Openc: The Ultimate Guide to the $13B NFT Marketplace – OpenSea

This article is a summary of the YouTube video ‘What is OpenSea? | The $13B NFT Marketplace Explained’ by Wishpond

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Written by: Recapz Bot

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How does it work?
OpenSea: Largest NFT marketplace, connects creators and collectors, faces competition.

Key Insights

  • NFTs (Non-Fungible Tokens) are unique digital assets that enable ownership of digital art and other digital goods.
  • OpenSea is the first and largest NFT marketplace, with a 95% market share.
  • OpenSea allows creators and collectors to deal with each other directly through its peer-to-peer marketplace.
  • Notable NFT collections on OpenSea include Board Ape Yacht Club and CryptoPunks.
  • OpenSea was founded in December 2017 by Devin Finzer and Alex Attalla, who had previous startup experience.
  • OpenSea initially focused on game developers and expanded to include various categories and features over time.
  • The platform started making significant revenue in 2019 and became the leading NFT marketplace by the end of the year.
  • OpenSea experienced exponential growth during the 2020 pandemic, with transaction volumes growing a hundredfold.
  • OpenSea does not charge to list an NFT, but it takes a 2.5% service fee when an item is sold on the platform.
  • The company has raised $427 million in funding, giving it a valuation of $13.3 billion.
  • OpenSea faced challenges in the past, including low revenue in 2020 and a delisting issue with PolygonPunks.
  • The company plans to expand beyond Ethereum onto other blockchains and increase the categories of NFTs offered.
  • OpenSea believes in the potential growth of the metaverse, gaming, and virtual worlds within the NFT space.
  • There is speculation about whether OpenSea is taking advantage of an NFT bubble or if it will thrive in the long term.
  • Coinbase, a major cryptocurrency exchange, launched its own NFT marketplace, posing potential competition to OpenSea.

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Transcript

NFTs seem to be everywhere right now, with people spending millions of dollars to own them. But are they just a scam, with con artists selling worthless JPEGs of apes to suckers for inflated prices? Or is it the future of owning digital art?

The founders of OpenSea believe in the latter, which is why they created the world’s first and now largest NFT marketplace with a 95% market share. But what is OpenSea, and how did they get so big? Join us as we break down OpenSea’s beginnings, how it makes money, and what the future holds for this groundbreaking marketplace.

To fully understand OpenSea, we first need to explain what exactly NFTs are. NFT stands for Non-Fungible Token, which as HubSpot founder Darmesh Sharp recently, is an awful term for an awesome idea. And it’s no surprise that they are difficult to understand because you shouldn’t name your product by what it isn’t, but by what it is.

In short, NFTs are the opposite of digital coins like Bitcoin. Crypto coins aren’t unique. So one Bitcoin is always equal to any other Bitcoin. This means that they are fungible or mutually interchangeable, in other words. An NFT or Non-Fungible Token, on the other hand, is a one-of-a-kind digital good.

All kinds of digital creators have gotten into it because it’s the first time it’s possible to create unique art and prove its ownership while allowing creators and collectors to deal with each other directly, which is the whole idea behind OpenSea’s peer-to-peer NFT marketplace.

Some notable NFT collections available on OpenSea include the Board Ape Yacht Club, which features a collection of 10,000 unique illustrated board apes created by Yuga Labs. It has generated more than $1 billion in total sales, with it even finding favor among celebrities like Eminem, who spent $452,000 on a board ape that looked just like him.

Even wilder, in March 2021, an individual paid a record-breaking equivalent of $7.5 million for an alien punk that forms part of the popular CryptoPunks NFT collection, that also features 10,000 unique pixelated punks.

As mentioned, OpenSea is the first and largest NFT marketplace where you can find all kinds of unique digital objects. Besides digital art, many other things are available, such as collectibles, avatars, game items, domain names, and even digital representations of physical assets. Simply put, OpenSea is like eBay for a variety of digital objects.

So how does it all start? OpenSea was founded in December 2017 by Devin Finzer and Alex Attalla, both of whom had experience with launching startups. Attalla, OpenSea’s CTO, graduated from Stanford with a degree in computer science in 2014, having sold a global platform for nightlife venues called Hostess.fm the previous year.

After graduating, he worked at Palantir and Zugata as a software engineer until he launched What’sGoodly, a social polling platform that he grew to over 300,000 users in 2016. Finzer, OpenSea’s CEO, worked as a software engineer at Pinterest after graduating from Brown University, where he studied mathematics. In 2016, he launched ClaimDog, a tool that allowed you to find if a business owes you money by searching the state’s unclaimed property database. He successfully sold ClaimDog to Credit Karma, where he stayed as an engineering manager until starting OpenSea.

Around the time of his successful exit, Finzer became interested in cryptocurrencies and blockchain, studying the technology and eventually deciding he wanted to make it his career.

I was deep into crypto. I was pretty set on doing something in the crypto space. It was just a matter of what, whether that was joining a company, starting a company. But I was going to all the meetups back when you could actually go to physical, learning as much as I could about it. And then this project, CryptoKitties, which I believe you had on the show, Dapper Labs, hit the mainstream tech scene and really showed the world that there was other stuff to do in crypto outside of pure financial or pure tech plays. But this could be a more consumer, mainstream audience type of technology. So that’s when that’s when the world heard of non-fungible tokens. And that’s when I got interested in it.

Along with Atala, Finzer drew up some basic ideas and applied to the startup accelerator Y Combinator, which provided them with $120,000 in seed funding. While their initial project, called Wi-Fi Coin, focused on sharing Wi-Fi bandwidth using blockchain technology, they quickly pivoted to OpenSea, releasing it in February 2018.

When they had to present their platform at Y Combinator a month later, they had already sold $500,000 worth of digital collectibles. Participation in Y Combinator gave the OpenSea team enough exposure to help them raise their first round of funding, with high-profile crypto investors like One Confirmation, Founders Fund, and Blockchain Capital injecting $2 million into the company that May.

Initially, OpenSea’s primary source of business was game developers, like CryptoKitties, that were looking for additional revenue sources to monetize their game characters. However, the company spent the remainder of 2018 adding more categories and features to the platform. It also made its first acquisition, the competing NFT marketplace Atomic Bazaar, further expanding its feature set.

2019 saw OpenSea continue to add more features while working with various artists and developers, such as Deadpool-themed NFTs in cooperation with Fox Entertainment, helping the platform become profitable and the leading NFT marketplace by the end of the year.

While the 2020 pandemic helped OpenSea grow even further, it would be 2021 that would take the company to the next level. Over six months, transaction volumes on the platform grew a hundredfold. Daily volumes exceeded $10 million and reached $3.08 billion in trading volume in August 2021, an 800% increase compared to the previous month. By November 2021, OpenSea had more than tripled this value to cross the $10 billion mark. This means the company has already surpassed traditional art sellers, such as the renowned British auction house Christie’s, which generated approximately $6 billion in sales.

Despite all this trading, OpenSea doesn’t charge anything to list an NFT, as the NFT isn’t transferred to the blockchain until the first purchase or transfer is made. This is also known as lazy minting. However, not all transaction fees, also known as gas fees, are covered by OpenSea. First-time sellers must pay two transaction gas fees to set up their accounts. There are also gas fees when an item is sold, and these need to be paid by either the buyer when purchasing fixed-price items or the seller when accepting offers.

So, how does OpenSea generate money? The company charges a services fee of 2.5% whenever a digital item is sold on the platform. While it hasn’t disclosed its revenue figures yet, judging by the trading volume to date, this figure is bound to be healthy.

To date, OpenSea has raised a total of $427 million in funding over nine rounds, with their latest $300 million Series C round on January 4, giving the company a valuation of $13.3 billion. Not bad for a company that’s not even four years old yet.

Still, it hasn’t all been smooth sailing for OpenSea. In March 2020, the platform was only making $28,000 in revenue per month, creating a make-or-break moment for the company. The founders felt the NFT market was dead and decided they would close up shop if they didn’t double their revenue by year-end. As it turned out, they would reach that goal by September.

The company also had to delist a collection of NFTs when Lava Labs, the creator of CryptoPunks, issued a DMCA takedown request against PolygonPunks, a copy of CryptoPunks that was stored on a different network to CryptoPunks. However, PolygonPunks made a return that September after a successful appeal.

Still, OpenSea remains the leader in NFTs, with a market share of more than 95%. Although this could change, as Coinbase, one of the world’s biggest cryptocurrency exchanges, launched its very own NFT marketplace in late 2021.

As the leading NFT marketplace, OpenSea is looking towards the future of NFTs and growing with them. In interviews, Finzer has said that OpenSea will continue to expand beyond Ethereum and onto other blockchains and increase the categories of NFTs it offers. He also believes that the metaverse, gaming, and virtual worlds are all interesting directions that are likely to continue to grow with the NFT space, and that while OpenSea will be the broadest and best marketplace, there will be many others as well.

From the CryptoKitties that inspired OpenSea to launch, to becoming the home to million-dollar NFT collections such as CryptoPunks and BoardApe Yacht Club. In just over three years, the platform has emerged as a market leader in facilitating digital ownership that is set to make its founders the first NFT billionaires. While its meteoric growth can be attributed to entering the market at the perfect time, some believe OpenSea is just taking advantage of an NFT bubble that will eventually pop. Whether OpenSea will

This article is a summary of the YouTube video ‘What is OpenSea? | The $13B NFT Marketplace Explained’ by Wishpond