Analysis of OpenSea's Acquisition of NFT Aggregator GEM: An Action by a Monopoly to "Eliminate Threats"

Author: Liu Quankai, Wu Says Blockchain

The acquisition of Gem by OpenSea is a very centralized approach. When competitors emerge, even if they do not yet pose a threat, monopolistic leaders will quickly acquire/merge through strong capital strength, stifling threats in their infancy. Chinese gamers should be very familiar with this; OpenSea's operations can be said to be quite similar to Tencent's.

It is still worth praising Gem.xyz; features like the shopping cart, rarity, flashbot, and whale purchase notifications are very useful. They not only save on transaction fees but also allow users to keep an eye on market dynamics and seize rare NFTs at critical moments. Many of these features are what the community has long hoped OpenSea would add, but the dragon has always been deaf to the community's voice. The emergence of Gem fills the functional gap in the NFT market. Therefore, we jokingly refer to Gem as the dragon-slaying warrior of OpenSea.

In fact, as an aggregator, Gem's related data is excellent. Since its launch in mid-December last year, Gem has accumulated over 246,000 ETH in trading volume, which is double that of Genie, which launched earlier in early October last year. The main reason Gem was able to achieve such a rapid turnaround is due to market depth; Gem aggregated more mainstream NFT markets, such as OpenSea, LooksRare, and X2Y2, earlier than Genie, which for a long time mainly focused on OpenSea and a few smaller markets. This prolonged inaction caused Genie to lose market share, and it wasn't until early April this year that it integrated LooksRare. Additionally, Gem has also aggregated Dune Analytics' analytical dashboard and has its own anti-sniping bot, which is also ahead of Genie. Gem has successfully overtaken Genie. Despite the excellent data, NFT aggregators do not charge platform fees, and the still-exploring profit model has sown the seeds for being acquired.

Data Source: Dune Analytics

Thanks to the convenience of its features and its role as an aggregator, Gem has naturally absorbed users from its aggregated platforms and occupied a certain market share, especially among large holders. From this perspective, Gem may pose a greater threat to OpenSea than LooksRare does. Currently, the ratio of NFTs purchased through the aggregator Gem to those purchased directly through NFT markets is 10:90. Although a significant portion still contributes to OpenSea, for OpenSea, which has long held over 95% of the NFT market trading volume, users being diverted by Gem feels more like Web2 companies. OpenSea's private traffic remains a key element, and it would not want its growing number of users to share with other platforms.

Data Source: Dune Analytics

OpenSea also faces a choice between crypto and traditional. Especially after some inappropriate remarks from OpenSea, the voices believing that OpenSea would issue airdrops have diminished. Coupled with OpenSea's longstanding disregard for community suggestions, there has been widespread public discontent. More community-oriented platforms like LooksRare and X2Y2 have begun to challenge it. In contrast to OpenSea, the community has a significant say in Gem's products and features. Gem has a popular feedback system and an excellent interaction system on community platforms like Discord. Gradually, the possibility and calls for Gem to issue airdrops are increasing, which undoubtedly puts OpenSea in a more unfavorable position.

As monopolistic companies often do, OpenSea has stifled threats in their infancy by acquiring Gem. Although Gem operates as an independent department, it is more likely to pursue compliance under OpenSea's regulatory framework, and it is highly probable that there will be no token plans in the short term. As Gem has already become part of OpenSea, the possibility of its airdrop has also diminished in this acquisition.

In the Web2 world, we have seen too many small but beautiful companies gradually decline after being acquired by giants. This acquisition may likely be due to Gem, as an NFT aggregator, not finding a profitable point to support platform development without charging any platform fees. It has not previously disclosed any funding, and perhaps the team is indeed facing operational funding difficulties. While this is understandable, it is still somewhat disappointing for crypto natives, as it feels more like a compromise to capital and a lack of confidence in tokenomics. Although Gem emphasizes that OpenSea's acquisition does not stifle the possibility of a token, similar statements were made by OpenSea last year. To this day, there is still no sign of OpenSea issuing a token.

Currently, Gem enjoys a considerable market share among aggregators, but it is believed that more community-oriented and decentralized challengers are already on the way, which may also bring new profit growth models for NFT aggregators.