Dialogue with OpenSea co-founder Alex: Our biggest competitive advantage is "selectivity."

Source: Crypto@Stanford

Interviewee: Alex Atallah

Compiled by: Linqi, Chain Catcher

OpenSea is the largest NFT marketplace in the world and one of the biggest winners in the NFT industry explosion. However, since the end of last year, it has faced criticism for not valuing the community, centralization, and increasing competition.

Recently, the Stanford University crypto group Crypto@Stanford conducted an exclusive interview with OpenSea co-founder and former CTO, Stanford alumnus Alex Atallah, discussing OpenSea's early journey, recent strategic thinking, the pyramid of security in the Web3 space, and the competitive landscape it faces.

Alex Atallah stated that OpenSea's biggest competitive advantage is "selectivity" and is working hard to become a broader marketplace that covers every major NFT blockchain, every type of metadata, every type of image, and every type of NFT attachment.

1. Entering Crypto

C@S: How did you get into the crypto space?

Alex: I entered the crypto space in the summer of 2017 because I wanted to do something at the forefront of technology. I have always regretted missing the birth of the internet. I love the history of technology, and the story of the birth of the internet is so exciting. I had a crazy desire to know if there would be something like that again because we had it just a few decades ago with the birth of the PC. So I felt like something happens from time to time in the tech space.

In 2017, the candidates for the "next internet" were virtual reality and crypto. The crypto space was fascinating, and the community I encountered here was ten times more passionate than any other internet community I had seen. It was also really noisy, with many projects doing ICOs, and a lot of the value seemed not long-term. But I thought if there was any community committed to long-term growth and had the same passion, excitement, and developer involvement as other communities, it would be very valuable.

Back in 2017, only a few projects met these criteria. They were often very low-key and humble, with founders just giving away their tokens to see what would happen with the experiment. For example, CryptoPunks was a very low-key project that distributed all of its 10,000 NFTs for free, and its community grew organically around it. Other examples include Decentraland with virtual property and CryptoKitties.

When CryptoKitties launched, it was the first time I had friends who were not interested in crypto register a Metamask wallet. At that moment, I felt, "Wow, this is the purpose of using crypto. This is the actual building block for developers." It also felt like a new fundamental primitive of the web, very different from web pages and cryptocurrencies, needing a place for people to discover them.

C@S: What is your argument regarding the NFT space?

Alex: NFTs meet the potential need for transferring value in a way that makes the community feel truly independent, providing users with a whole new space for development. I believe there are creatives in existing digital communities, or there is very rapid information transfer among all members. And there is a potential need to transfer value out. Depending on the community, it will manifest in different ways. There will be some communities that have never existed before emerging around NFTs.

My argument is that this new building block of the web is a new way to express oneself as a creator, interact with creators as a fan, or curate as a creative talent. There are some types of NFTs that do not exist now, and I believe they will also power the core functions of the web.

You can think of a font license as an NFT; every time a calligrapher's font is sold on the secondary market, they receive subsidies and royalties, and it is very clear who owns which font license, and which fonts are scarcer than others. Or you can imagine access passes for private digital experiences.

NFTs truly change the way the web incentivizes people. I think we have only barely scratched the surface of NFT capabilities.

2. The Founding Story of OpenSea

C@S: Can you describe the "aha" moment when you came up with OpenSea?

Alex: The "aha" moment for founder Devin was when he was playing CryptoKitties. At that time, there were already exchanges for ERC-20 tokens, so we thought we should build a marketplace for all the upcoming ERC-721 tokens in an eBay-like manner. It seemed like the right time because CryptoKitties was in an explosive phase. There were also some other projects in different verticals: one was the art project CryptoPunks, and another was the virtual land project Decentraland.

It was unclear whether ERC-721 would see explosive changes. CryptoKitties did gain a lot of attention, but it still didn't have that many users. It was clear that the user experience was poor. Buying NFTs, selling NFTs, and finding detailed transaction histories were really difficult (and still are).

We believed OpenSea could adequately address these issues. OpenSea would become the true source for NFTs. Just like users use block explorers to understand what transactions are happening on the blockchain, OpenSea would show users what is happening with NFTs in transactions, regardless of which blockchain they were created on or what kind of metadata they were attached to.

C@S: When you launched OpenSea, what was your competitive tactic against the experienced team of competitors like Rare Bits? How did you guide your market?

Alex: Whenever a new project looked exciting, we would talk to those users to find out what they wanted from OpenSea and see how we could win their loyalty. We actively did this for every project we could find, and each project showed some promise. We also paid a lot of attention to user experience. We wanted the marketplace to be very easy to browse, while new projects were continuously being discovered.

When Rare Bits launched, its user experience was better than OpenSea's, and we looked at it and thought, "Okay, we really need to step up to ensure we can maintain our top market position." So we added a search index and greatly improved the filtering features. We collaborated with projects and sellers to try to find new sales models. We later used the Wyvern protocol, which eliminated listing fees, allowing users to sell projects without gas fees.

Then we provided a bidding feature so users could price listed NFTs. We added an English auction model to help the market discover the prices of NFTs being sold by users. These initial efforts targeted the experiences of both buyers and sellers, along with reduced gas fees, helped us gradually grow this market.

3. Alex's New Role at OpenSea

C@S: As a co-founder and former CTO, you have been an integral part of OpenSea's exponential growth. Can you describe your role at OpenSea and what your daily work looks like?

Alex: In fact, we just brought in a new CTO, Nadav Hollander, through the acquisition of a company called Dharma. I am still working at the company but transitioning to focus on the developer ecosystem, security research, and the recently announced venture capital project. My daily work usually revolves around these three things, along with some onboarding training.

Our developer ecosystem is currently really limited to those who have already deeply researched NFTs; it does not truly cater to developers who just want to click a button to patch smart contracts. Therefore, we are working to improve the developer experience and striving to enhance bottom-up funnel feedback so that when developers have questions, pull requests, or feature requests, we can interact with them in a timely manner and clarify what should be integrated into our platform.

In terms of security, last week OpenSea collaborated with about 20 companies to launch an NFT security group, including Coinbase, Adobe, Metamask, Rarible, Nifty Gateway, MakersPlace, and others. The goal of the organization is to share malicious contracts and hazardous NFTs to protect users as much as possible.

In a sense, web3 is a large meta-platform. Users can jump from one website to another, seeing the same data. Users can see what they own because they truly own it digitally. So every website must set up safeguards to prevent users from accidentally incurring losses. Therefore, the security of NFTs is a very large area that needs to be handled correctly.

C@S: Can you delve deeper into your motivations for acquiring Dharma?

Alex: The Dharma team is truly amazing. In the crypto space, almost all companies are opportunistic, rushing into this gold rush and building shaky foundations. Dharma has built a solid foundation with high-quality smart contracts, providing users with drive.

Their mobile app, launched a few years ago, indeed raised the standard for crypto mobile apps. It is a great fiat on-ramp for L2 blockchains like Polygon, and the user experience and design are excellent. It was the best app Devin and I felt at the time.

Our top priority is to build the most reliable, trustworthy, and inclusive marketplace. This acquisition aligns with that goal, and everyone in the Dharma team, like Brendan and Nadav, aligns very well with OpenSea in terms of cultural fit, which is significant.

C@S: Regarding the previously mentioned NFT security group initiative, what specific security challenges do you see in the NFT space?

Alex: You can think of the security challenges in the NFT space as a pyramid. At the base is the blockchain itself. Ethereum is very solid, and not many security issues have been discovered. Some new chains occasionally have problems, for example, some denial-of-service attack methods that have not really occurred on Ethereum.

Above the blockchain are smart contracts and various types of programs that explicitly state the owners of NFTs. The problem space at this layer is vast, with many contracts not correctly using the "transfer out" function that allows NFTs to be transferred between different users. We need to find a good way to audit these transactions so that when transactions occur, users are not disappointed. This is very important to prevent people from losing interest in NFTs as they develop to the next billion users.

Above smart contracts is metadata. We have seen attempts to attach malicious metadata to NFTs. This includes metadata with cross-site scripting attacks, metadata that has some deceptive effects on users, or phishing attacks. Many of these are more similar to web2 security issues.

At the top of the pyramid is user interoperability. Websites unrelated to a particular project may entice users of that project to perform some insecure actions. This is simply because, in web3, platforms do not own users' assets. When users own something, they may run into trouble when they randomly visit untrustworthy websites. It's a bit like when the internet first emerged, there were many secure websites, but it was also easy to fall into malicious websites. Ensuring internet security is a concern for multiple companies and platforms. The same goes for NFTs.

4. About OpenSea

C@S: Does OpenSea plan to maintain centralized governance/ownership rather than becoming a DAO and a community-owned treasury?

Alex: We are considering this matter and trying to come up with some new ideas. We are very open to reflecting on how we implement it. But we do not have any plans to share this yet.

C@S: What is OpenSea's competitive advantage compared to platforms like Rarible, SuperRare, and the upcoming Coinbase NFT and Gamestop NFT platforms?

Alex: "Selectivity" is one of our biggest advantages. We have spent a lot of time ensuring that NFTs from around the world are correctly displayed on OpenSea. We are working hard to become a broader marketplace that covers every major NFT blockchain, every type of metadata, every type of image, and every type of NFT attachment, and ensuring that the information users find (quantity, attention, transactions, account history, where previous transactions occurred) is accurate.

We have spent more time on these features than other platforms, and we try to be as comprehensive as possible to give people a clear understanding of the entire NFT world.

C@S: OpenSea was founded at the end of 2017, followed closely by the 2018/2019 bear market. How did you survive the bear market? What advice do you have for entrepreneurs?

Alex: The most important thing for me is the developers. Even when the trading volume on OpenSea is not very high, or usage is flat or declining, we still see developers and creators continuously trying cool new things. They suddenly appear, just discovering a new way to use NFTs or a new type of art that can connect to NFTs, keeping the space exciting.

In terms of the number of innovative developers, its volatility is far lower than the market. Its retention rate is very high, and the retention rate is unrelated to the amount or price of ETH. So this is also an exciting signal.

C@S: How big is your team now? How much has it grown since last year?

Alex: Our team is currently about 110 people. Last year at this time, we had about 10 people. We have grown 11 times.