In 2017, Devin Finzer and Alex Atallah created OpenSea because they saw a need for NFT collectors to safely trade. The world of crypto has seen its share of fraud and creating the first NFT marketplace allowed people to buy NFTs without fewer worries of being scammed.
For a small transaction fee, users can trade cryptocurrency for NFTs by joining their wallets. The platform never takes custody of the assets so traders don’t need to worry about losing their tokens in an attack on OpenSea.
The company serves as a huge database of NFTs and even shows those that are sold on other platforms. That way, users can view the market as a whole when choosing how to invest their funds.
OpenSea Business Model
OpenSea earns from the trade of NFTs on its marketplace. These non-fungible tokens are minted ERC 721 or ERC 1155 tokens that have been added via a smart contract code to the Ethereum blockchain. OpenSea allows collectors to safely trade their currencies for unique digital items.
A few of the NFT items sold on OpenSea include the following:
- Images – Whether photographs or digital art, the majority of NFTs on OpenSea are images. One of the most popular collections that you’ll find is the first NFT project known as CryptoPunks.
- Videos – Animations and short films make up several popular NFTs. Some are accompanied by sound.
- GIFS – You can find several GIFs and memes on OpenSea, both new and old.
- Domain Names – Crypto domain names can either be used as hexadecimal wallet addresses or censorship-resistant sites.
- Game Items – Whether trading cards or game pieces for future games, you can find an assortment of game items on the platform.
OpenSea charges a transaction fee of 2.5% of the sale price of each item sold on the platform. The buyer pays the fee when purchasing an item outright, while the seller pays it when accepting an offer.
While the majority of the items traded on OpenSea run on the Ethereum blockchain, it also runs across Polygon and Klatyn. The platform may work with additional blockchains in the future as it grows. NFTs are not available on the bitcoin chain.
Not All Fees Go to OpenSea
It is important for collectors to realize that not all trade fees go to OpenSea. While the company collects the 2.5% transaction fee, you will also need to bear in mind the following expenses:
- Gas Fees – Gas fees are paid to the Ethereum Blockchain whenever you buy, sell, trade, or change the status of an NFT. These fees will fluctuate in price throughout the day.
- Royalty Fees – Artists are allowed to set up royalty fees on their work. This means they will receive a percentage of the sale whenever it is resold in the future.
How OpenSea Was Funded
OpenSea initially raised over $125 million through eight rounds of venture capital funding. A few of their more notable investors (from the 46 that CrunchBase has tracked) include the following: Tim Ferris, Mark Cuban, SV Angel, Tobi Lütke, Republic, Devang Thakkar, Andreessen Horowitz, and Coatue.
How Much OpenSea Earns
OpenSea earns 2.5% of the sales conducted on their marketplace, whether they be sold through a fixed price, bid, or auction. While the company doesn’t release its financial statements to the public, you can find the approximate earnings of the company by looking at its monthly revenue.
Calculating 2.5% of the platform’s monthly volume comes to the following approximate figures in 2021. Note that their expenses (marketing, servers, R&D, payroll, etc) are not taken from these figures. Unless they make their finances public, the true earnings of the company are not known. These figures are also in the USD value of the trades at the time of sale. As ether (ETH) fluctuates, there is no way to really know how the company operates.
- February – $2,418,282
- March – $3,700,442
- April – $2,394,480
- May – $3,472,947
- June – $3,757,705
- July – $8,224,119
- August – $85,658,364
- September – $75,059,249
- October – $65,978,264
How OpenSea Has Grown
As Devin Finzer and Alex Atallah were creating OpenSea, they spent a lot of their time in NFT Discords listening to the community. Even past the initial startup of their company, the two remained passionate about the industry and continued to listen to collectors to identify the needs of the community.
A full review of OpenSea shows that not only did the company have a first-mover advantage, but it has also grown as new collectors began to buy and sell NFTs within the space. They allow creators to mint new NFTs under their lazy minting system and give them several options on how to market it (whether requiring collectors to “buy now,” make an offer, or bid in an auction.
OpenSea has also historically worked with blockchain influencers to market their company on social media, bringing in new cryptocurrency enthusiasts to buy and sell non-fungible tokens on their marketplace.
The Future of OpenSea
Up to this point, the OpenSea marketplace has controlled the lion’s share of NFT trade. Most months, there are 95% more digital goods bought and sold on OpenSea than the rest of the NFT marketplaces combined.
That being said, many of the top NFT digital asset sales happened through traditional auction houses. Christie’s sold Beeple’s “Everydays: The First 5000 Days” for $69 million and Jack Dorsey’s first Tweet was sold by an online company called Valuables.
There are still relatively few wallets that trade in the NFT space. As larger blockchain companies enter the space, several collectors are likely to start purchasing NFTs for the first time, broadening the digital art market. In fact, as exchanges, like Coinbase, begin to offer NFTs, some collectors would prefer to keep their assets in one place rather than create a MetaMask account in order to trade on OpenSea.io.
While this may take away from the percentage of OpenSea’s market share, the largest NFT marketplace will still likely continue to grow in value over time, especially as they implement changes that make their service more user-friendly. The founders started their company while learning about NFT collectors and there are likely few who understand the market as well as they currently do.
OpenSea Competition
There are several OpenSea alternatives that offer slightly different services. As more interest in the NFT market grows, these platforms continue to grow. A few of the top places to buy NFTs include:
- Rarible – Rarible is the closest comparison to OpenSea in the industry. It also has relatively low transaction fees (2.5% to both the buyer and the seller) and a large database of NFTs. Rarible also has its own governance token $RARI.
- SuperRare – Like Rarible, SuperRare has its own token, $RARE. The platform prides itself on being exclusive, hand-picking the artists that sell on their marketplace. They take a 15% commission from initial sales on their platform, plus 2.5% on secondary sales.
- Nifty Gateway – Founded by the Gemini infrastructure, Nifty Gateway has sold the works of many famous artists, including Grimes, Steve Aoki, and Beeple. They take 5% plus 30 cents from each sale.
- Mintable – Known for gasless minting, Mintable has grown in popularity since it was founded in 2018. They charge a 15% commission on every initial sale, plus 2.5% on secondary sales.