OpenSea has experienced ups and downs over the past seven years, and the once leading NFT marketplace has chosen to issue its own token

Author: Babywhale, Glendon, Techub News

On the evening of February 13, OpenSea announced the launch of the OS2 public beta version on X, along with the introduction of the platform token SEA, and hinted at an upcoming airdrop. Although specific timelines and details have yet to be disclosed, this announcement has undoubtedly stirred the hearts of many veteran players in the crypto space. Within just one hour, the tweet garnered over a thousand comments and retweets, and community discussions surged.

OpenSea CEO Devin Finzer also tweeted to emphasize, "The OS2 being launched is not just a new product, and SEA is not just a token, but a completely new OpenSea built from the ground up." There have also been rumors that the new version of OpenSea will reference Blur's trading-centric UI.

OpenSea is finally issuing a token. If this were three years ago, it would undoubtedly have been a highly anticipated celebration in the crypto community. However, times have changed; the current crypto space is dominated by MemeCoins, and NFTs have long been "out of fashion." What’s even more lamentable is that even if we limit our focus to the NFT sector, OpenSea's glory days are behind it. According to Dune data, OpenSea's trading volume in January was only $195 million, a staggering 96% drop from the $5 billion peak in early 2022, with annual revenue shrinking to approximately $33.26 million.

Furthermore, nftpulse data shows that as of the time of writing, OpenSea's market share over the past 30 days has plummeted from 95% in December 2021 to 29%; on the other hand, OpenSea's valuation has also dropped from a peak of $13.3 billion at the beginning of 2023 to around $1.5 billion, and it even reached a point where it was "up for sale."

So, how did OpenSea, once a dominant player in the NFT trading market, end up in this situation?

Let’s take a look back at OpenSea's development history to see how it rose rapidly and how it fell from its throne in the competitive NFT market. Finally, let's discuss what impact OpenSea's decision to issue a token at this time may have on the overall NFT market landscape.

Early Days: Surviving in the NFT Wilderness

There is no doubt that OpenSea is a legendary company that started from scratch in the Web3 startup space. Especially between 2021 and 2022, the company skyrocketed from obscurity to a valuation of $13.3 billion at an astonishing pace, firmly sitting at the top of the NFT trading market. However, behind this brilliance lies a dramatic history of market ups and downs. Therefore, I believe that the rise and fall of OpenSea can also be seen as a microcosm of the NFT industry's transition from wild growth to rational competition.

In September 2017, Devin Finzer and Alex Atallah secured seed funding from the well-known venture incubator Y Combinator with their innovative project "Wificoin," which aimed to use cryptocurrency to pay for shared WiFi and had no connection to the NFT space.

However, in November 2017, Dapper Labs officially launched the Ethereum-based game CryptoKitties, sparking a wave of hype. The frenzied bidding drove the price of CryptoKitties NFTs to 247 ETH, approximately $118,000 at the time.

In the same year, CryptoKitties' founder and CTO Dieter Shirley proposed the concept of NFTs (Non-Fungible Tokens) and facilitated the introduction of the EIP-721 standard that defines NFTs. (Techub News note: EIP-721 was later discussed and improved, officially adopted in 2018, and became the current ERC-721 protocol standard.)

The introduction of this standard changed the entrepreneurial direction for Devin Finzer and his team. They decided to abandon the original "Wificoin" project and created the NFT trading platform OpenSea in February 2018.

According to The Generalist, Devin Finzer stated, "We saw the potential of the NFT market because there was a standard for digital projects, and everything that came after CryptoKitties would adhere to this standard."

At that time, the blockchain and cryptocurrency were still in their early development stages, and the concept of NFTs had not yet become widespread; the entire NFT market was almost a barren land.

Despite this, OpenSea was not the only NFT trading platform at that time. Almost on the same day it launched on Product Hunt, Rare Bits, which claimed to be a "zero-fee marketplace for crypto assets similar to eBay," emerged as a more advantageous competitor. Interestingly, OpenSea also described itself as "the eBay for crypto goods." (Techub News note: eBay is an online auction and shopping website where people can buy and sell goods globally.)

In May 2018, OpenSea raised $2 million from investors including 1confirmation, Founders Fund, Coinbase Ventures, and Blockchain Capital. However, Rare Bits had already secured $6 million in funding a month earlier, with investors including Spark, First Round, and Craft.

From the perspective of VC investment, although OpenSea was at a disadvantage, 1confirmation partner Richard Chen favored OpenSea more, believing that "Rare Bits does not understand NFTs as well as OpenSea does. OpenSea's team is more capable and battle-ready, and Devin and Alex have done a great job discovering new NFT projects and pushing them onto OpenSea. Moreover, when we invested in April 2018, OpenSea's trading volume was already four times that of Rare Bits."

Additionally, the sales strategies of the two companies differed. OpenSea insisted on charging a 1% transaction fee (which was later gradually increased to 2.5%), maintaining operations through stable revenue. Rare Bits, on the other hand, adopted a "zero-fee" strategy in 2018 and promised to refund users' gas fees incurred during transactions, attempting to attract traffic by lowering user costs. This strategy initially attracted some attention and seemed more user-friendly, but it was detrimental to the platform's long-term development. The high operational costs meant that Rare Bits would struggle to survive, especially with the arrival of the "crypto winter of 2018."

During this period, to expand its user base and increase platform trading volume, Rare Bits attempted to extend its business from NFTs to a broader range of virtual goods trading, such as launching "digital stickers" in collaboration with the anime platform Crunchyroll and exploring trading of non-NFT assets like game items.

In contrast to Rare Bits' diversification, OpenSea remained focused, with its core work always aimed at improving NFT trading.

However, the road to dawn was not easy for OpenSea. The platform's early trading volume remained sluggish, and early projects were limited to a few NFTs like CryptoKitties and CryptoPunks.

According to reports from Titanium Media, in March 2020, the team consisted of only five people, with a monthly trading volume of around $1 million. Based on the then 2.5% commission rate, OpenSea's monthly revenue was only $28,000. If it weren't for a $2.1 million "lifeline" injection from strategic investors like Animoca Brands at the end of 2019, this startup might have vanished in the industry's winter. As for Rare Bits, it had already shown signs of peril as early as 2019, and by 2020, the platform had completely exited the market.

In hindsight, OpenSea's rise to become the king of the NFT field was inseparable from its focus on core business and streamlined operational decisions. Devin Finzer stated in an interview, "We are willing to develop in this field for the long term, regardless of the current growth trajectory. We want to build a decentralized market for NFTs and hope it can last for 3-4 years."

Time quickly moved to the second half of 2020, and dawn was approaching. This year can be seen as a watershed moment for OpenSea. As the crypto market began to gradually warm up in the second half of the year, OpenSea, leveraging its first-mover advantage in the NFT market, quickly reaped the benefits, and its platform trading volume began to rise rapidly. Dune data shows that in October 2020, OpenSea's monthly trading volume reached approximately $4.18 million, a 66% increase from $2.46 million in September.

To offer a wider variety of NFT assets and attract broader liquidity, OpenSea began to fully implement its "open market" product strategy.

In December 2020, OpenSea launched a new feature called "Collection Manager," allowing users to mint NFTs without fees (gas fees to be borne by buyers). The official referred to this feature as "Lazy Minting," separating on-chain issuance from metadata. Users could upload the metadata of their items to OpenSea for free, and only when the item was sold for the first time would it be minted as an on-chain ERC-1155 NFT.

This feature significantly lowered the barriers for creators, and due to OpenSea's lack of review for NFT listings, every user could directly mint and issue NFTs on OpenSea. Beyond this advantage, OpenSea also covered the widest range of trading categories among similar platforms, including digital avatars, music, domain names, virtual worlds, trading cards, artworks, and various NFT collectibles. This strategy maximized the supply of creators' works and attracted an increasing number of users in both primary and secondary markets.

Objectively speaking, the potential of the NFT market was a significant factor in OpenSea's later success, but the rapid emergence of this sector would not have been possible without OpenSea's contributions.

In 2021, the crypto market experienced a comprehensive "bull market," and OpenSea, which had been dormant for two years, began to truly shine.

NFTs Experience Phenomenal Growth, OpenSea Reigns with Billions in Monthly Trading Volume

According to Dune data, February 2021 marked the first explosive growth for OpenSea's data. On February 2, OpenSea's daily trading volume exceeded $5 million, while the total trading volume for January was just over $7.5 million. Ultimately, OpenSea's trading volume for the entire month of February approached $95 million, more than ten times the previous month.

Starting from early 2021, a large number of commemorative NFTs began to be issued on OpenSea. Bands, entertainment stars, sports celebrities, and well-known artists all started launching their own NFTs, and many famous brands began to release commemorative NFTs or use NFTs to launch customer loyalty programs. It can be said that the NFTs that began with CryptoKitties first connected Web3 with traditional industries, allowing many who were previously unfamiliar with crypto to encounter a completely new "species."

NFT series launched by Budweiser

As the largest NFT trading platform, OpenSea finally welcomed the arrival of the windfall. Data shows that in March 2021, the trading volume on OpenSea first surpassed $100 million, exceeding $300 million in July, and then skyrocketing to $3.44 billion in August, more than ten times the previous month. It was also in March that OpenSea completed a $23 million funding round led by a16z, with many angel investors, including Mark Cuban, participating in this round of investment.

Although NFTs had actually begun to develop rapidly since early 2021, with the floor price of the CryptoPunks series rising from single-digit ETH at the beginning of the year to over ten to twenty ETH by mid-year, the main narrative of the market in the first half of 2021 still revolved around DeFi. At that time, people's attention had not fully shifted to NFTs. The reasons for this included the ongoing popularity of DeFi and the absence of tradable targets and concepts in the NFT sector.

As the second half of the year approached, the emergence of a series of PFPs represented by BAYC ignited market enthusiasm, and NFTs were regarded as another phenomenal concept following DeFi. With the surge in NFT trading, OpenSea's monthly trading volume remained at a high level of billions of dollars, even exceeding $5 billion in January 2022. OpenSea's product head Nate Chastain tweeted at the end of August 2021 that the company had only 37 employees, yet that month, OpenSea's fee revenue alone exceeded $80 million, with an average contribution of over $2 million per person, which is an astonishing figure in any industry.

Before the end of 2021, OpenSea spent most of its time accelerating its sprint. During this period, aside from Nate Chastain's departure due to an insider trading scandal, there were hardly any other negative news about OpenSea. Other NFT trading platforms, even those that secured large amounts of funding, could not shake OpenSea's position. In fact, almost all NFT trading platforms' products referenced OpenSea to some extent.

Challengers Lurk, Yet OpenSea "Betrays" Web3 with Plans for IPO?

Amidst this prosperous era, a turning point quietly approached, starting with rumors of OpenSea's IPO…

In early December 2021, Bloomberg reported that Lyft's CFO Brian Roberts would join OpenSea as CFO, and he indicated that he was planning an IPO for OpenSea. This was originally a rather ordinary piece of news, but it sparked some discussions within the Web3 community, with many believing that OpenSea should issue a token to reward its users, which is what Web3 projects should do.

Perhaps feeling some pressure, two days later, Brian Roberts personally clarified that there were currently no IPO plans, stating, "There is a big difference between thinking about what an IPO will ultimately look like and actively planning for one. We have no plans to go public; if we did, we would seek community involvement."

This somewhat ambiguous statement not only failed to allay community concerns but instead strengthened the belief that OpenSea would eventually go public, as he did not mention anything about issuing a token.

Had OpenSea decided to issue a token at that time, the NFT trading platform sector might not have had the subsequent exciting stories. It was the "selfish" decision to choose an IPO that opened a crack in the once impregnable wall.

At that time, OpenSea held over 90% of the NFT trading market on Ethereum, and after its stance on not issuing a token became known, some entrepreneurs found opportunities and quickly launched NFT trading platforms that issued tokens. LooksRare was one of them. Although it was not the first project to launch a "vampire attack" on OpenSea, its emergence had a significant impact after OpenSea's IPO plans were revealed.

On January 10, 2022, LooksRare officially launched, stating that users who traded more than 3 ETH on OpenSea could list an NFT on LooksRare to receive an airdrop. Additionally, users could stake the LOOKS tokens received from the airdrop to share in the platform's trading fees. Just two days after its launch, LooksRare's daily trading volume surpassed that of OpenSea, and by January 19, 2022, its seven-day trading volume data showed that LooksRare's volume was more than three times that of OpenSea.

Once the crack was opened, the market realized that OpenSea was not invincible, and everyone began to show their skills. The launch of X2Y2 in February 2022, Element focusing on the BNB Chain, Zora focusing on high-end art NFTs, and Magic Eden focusing on the Solana NFT market all continuously encroached on OpenSea's existing market and potential expansion markets. It may be an exaggeration to say that arrogance played a role, but at least during its peak, OpenSea failed to take preventive measures, which was indeed a significant strategic mistake.

Nonetheless, OpenSea's market influence remained difficult to shake. As we entered the second quarter of 2022, on one hand, Yuga Labs was about to issue the APE token, and on the other hand, trading of "blue-chip NFTs" like Moonbirds and Doodles remained active. As the most liquid NFT trading market, OpenSea still held the lifeblood of the NFT market.

The main culprit responsible for changing the entire NFT sector or causing the NFT crash quietly emerged at this time, fundamentally altering the rigid perceptions of what the NFT market should look like.

Blur Emerges, NFT Market "Top Spot" Changes Hands

At the end of March 2022, Blur announced it had completed $11 million in funding. At that time, many people might have wondered why a new NFT trading platform was emerging, but after Blur officially launched at the end of October, it delivered a shocking blow to everyone.

With a completely different UI, it clarified that listings, bids, and trades would all come with airdrops, and the airdrops were "treasure chests" whose token amounts were unknown. The UI designed purely for trading, combined with the clear yet ambiguous airdrop, made Blur excel in product and gameplay design. Although many initially criticized Blur's UI as difficult to use, they found that once accustomed, this design was indeed much more user-friendly for buying and selling than OpenSea. To put it metaphorically, if OpenSea is the e-commerce platform for NFTs, then Blur is the exchange for NFTs.

Prices are listed from low to high, with real-time trading and transaction price distributions displayed on the right. This user-friendly UI design, combined with the expectation of airdrops, led to a massive influx of funds into Blur. Previously, many NFT trading platforms attracted traffic through tokens, but OpenSea's market share in trading volume had not been challenged in monthly or quarterly data. However, with the emergence of Blur, OpenSea's trading volume share fell below 50% just a week ago.

Yet, precisely because of this, large funds gained the ability to manipulate the market, buying and selling frantically. Coupled with the fact that the crypto market had entered a deep bear phase, the reckless buying and selling by large funds led to a significant drop in NFT prices, causing retail investors to lose interest in NFTs. After Bitcoin had fallen to around $20,000, the "last gatekeeper" of crypto assets also quietly exited the scene. The collapse of the NFT market, combined with the rise of the new king Blur, turned OpenSea into collateral damage.

In early 2022, OpenSea completed a $300 million Series C funding round at a valuation of $13.3 billion. By early 2024, OpenSea's CEO had already admitted to considering a sale. In this round of Bitcoin's "one-man bull market," aside from the airdrop-anticipated Pudgy Penguins, many previously blue-chip NFTs saw their floor prices plummet to distressing levels. For OpenSea, failing to make changes could lead to years of hard work being handed over, which is certainly not what they want to see.

Thus, OpenSea's decision to launch the platform token SEA is, on one hand, a self-rescue measure in response to the continuous decline of its business; on the other hand, this former king may also harbor a bit of unwillingness and ambition to return to the top. So the question arises: will OpenSea's token issuance change the competitive landscape of the NFT market?

Recent Trading Volume Surge, OpenSea Aims to Reshape the Competitive Landscape of the NFT Market?

Undoubtedly, OpenSea's token issuance and the launch of the OS2 public beta version will most likely impact Blur. As a powerful competitor that has disrupted OpenSea's position, Blur has shown signs of decline as the crypto market has trended downward, but as of the time of writing, its trading market share over the past 30 days still exceeds 44%, firmly holding the top spot in the NFT market.

In addition to the unique product UI and gameplay design mentioned above, Blur initially attracted a large number of users with its Bid Airdrop (bidding reward tokens) and zero-fee model. It conducted multiple airdrops in 2023 to capture market share, as evidenced by the data:

On February 15, 2023, Blur conducted its first season airdrop of 360 million BLUR tokens, which accounted for 12% of the initial total supply and was immediately released. According to Glassnode reports, after the BLUR token airdrop, Blur's market share surged, with its NFT trading volume market share jumping from 48% to 78%, while OpenSea dropped to 21%.

On February 23, 2023, Blur initiated its second season airdrop of 300 million BLUR tokens. This airdrop directly propelled Blur's trading volume significantly beyond that of OpenSea. DappRadar data showed that on February 22, 2023, BLUR's trading volume reached approximately $108 million, while OpenSea's was only $19.27 million during the same period.

To a certain extent, Blur's two large token airdrops played a crucial role in breaking OpenSea's "moat." As the saying goes, "an eye for an eye," in the current NFT market, which has yet to recover, if OpenSea's SEA token attracts users through airdrops or staking rewards, it could very well replicate this strategy, even emulating the "vampire attacks" launched by LooksRare, x2y2, and other "OpenSea killers" to compete for its core users.

In fact, since OpenSea confirmed it would conduct an airdrop, it has sparked much anticipation and discussion among Twitter users, with many believing this will be one of the largest airdrops of the year.

Additionally, regarding fees, the recently launched OS2 beta version has reduced market fees to 0.5% and transaction fees to 0%, directly competing with Blur's zero-fee model. Once SEA is launched, OS2, with its combination of "low fees + token incentives," is likely to build a very flexible competitive strategy.

Objectively speaking, most users are essentially profit-driven. If the SEA token's reward mechanism is more attractive, coupled with the fact that some existing users of Blur originally came from OpenSea, it is not impossible for these users to return to OpenSea. However, Blur's "moat" lies in its faster trading speed and higher gas efficiency, which still gives it a technical advantage in the short term.

The market has already reacted to the news of the token issuance. According to nftpulse data, as of the time of writing, OpenSea's daily trading volume has reached approximately $29.8 million, with its trading share soaring to 70.6% of the total daily trading volume.

For the entire NFT market, OpenSea's launch of the SEA token is undoubtedly a positive development. In addition to significantly stimulating NFT trading volume in the short term, OpenSea also mentioned in a tweet that OS2 now supports cross-chain trading across 14 chains, including Flow, ApeChain, and Soneium. This raises the question of whether the SEA token could become a universal token for a multi-chain NFT ecosystem, potentially driving the development of NFT markets outside of Ethereum (such as Solana). This is something to look forward to.

However, from another perspective, the intense competition between OpenSea and Blur will also squeeze the survival space of second-tier platforms like LooksRare and X2Y2. Blur will likely not sit idly by as its former rival makes a comeback; it may introduce more token application scenarios or further incentivize user loyalty through token rewards. Additionally, Magic Eden, another latecomer, should not be underestimated. With its dominant position on Bitcoin and Solana chains, its total market trading volume reached $3.2 billion in the past year, accounting for over 30%, second only to Blur's $3.8 billion (approximately 36%), while OpenSea's trading volume over the past year was only $1.2 billion, accounting for less than 12%.

In summary, I believe that OpenSea's SEA token is not only crucial for the platform's self-rescue but may also become a driving force to help the NFT market emerge from its sluggish state. In the long run, the competition between OpenSea and Blur will also push the NFT sector towards more complex financialization and multi-chain development. As for whether OpenSea can reclaim its dominant position, whether the future landscape will be a clash of two strong contenders or if Blur will continue to reign, will depend on the performance of the SEA token after its launch. Let's wait and see!