Anyone learning about NFTs for the first time is likely to run into the NFT marketplace, OpenSea, sooner rather than later. When discussing the secondary market for NFTs, OpenSea is the first name that comes to mind as one of the oldest NFT markets and by far the largest userbase.
However, what is OpenSea and how does it operate? Read on because we’ve got you covered.
The history of the OpenSea NFT marketplace
OpenSea is a platform for minting, purchasing, trading, and viewing NFTs that was established back in December 2017 by Devin Finzer and Alex Atallah. The business has been compared to a “eBay for crypto assets” or a “Web3 Amazon” in common parlance.
The ERC-721 Ethereum standard, which was brand-new at the time and allowed for the early NFT projects that gave rise to the modern-day sector, served as a major source of inspiration for OpenSea.
The original NFT collection CryptoKitties, which had their own exclusive trade platform, served as another source of inspiration for the OpenSea marketplace. The plan was for OpenSea to serve as a central hub where users could manage and transact in a wide range of various NFTs.
It didn’t see much action for a while and concentrated on developing its platform. Of course, it all changed in 2021 when NFTs became significantly more popular, thanks to a number of causes such as the growth in popularity of NBA Top Shot, Beeple’s historic sale, the success of CryptoPunks, and the Bored Ape Yacht Club.
How does the NFT marketplace work?
A non-custodial, peer-to-peer NFT market is called OpenSea. That has several implications. One of the meanings of the non-custodial aspect is that, in theory, there is no single entity in charge of all the assets on OpenSea (more on centralization issues with OpenSea to come).
The way it operates is that smart contracts completely control all of the transactions on OpenSea. Trustless transactions are therefore made possible. The ability to join to OpenSea and start trading is also available to anyone with a suitable crypto wallet.
The peer-to-peer feature of OpenSea, on the other hand, is related to the fact that OpenSea does not sell NFTs directly. Instead, it enables individuals or projects to sell NFTs to other individuals. Users can simply manufacture their NFTs on OpenSea thanks to the gas-free minting option that OpenSea offers. Nevertheless, any NFTs from supported blockchains can trade on the NFT market, and they frequently do.
Like the majority of online marketplaces, OpenSea generates revenue from transaction fees. Currently, it charges 2.5% of the transaction as a fee. This figure frequently comes up when OpenSea is criticised in comparison to some of its rivals that charge less. Fair enough, some other marketplaces do charge up to 15% in fees.
What kind of NFTs trade on OpenSea?
At first, OpenSea solely served Ethereum NFTs, the first smart contract chain. Notably, Ethereum is the location of today’s most well-known NFT collections. OpenSea, on the other hand, has grown to become a cross-chain exchange, providing trading on NFTs on the Polygon, Solana, and Klatyn blockchains at the moment.
OpenSea’s dominance of the NFT market so far
In terms of overall transaction volume and user count, OpenSea is second only to the Axie Infinity market on the Ronin sidechain in DappRadar’s rankings of NFT marketplaces.
OpenSea unquestionably made good use of its years of being ahead of the curve. It has been excellently positioned for the eruption of NFTs in 2021 ever since its creation. It created a market that was accessible to everyone and quite simple to use for trading. This contributed to it having a higher adoption rate than other NFT marketplaces.
Due to its enormous user base, creators have access to the widest market possible to advertise their NFTs. The same is true for NFT owners, who can explore and accumulate a limitless variety of NFTs.
Clearly, the growing activity and interest in NFTs led to a sharp increase in OpenSea’s user base and transaction volume. In reality, the business had raised $300 million by the beginning of 2022, giving it a whopping $13.3 billion in valuation.
But over the past few months, OpenSea has encountered numerous public difficulties. Although it continues to be the largest and most popular NFT marketplace, its hold on the market has a little bit loosened.
OpenSea’s highly publicized flaws and missteps
Is the OpenSea NFT marketplace “too centralized”?
The degree to which OpenSea is a centralised NFT market operating in a decentralised environment is one topic that frequently comes up. Many NFT owners find this to be a significant sticking point. Thus, many criticise certain of OpenSea’s operations as not being fully Web3-based.
Yes, it’s possible that OpenSea won’t be able to get rid of any NFTs from the blockchain. However, it has the complete authority to ban NFTs from its market. Additionally, this decision could be disastrous for NFT producers considering its influence and the extent of its user base. To that reason, NFT projects that have been removed from the OpenSea marketplace frequently protest on Twitter and other online forums.
OpenSea has been no stranger to scandals
The OpenSea “insider trading” debacle was undoubtedly one of the greatest controversies in the NFT industry in 2021. When Nate Chastain, Opensea’s then-Head of Product, resigned from the NFT market following allegations of misconduct, this happened in September 2021.
This happened right after OpenSea admitted that one of its employees had been in charge of NFT projects that were supposed to be shown on the NFT marketplace’s front page. The disclosure came after several days of debate on NFT Twitter. All of this was started by a watchful user who flagged some erroneous behaviour from Chastain’s open Ethereum wallet.
In the months that followed, things for OpenSea didn’t really get much better. OpenSea has been facing a lot of criticism on Twitter from roughly Q4 2021, ranging from centralization issues to a persistent exploit of their delisting system that resulted in the loss of countless high-value NFTs.
What’s the outlook for the OpenSea NFT marketplace?
In light of everything, OpenSea won’t be disappearing anytime soon. Despite the fact that new rivals appear almost daily, OpenSea’s NFT marketplace is still going strong thanks to the head start it received. For example, by most metrics, it continues to outperform its nearest rival, LooksRare. Not to mention the difficulties the LooksRare platform has encountered.
In addition, NFT marketplaces on other blockchains, such as Magic Eden, the leading Solana marketplace, compete with OpenSea. Nevertheless, Magic Eden may soon face more challenging competition now that OpenSea has entered the Solana market.
It is unclear if other NFT markets will soon overtake OpenSea due to the addition of integrations for other blockchains and other user-friendly features like card payment possibilities. not to mention surpass it.