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What is OpenSea?

Published on
June 22, 2022

What is OpenSea?

OpenSea is the largest open marketplace for NFTs in the world. In this explainer, learn what's pushing everyone there.

You might be wondering what non-fungible tokens (NFTs) and OpenSea are if you've heard a lot about them. Perhaps you've heard of CryptoKitties, the first NFTs game to crash the Ethereum network, or the BAYC, one of the most popular NFTs collections with a starting price of roughly 100 ETH, or thousands of dollars.

NFTs are non-interchangeable tokens that are transparently registered on the blockchain. We can use them to prove ownership of digital and physical assets in a tamper-proof manner.

We may tokenize anything from digital art and music to in-game and real-world assets like real estate. These digital assets have gained a lot of traction as a way for artists to secure their intellectual property.

You must go to an NFT marketplace to explore, buy, sell, or build your own NFT, and the largest one is OpenSea. According to DappRadar, the NFT marketplace had a cumulative trading volume of US$12.5 billion through 2021, accounting for roughly 88 percent of the total NFT trading volume that year.

Bored Ape Yacht Club, CryptoPunks, MonsterArmy, and Doodles are some of the most well-known NFT collections on OpenSea ( like MonsterArmy). We'll look at what OpenSea is and how NFT marketplaces work.

What is OpenSea?

OpenSea is a marketplace comparable to eBay, Etsy, and Amazon, with the exception, that all of the things displayed are one-of-a-kind digital treasures in the form of NFTs that users may buy, sell, and mint. OpenSea is a decentralized, peer-to-peer exchange that allows users to conduct direct, trustless transactions with one another.

OpenSea was formed in 2017 by software programmers Alex Atallah and Devin Finzer, who was motivated by the release of the popular NFT series CryptoKitties and saw the potential for NFTs to provide actual ownership of digital objects for the first time.

The platform allows digital artists and content creators to mint NFTs, establish unique marketplaces and NFT collections, set fees for their tokens, and sell them through auctions.

What is OpenSea, and how does it work?

The marketplace on OpenSea is non-custodial, which means that no central entity has control over the platform's transactions. Instead, self-executing smart contracts facilitate transactions and ensure fair commerce. On OpenSea, transactions are either completed (the buyer receives the NFT and the seller is compensated) or not completed. Atomic transactions are what they're called.

Because OpenSea is a peer-to-peer marketplace, there is no intermediary between the buyer and seller. Despite this, the platform keeps 2.5 percent of each transaction. The costs of competitors range from 0% to 15%.

The Wyvern Protocol, a set of smart contracts on the Ethereum blockchain meant to facilitate the buying and trading of unique digital assets, lies at the heart of OpenSea's architecture. The platform supports Ethereum, Polygon, Klatyn, and other blockchains.

OpenSea Strengths

The ability to mint NFTs for free utilizing Opensea's Polygon-based gas-free marketplace is one of the key benefits for creators. By choosing the gas-free marketplace, creators will avoid paying the Ethereum network's transaction costs, often known as gas fees. Another benefit is that the NFT's original author can set up a royalty payout for each secondary-market sale of the token in perpetuity.

Buyers may quickly search through NFT collections, filtering by price, status, native blockchain, and token rarity. Buyers can cast a bid, make an offer, or buy right away and pay the NFT's asking price, depending on the type of auction. Buyers can also view each NFT's purchase history, including how many times sellers sold it, bought it, and how much it cost.

More than a dozen crypto wallets are supported by OpenSea, with MetaMask and Coinbase Wallet being the most popular.

OpenSea Weaknesses

One of OpenSea's key issues is that, because it runs on the Ethereum blockchain, it may have significant gas fees during periods of heavy network congestion. OpenSea is the Ethereum network's most important gas guzzler. To address this issue, OpenSea developed a gas-free marketplace and included cross-chain functionality for Polygon. Ethereum 2.0, a more cost- and energy-efficient, proof-of-stake-based version of the protocol, is also attempting to address this issue.

Another issue to be concerned about is the platform's performance. According to OpenSea's status tracker, the website and API are frequently experiencing performance issues. Additionally, OpenSea has had a service provider outage and ongoing database difficulties, increased API errors and delayed response times. As a result of these concerns, the company started producing a monthly site reliability report that explains the issues from the previous month and what efforts are being made to remedy them.

Customers have lost money due to the misuse of OpenSea. OpenSea's head of product was accused of selling NFTs on insider information in September 2021. The executive was buying NFT drops before they were displayed on the platform's site, then selling them shortly after being released to the public, using private crypto wallets. In a blog post, OpenSea stated that it would "offer recommendations on how we might tighten our existing controls" and accepted the unnamed executive's resignation.

Users noticed a theft of 332 ETH on OpenSea in January 2022, which was worth roughly US$800,000 at the time of the incident. OpenSea claimed it contacted impacted consumers directly and compensated them, but the problem is essential to blockchain marketplaces. It informed all users about how to handle their accounts to avoid vulnerability.

OpenSea is no exception to the rule that blockchain-related technologies establish a community around their platforms. However, some communities, such as OpenSea in December 2021, endure upheaval. After its CFO announced plans to take the firm public, the NFT marketplace received a lot of flak. Users thought the company should fundraise using an OpenSea token airdrop to keep the money in the community. Following the backlash, the CEO stated that the company was "not considering an IPO," but that if it did, it would "seek to incorporate the community."

Other NFT marketplaces

Binance NFT is one of the most popular curated NFT marketplaces, having launched in June 2021. The Binance Smart Chain underpins the platform, which has no marketplace costs.

On the Crypto.com chain, the Crypto.com NFT was released in March 2021. The site has partnered with well-known brands such as Aston Martin and the UFC. There are no marketplace fees on Crypto.com NFT.

LooksRare bills itself as a "community-first" NFT marketplace that began in January 2022 with a "vampire attack" to dethrone OpenSea. Within a week of its inception, the Ethereum-based marketplace had surpassed $1 billion in sales volume. For NFT sales, the platform charges a 2% basic sales fee.

Gemini owns Nifty Gateway, the first USD-based, centralized NFT marketplace. The Winklevoss twins bought the marketplace in 2019 after being created in 2018. The platform charges a 5% marketplace fee.

Rarible is a community-owned NFT marketplace with comparable characteristics to OpenSea and is built on the Ethereum network, supporting Flow and Tezos on several chains. The platform became live at the start of 2020. Rarible has 1.6 million members to date and charges a 2.5 percent marketplace fee.

Solanart is the first and biggest NFT marketplace developed on the Solana blockchain. Its trustless marketplace strives to encourage artists and creators. Solanart began operations in July 2021 and charges a 3% marketplace fee.

SuperRare, which opened in April 2018, was one of the first Ethereum-based NFT marketplaces. SuperRare is a marketplace that sells only digital art and charges a 15% commission.

What does OpenSea have in mind for the future?

OpenSea raised US$300 million in a Series C fundraising round headed by Paradigm and Coatue in January 2022, valuing the platform at US$13.3 billion. While the firm has stated that it is not actively planning an IPO, the employment of a seasoned CFO in 2021 indicates that this is a possibility. Brian Roberts was previously the CFO of Lyft, a ride-sharing platform, where he oversaw the company's IPO, which raised $7 billion in financing.

OpenSea will always face competition as the premier NFT marketplace. The vampire attack by LooksRare was a surprising and successful example. While comparable approaches may reduce OpenSea's trading volume in the short term, its substantial market share may enable it to maintain its position as the industry leader in the long run. Trading volume on OpenSea increased 646-fold in 2021, topping US$14 billion. OpenSea accounted for 56 percent of the total transaction volume in the NFT market, which was valued at $25 billion in 2021. The NFT market is expected to exceed US$35 billion in 2022 and US$80 billion in 2025, according to investment bank Jefferies. With its size advantage, OpenSea may maintain its position as the leading NFT marketplace for the foreseeable future.