NFTs and OpenSea | What is OpenSea?
- What is OpenSea?
- How does OpenSea work?
- How to buy and sell NFTs on OpenSea
- How does OpenSea make money?
- Who are OpenSea’s competitors?
What is OpenSea?
OpenSea is an online marketplace that connects buyers and sellers of non-fungible tokens (NFTs).
The concept is the same as the private auction marketplace, eBay. Artists, creators and owners are able to list and advertise their digital assets on OpenSea to over 39 million visitors per month. When a sale is made on the site OpenSea also facilitates the monetary exchange (of cryptocurrency) from person to person and records the transaction on the underlying blockchain (public proof of transaction).
Without sites like OpenSea fewer non-fungible token sales would be made as fewer buyers and sellers would be able to find each other and these transactions would have to be done manually by each person, a complex and time-consuming process.
Founded in 2017 and built on the Ethereum blockchain, OpenSea was one of the earliest NFT marketplaces to launch and experienced exceptional growth in 2021 from less than 1 million visitors a month to over 39 million.
How does OpenSea work?
OpenSea advertises millions of NFTs a month and facilitates the entire NFT token transaction process, whether that be minting, public or private transfer.
Directly via OpenSea creators can mint new tokens. Usually a collection (sometimes called a project) is made up of a limited number of tokens. In order to prove originality of each token it must be recorded on the blockchain. Creators can upload their collection of digital assets (e.g. images) to OpenSea and ask buyers to pay for them to be authenticated during the purchase process.
Transactions are bundled together with other transactions happening at the same time to form a timestamped block. The transactions in the block are then verified by ‘miners’ who are using large amounts of computing power to complete the cryptographic puzzles or equations required to confirm the transfer of ownership.
Once the transfer of ownership is completed, the transaction is indexed on the public ledger and can be checked by anyone. This public record is what enables NFTs to be assigned value as they cannot be duplicated.
How to buy and sell NFTs on OpenSea
The first steps to buy or sell an NFT on OpenSea are identical. You must register an account on opensea.io and complete the required details to create your profile. Then you must connect a cryptocurrency wallet in order to buy or sell NFTs on Opensea.
Cryptocurrency wallets are the private record of the owners public and private keys, meaning the record of all your transactions are available for you to see including cryptocurrency, NFTs and more.
To explore and use OpenSea users need a connected crypto wallet. A connected wallet allows OpenSea to facilitate transactions between users immediately as the ownership transfer can be made from the seller to the buyer and then recorded against the NFT listing on the platform.
3.1 Buying NFTs
To buy an NFT you can browse all of the listings available on OpenSea including art, music, domain names, virtual worlds, trading cards and collectibles.
When you select a category to browse you will be able to scroll through thousands, if not millions of NFTs and filter the results based on select criteria to narrow your search if needed.
Once you have found a NFT you are interested in purchasing then you can click on its profile. On the profile you will see all the key information such as artist, current owner, price, transaction history and more.
If you want to go ahead and purchase the NFT then there are two options, buy now and auction. To buy an NFT for a set price it needs to be listed by the seller for sale. If it is then you can click the buy now button and complete the payment details requested.
If an NFT is not listed or it is only listed for auction then you are only able to bid on the NFT (similar to an eBay auction). Your bid will be received by the seller and they can either choose to accept it or let the auction continue, if you are still the highest bidder when the auction ends you will win the auction and receive the NFT.
3.2 Selling NFTs
To sell an NFT that you own you need to select it in your wallet via OpenSea and choose the sell button.
You will be redirected to a new page requesting the details of the sale you would like to make including price, auction type and the duration you want the auction to run for.
Once you submit your sale request then you just need to wait.
For a buy now listing you don’t need to do anything and when your NFT sells it will be processed automatically and you will receive a notification by email that it has sold.
For auction listings you will receive notifications of bids and can choose to accept the bid and end the auction early or let it continue. Once the auction ends or you accept a bid the sale will be processed automatically.
3.3 Gas fees
When buying and selling NFTs you will incur ‘gas fees’ for listing and purchasing. This is an additional payment to Ethereum miners in order to compensate them for processing the transaction. Gas fees fluctuate automatically depending on demand, when demand is high gas fees are high (up to a few thousand dollars) and when demand is low fees can be as low as $20.
How does OpenSea make money
The OpenSea model is simple, the platform takes a commission of 2.5% for every transaction completed on the site.
For example, if you purchase an NFT for $100 (not including gas) then the seller receives $97.50 and OpenSea receives $2.50.
The fee is automatically applied to the price and is taken in the same payment causing no friction for the users.
Who are OpenSea’s competitors?
As of September 2021, OpenSea has three competitors, albeit all of them are much smaller:
By traffic volume OpenSea dwarfs all three competitors combined with total monthly traffic of 36 million versus 1-2 million for the other three NFT marketplaces.
OpenSea is the oldest of the four marketplaces and has a substantial dominance over the other two Ethereum based marketplaces, SuperRare and NiftyGateway. However, Solanart has emerged as a new competitor with significant potential. Being built on the Solana blockchain has one distinct advantage over OpenSea – lower gas fees.
The gas fees of the Solana chain are in the range of cents to a couple of dollars in comparison to Ethereum’s sometimes extortionate fees of up to a few thousand dollars. This makes NFTs more accessible for many and reduces prices immediately. Despite not being home to many of the original NFT collections, OpenSea will be monitoring the growth of Solanart closely.