What is OpenSea and why is everyone talking about it?
OpenSea is the world's biggest open market for NFTs. Find out what drives everyone there in this BTCira explainer.
If you hear a lot about non-fungible tokens (NFTs) and OpenSea, you might be wondering what they are. You may have heard about CryptoKitties, the first NFT game to crash the Ethereum network, or Bored Ape Yacht Club, one of the most favored and popular NFT collections with a reserve price of almost 100 ETH or thousands of US dollars.
NFTs are non-exchangeable tokens that are transparently registered on the blockchain. They can be utilized as a tamper-proof representation of ownership rights of both digital and physical assets.
Anything can be tokenized, from digital art and music to in-game assets and real-world assets like real property. These digital assets are gaining popularity as a solution for artists looking to protect their intellectual property.
In order to browse, buy, promote or create your very own NFT, you need to go to an NFT market, and the largest one round is OpenSea. The NFT market had a cumulative buying and selling quantity of US$12.five billion thru 2021, almost 88% of overall NFT buying and selling quantity that year, consistent with DappRadar.
Some of the more notable NFT collections on OpenSea are:
- Bored Ape Yacht Club,
- CryptoPunks,
- and Doodles.
What is OpenSea?
OpenSea is a marketplace similar to Amazon, Ali Baba, and eBay except all products listed, are unique digital collectibles in the form of NFTs that users can buy, sell, and create. The platform is a decentralized peer-to-peer exchange that allows users to transact business directly with each other without trust.
OpenSea was encoded and founded in 2017 by software developers Alex Atallah and Devin Finzer who were intrigued by the launch of the popular NFT CryptoKitties series and saw the potential in NFTs to enable real item ownership for the first time.
Digital artists and content creators can use the platform to mint NFTs, create custom markets and collections of NFTs, set fees for their tokens, and create auctions to sell them.
How OpenSea work?
The OpenSea market is non-custodial, meaning that no central partaker has control of transactions on it. Rather, transactions are simplified by self-executing smart contracts that ensure fair trading. Transactions on OpenSea happen in an entirety(the buyer gets the NFT and the seller gets paid) or not at all. These are called atomic transactions.
Because OpenSea is a peer-to-peer marketplace, technically there is no middleman between seller and buyer. Despite this, the platform retains 2.5% of each transaction. Competitors' costs range from none to 15%.
A series of smart contracts on the Ethereum blockchain is designed to facilitate the buying and trading of unique NFT's digital assets. The platform presents cross-blockchain support for Ethereum, Polygon, and Klatyn.
Strengths
One of the main benefits for creators is being able to issue NFTs for free via Opensea's polygon-based gasless market. Opting for the gasless market means that creators on the Ethereum network will not have to pay transaction fees, also known as gas fees. Another benefit is that the original creator of an NFT can in perpetuity receive a royalty payment for each sale of the token on the secondary market.
Buyers can easily search NFT collections and filter by price, status, native blockchain, and rarity of each token. Depending on the type of auction, buyers can bid, make an offer, or buy outright and pay for the request. NFT price. Buyers can also view each NFT's purchase history, including how many times it was sold, who bought it, and its prices.
OpenSea supports more than a dozen crypto-currency wallets, with MetaMask and Coinbase Wallet being the most popular to use.
Weaknesses
One of OpenSea's main concerns is that due to its use of the Ethereum blockchain, peaks in network congestion can result in high gas charges. OpenSea is actually the largest gas consumer on the Ethereum network. To address this issue, OpenSea added cross-chain support for Polygon and created a free gas market. Ethereum is also trying to solve this problem by moving to Ethereum 2.0, a cheaper and more energy-efficient proof-of-stake-based iteration of the protocol.
Another issue concerns platform performance. According to OpenSea's health tracker, the website and API often run with degraded performance. OpenSea has also experienced a vendor outage as well as ongoing database issues, many API errors, and delayed response times. In response to these performance issues, the company began publishing a monthly site reliability report that outlines the issues over the past month and the steps taken to resolve them.
Customers suffered losses thanks to the improper use of OpenSea. In September 2021, OpenSea's product manager was accused of trading insider NFTs. shortly after they were published. OpenSea quickly responded in a blog post that there would be "recommendations on how we can strengthen our existing controls" and accepted the company's resignation unidentified executive.
In January 2022, users on OpenSea noticed a theft of 332 ETH worth around $800,000 at the time of the attack. OpenSea said it has contacted affected customers directly and reimbursed them, but said the issue is critical to blockchain markets and shared with all customers how to manage their accounts to avoid this vulnerability.
Blockchain-related technologies often develop a community around their platforms, and OpenSea is no exception. But sometimes unrest occurs in communities, as was the case with OpenSea in December 2021. The NFT market was heavily criticized when its chief financial officer started getting to take the corporate public. The company must keep its fundraising within the community via an OpenSea token airdrop. After the backlash, the executive said the company "is not planning an IPO, and if we ever did, we would try to get the community involved."
Other NFT marketplaces
Binance NFT launched in June 2021 and is one of the most popular selected NFT markets. The platform is powered by Binance Smart Chain and does not charge any market fees.
Crypto.com NFT was launched on the Crypto.com chain in March 2021. The platform has partnered with well-known brands such as Aston Martin and UFC.Crypto.with NFT does not calculate market prices.
LooksRare bills itself as a "community first" NFT marketplace that debuted in January 2022 with what it called a vampire attack to challenge OpenSea's dominance. The Ethereum-based marketplace has surpassed over $1 billion in sales volume within a week of its launch. The platform charges a 2% fee for NFT sales.
Nifty Gateway is the first centralized USD-based NFT marketplace owned by Gemini. The marketplace was launched in 2018 and acquired by the Winklevoss twins in 2019. The platform charges a 5% marketplace fee.
Rarible is a community-owned NFT marketplace with similar features to OpenSea and also built on the Ethereum network, with multi-chain support for Flow and Tezos. The platform was launched in early 2020. To date, Rarible has more than 1.6 million users and calculates a market price of 2.5%.
Solanart is the first and biggest NFT marketplace built on the Solana blockchain, which aims to promote artists and creators through their trusted marketplace. Launched in July 2021, Solanart charges a 3% market fee.
Super Rare is one of the first Ethereum-based NFT markets and was launched in April 2018.SuperRare is a market exclusively for digital art and costs 15%.
What does the future hold for OpenSea?
In January 2022, OpenSea closed a $300 million Series C funding round led by Paradigm and Coatue, raising the platform's valuation to $13.3 billion. to this eventuality. Previously, Brian served as CFO of ridesharing platform Lyft, where he led the company's IPO and raised $7 billion of capital.
As the leading NFT market, OpenSea will always front the competition. LooksRare's Vampire Attack was a surprising and successful example. While similar tactics could eat into OpenSea's trading volume in the short term, its large market share could help it remain a leader in the long term. OpenSea saw a 646x increase in trading volume to over $14 billion in 2021. As the total NFT market was $25 billion in 2021, OpenSea accounted for 56% of the transaction volume. Investment bank Jefferies expects the NFT market to surpass $35 billion in 2022 and $80 billion in 2025. With its scale advantage, OpenSea could remain the leading NFT market for the foreseeable future.
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