What Is OpenSea? A 101 Guide
While NFTs (non-fungible tokens) like CryptoKitties and CryptoPunks were popular among early Ethereum users, it wasn't until the 2021 crypto bull run that more people learned about these unique tokens. Estimates suggest NFT trading volumes exploded by 21,000% during 2020-2021, and one of the biggest beneficiaries of this NFT boom was OpenSea.
To this day, OpenSea commands a high percentage of trading volume in the NFT ecosystem. Chances are many of the NFT collections you've seen on social media are on this market. But what is OpenSea, and what makes it so popular?
What is OpenSea?
OpenSea is one of the oldest peer-to-peer (P2P) NFT markets and often has the highest trading activity in the NFT industry. It was created by entrepreneurs Devin Finzer and Alex Atallah in 2017 and is a prime example of an NFT marketplace. Finzer and Atallah were inspired to create OpenSea after they saw the success of early NFT projects like Ethereum's CryptoKitties. During its early days, OpenSea only permitted NFT trading on the Ethereum blockchain, but now, it has become a multi-chain website with support for Polygon, Solana, and Klaytn NFTs.
The NFT marketplace gained mainstream attention during the 2021 crypto bull market, thanks to many successful NFT collections such as the Bored Ape Yacht Club (BAYC). At the height of the NFT boom, OpenSea had a daily trading volume of roughly $2 billion. OpenSea has attracted many prominent investors, including Shark Tank's Mark Cuban, Reddit's Alexis Ohanian, and the NBA's Kevin Durant. In early 2022, market analysts estimated OpenSea's valuation was close to $13.3 billion.
What is an NFT marketplace?
Because OpenSea is involved in NFT trading, it's essential to understand the basics of how NFTs work. NFTs are cryptocurrencies, but unlike "fungible" cryptos such as Bitcoin and Ethereum, they aren't interchangeable. In other words, you can't trade an NFT on a centralized crypto exchange (CEX) for a market price like you would with the usual cryptocurrencies. NFTs are unique and indivisible digital assets on top of a blockchain like Ethereum. These tokens use autonomous smart contracts to handle transactions and verify ownership rights on their respective blockchains.
Although NFTs are most often associated with art and profile pictures, they can represent any form of digital media. Currently, most NFTs are on Ethereum, but there are several NFT projects on multiple smart contract-enabled blockchains such as Solana, Cosmos, and Polygon.
An NFT market is a website that lets users trade and store their NFTs and, sometimes, create (or "mint") and sell them. Since NFTs don't have a spot market value, users can't sell them on traditional CEXs. NFT markets enable creators to set the price they want for their digital collectibles. While some markets offer auction-style pricing, others accept pre-set prices or offers. Although most NFT markets use crypto for transactions, some websites have also opened up to payment in fiat currencies with credit and debit cards.
How does OpenSea work?
All you need to use OpenSea is a compatible crypto wallet such as MetaMask, Coinbase Wallet, or Phantom. After connecting your wallet to OpenSea's website, you can browse, buy, or sell NFTs. OpenSea also allows users to mint NFTs for free by clicking the "Create" tab. Here’s how to buy NFTs on OpenSea:
- Auction: Place a bid on an NFT you want, and wait until the closing date to see if you won the digital collectible.
- Buy: OpenSea allows you to buy many NFTs outright for a fixed price. To find the lowest "Buy It Now" price, scan the "floor price," which is the lowest price of an asset, on an NFT collection.
- Offer: If you want an NFT for slightly lower than the floor price, OpenSea allows you to offer a price to the seller and see if they accept it.
If placing a bid or offer for an NFT, you need to know what WETH is on OpenSea. WETH is a "wrapped" form of Ethereum's native cryptocurrency ETH. Unlike ETH, WETH isn't used to pay gas or transaction fees on the Ethereum blockchain. Although WETH has the same value as ETH, it's a synthetic token that can be deposited into a bid or offer smart contract on OpenSea. If you win the NFT bid or the seller accepts your offer, the smart contract will automatically send your WETH to the seller and transfer the NFT to your crypto wallet. This helps automate the process of buying and selling NFTs on OpenSea.
At first, you could only use cryptocurrencies like ETH and WETH to pay for NFTs on OpenSea. However, OpenSea now partners with fiat-to-crypto service MoonPay to help customers use credit or debit cards to purchase NFTs.
Why is OpenSea important?
OpenSea's long history and large market cap substantially influence how NFT markets function. Many new NFT marketplaces have drawn inspiration from OpenSea's design. Besides this influence, OpenSea was one of the first sites that made it easy for users to create and buy NFTs. Unlike curated NFT markets like Nifty Gateway and SuperRare, you don't need special accreditations to mint NFTs on OpenSea. Since everyone with a crypto wallet can interact with OpenSea, it helps make NFTs more accessible.
OpenSea also has a wealth of historical NFT trading data. It's easy to find information such as daily trading volume and average prices for all NFT collections on OpenSea, helping traders and crypto market analysts understand which NFT projects have the most traction. OpenSea's charts also serve as a barometer of the overall NFT market.
Is OpenSea a decentralized NFT market?
OpenSea has many traits of a dApp (decentralized application), but it also has features of a private company. On the decentralized side, OpenSea lets crypto wallet users interact with the marketplace’s protocol and seamlessly handle crypto transfers.
Despite providing decentralized services, OpenSea still has central headquarters in New York, and its leadership often introduces new features or policies without voting procedures. Unlike many competing NFT markets or DeFi (decentralized finance) dApps, OpenSea hasn't issued a crypto governance token, which means its users can't vote on upcoming proposals as on other dApps.
Examples of NFT Collections on OpenSea
Although OpenSea has always garnered attention for its animated profile pic (PFP) collections, it also offers a wide assortment of digital collectibles, which include:
- Bored Ape Yacht Club: Yuga Labs' BAYC consists of 10,000 animated ape avatars on the Ethereum blockchain. Shortly after its 2021 launch, BAYC became one of the most talked-about NFT collections. Thanks in part to its association with celebrities, many of these apes have sold for millions.
- Doodles: Like the BAYC, the Doodles are a popular 10K PFP (10,000 profile picture) collection on the Ethereum blockchain. These pastel-colored NFTs have also become closely associated with many celebrities, and singer Pharrell now serves as Doodles' chief brand officer.
- Metaverse land NFTs: Many high-profile metaverse games like Decentraland and The Sandbox sell virtual land rights as NFTs on sites like OpenSea. The BAYC's Yuga Labs also offers land NFTs for its upcoming "Otherside" metaverse on OpenSea.
While OpenSea enjoys a high status in the NFT sector, it's not the only NFT trading portal. Here are a few of OpenSea's major competitors:
- Rarible: Rarible is a multi-blockchain NFT market that uses many aspects of social media to encourage a sense of community.
- LooksRare: LooksRare is an Ethereum-based NFT market that allows users to stake LOOKS tokens for bonus rewards and voting rights.
- Magic Eden: Created in late 2021, Magic Eden is the most successful NFT market on the Solana blockchain with a $1.6 billion valuation.
OpenSea increasingly faces more competition in the NFT space, but at the time of writing, other markets have yet to surpass OpenSea's influence on NFT trading. In the history of cryptocurrency, no website has had a more significant impact on making NFTs mainstream. While the future of OpenSea's market is unknown, it has certainly helped popularize NFT trading.
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