afford today will unlock new demand. And the original owner can benefit from increased liquidity and a potential ‘curator’ fee they can earn through the sale of fractionalized chunks. Win-Win!
- Consider partnering with a DeFi protocol (or create their very own!) to allow the use of NFTs as collateral to borrow money, at least blue-chip NFTs to begin with. This cross-pollination could unlock a whole new user base and demand for OpenSea.
- Vitalik recently talked about non-transferable NFTs that have potential uses like the issuance of college degrees, land titles, etc. While there are many considerations yet to be hashed out (like what if the owner wants to transfer to their own second wallet due to security concerns), OpenSea can lead the discussion in the community and maybe even write an ERC standard for it! They could even explore potentially creating a B2B solution that offers non-transferable NFT implementation for businesses that may want to use it.
The options for NFTs mentioned above, like fractionalization and utility as collateral, could bring OpenSea under the scrutiny of regulators. They will have to be careful. Regulation is a big potential hurdle that OpenSea needs to continuously monitor, given the general regulatory uncertainty about all things crypto. They may even consider lobbying for crypto-friendly laws to help the ecosystem move forward, given their power in the crypto community.
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