Anyone interested in NFTs for the first time is likely to come across the OpenSea NFT marketplace sooner rather than later. When it comes to the secondary market for NFTs, OpenSea is the first name that comes to mind. It is one of the oldest NFT marketplaces, with by far the largest userbase.
But what is OpenSea and how does it function? We’ve got you covered, so continue reading!
The OpenSea NFT marketplace’s history
OpenSea is a platform for minting, buying, selling, and viewing NFTs that was founded by Devin Finzer and Alex Atallah in December 2017. The company has been compared to a “eBay for crypto assets” or a “Web3 Amazon” in popular parlance.
The ERC-721 Ethereum standard, which enabled the early NFT applications that laid the groundwork for the sector we know today, was a major inspiration for OpenSea.
The OG NFT collection CryptoKitties, which had its own specialised trade platform, was another source of inspiration for the OpenSea marketplace. OpenSea was supposed to be a single location where users could manage and trade a range of various NFTs back then.
It didn’t see much action for a while and concentrated on expanding its platform. That all changed in 2021, when a combination of circumstances such as the growing popularity of NBA Top Shot, Beeple’s historic sale, and the success of CryptoPunks and the Bored Ape Yacht Club propelled NFTs into the mainstream.
What is the structure of the NFT market?
OpenSea is a peer-to-peer non-custodial NFT marketplace. That implies a few things. For starters, the non-custodial component alludes to the fact that the assets on OpenSea are not controlled by a centralised entity (more on centralization issues with OpenSea to come).
The way it works on OpenSea is that all transactions are governed by smart contracts. As a result, trustless transactions are possible. Anyone with a compatible crypto wallet can also connect to OpenSea and start trading.
The peer-to-peer feature of OpenSea, on the other hand, is due to the fact that OpenSea does not sell NFTs. Rather, it enables individuals or projects to sell NFTs to others. Users can simply manufacture NFTs on OpenSea using a gas-free minting mechanism provided by OpenSea. Regardless, any NFTs from supported blockchains can trade on the NFT marketplace.
OpenSea, like most online markets, makes money by charging a transaction charge. At current time, the cost is 2.5 percent of the transaction. This statistic is frequently mentioned in comparisons of OpenSea versus competitors with cheaper costs. Although, to be fair, several other markets charge as much as 15% in fees.
On OpenSea, what types of NFTs are traded?
OpenSea was designed specifically for Ethereum NFTs, the first smart contract chain. The most well-known NFT collections are currently hosted on Ethereum. However, OpenSea has evolved into a cross-chain exchange, with trading on NFTs on the Polygon, Solana, and Klatyn blockchains already available.
So far, OpenSea has dominated the NFT business.
Without a doubt, OpenSea capitalised on its years of foresight. It has been properly positioned for the eruption of NFTs in 2021 since its inception. It created a trading platform that was reasonably simple to use and accessible to anyone. This contributed to a higher adoption rate than other NFT marketplaces.
Its enormous user base provides creators with the largest audience for marketing their NFTs. Similarly, NFT collectors have a limitless supply of NFTs to discover and collect.
The increased interest and engagement in NFTs resulted in a tremendous increase in OpenSea’s userbase and transaction volumes. In reality, by the beginning of 2022, the company had raised $300 million in investment, valuing the company at an astonishing $13.3 billion.
Despite this, OpenSea has encountered numerous public difficulties in recent months. Although it is still the largest and most popular NFT marketplace, its monopoly has lessened.
OpenSea’s problems and blunders have been widely acknowledged.
Is the NFT marketplace on OpenSea “too centralised”?
One question that frequently arises is how much of OpenSea is a centralised NFT marketplace operating in a decentralised world. For a large number of NFT owners, this is a huge stumbling block. To put it another way, many individuals argue that certain of OpenSea’s operations aren’t actually Web3.
To be sure, it’s possible that OpenSea won’t be able to delete any NFTs from the blockchain. It does, however, have complete authority to ban NFTs from its marketplace. This move could be detrimental for NFT designers due of its prominence and large userbase. To that reason, NFT projects that have been delisted from the OpenSea marketplace frequently complain on Twitter and elsewhere.
OpenSea is no stranger to controversy.
The ‘insider trading’ controversy at OpenSea was, of course, one of the biggest scandals in the NFT sector in 2021. Nate Chastain, Opensea’s then-Head of Product, resigned from the NFT marketplace in September 2021 after being accused of misusing his position.
This came after OpenSea admitted that one of its employees had been front-running NFT projects that were supposed to appear on the NFT marketplace’s first page. Following a few days of discussion on NFT Twitter, the admission was made. All of this was sparked by a suspicious activity from Chastain’s public Ethereum wallet, which was discovered by a vigilant user.
In the months that followed, things didn’t get much better for OpenSea. From concerns about centralization to a long-term manipulation of OpenSea’s delisting system that resulted in the loss of innumerable high-value NFTs, OpenSea has taken a battering in the Twitter court of public opinion, effectively since Q4 2021.
What does the future hold for the OpenSea NFT market?
Considering everything, OpenSea isn’t going anywhere anytime soon. While new competitors appear on a daily basis, OpenSea’s head start in creating its NFT marketplace is holding firm. By most criteria, it continues to outperform its nearest competitor, LooksRare. Not to mention the problems with the LooksRare platform itself.
NFT marketplaces on other blockchains, such as the top Solana marketplace Magic Eden, also compete with OpenSea. Nonetheless, Magic Eden may face stronger competition in the future if OpenSea moves into the Solana space.
It’s unclear whether other NFT marketplaces will be able to catch up to OpenSea anytime soon, given the addition of new blockchain connections and other user-friendly features like card payment possibilities. Let alone passing it.
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