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On the evening of February 13, OpenSea announced the public beta launch of OS2 on X and revealed plans to introduce the platform token, SEA, hinting at an airdrop. Although specific timelines and details have yet to be disclosed, the announcement has undoubtedly stirred the hearts of many seasoned crypto enthusiasts. Within just an hour, the tweet garnered over a thousand comments and retweets, with community discussions heating up rapidly.
OpenSea CEO Devin Finzer emphasized that "the OS2 we are launching is not just a new product, and SEA is not just a token; it is an entirely new OpenSea built from the ground up." There had been rumors that OpenSea's new version would draw inspiration from Blur's trading-focused UI.
OpenSea's Journey and the Decision to Issue Tokens
OpenSea's decision to issue tokens comes at a time when the NFT market has significantly cooled. If this announcement had been made three years ago, it would have undoubtedly been the most anticipated event in the crypto space. However, times have changed, and the current crypto landscape is dominated by MemeCoins, with NFTs having lost much of their former glory. According to Dune data, OpenSea's January trading volume was a mere $195 million, a staggering 96% drop from its peak of $5 billion in early 2022, with annual revenue shrinking to approximately $33.26 million.
nftpulse data further reveals that as of this writing, OpenSea's market share over the past 30 days has plummeted from 95% in December 2021 to 29%. Additionally, OpenSea's valuation has declined from its peak of $13.3 billion in early 2023 to around $1.5 billion, with the platform even considering a potential sale.
How Did OpenSea, Once the Dominant NFT Exchange, Reach This Point?
To understand OpenSea's current situation, it's essential to review its history, from its rapid rise to its fall from the throne in the NFT market competition, and finally, to discuss the potential impact of its token launch on the NFT market landscape.
Early Days: Surviving in the NFT Wilderness
Undoubtedly, among Web3 startups, OpenSea is a legendary company that started from scratch. Particularly between 2021 and 2022, the company skyrocketed from obscurity to a $13.3 billion "unicorn," firmly establishing itself as the leading NFT exchange. However, behind this success lies a dramatic tale of market ups and downs. In fact, OpenSea's rise and fall can be seen as a microcosm of the NFT industry's transition from unbridled growth to rational competition.
In September 2017, Devin Finzer and Alex Atallah secured seed funding from the renowned startup incubator Y Combinator with their innovative project "Wificoin," which aimed to use cryptocurrency for shared WiFi payments and had no connection to the NFT space.
However, in November 2017, Dapper Labs officially launched CryptoKitties, an Ethereum-based game that sparked a frenzy, with bidding pushing the price of CryptoKitties NFT collectibles to 247 ETH, approximately $118,000 at the time.
That same year, CryptoKitties founder and CTO Dieter Shirley introduced the concept of NFT (Non-Fungible Token) and promoted the launch of EIP-721, which defined the NFT standard. (Techub News notes that EIP-721 was later discussed and improved, officially passing in 2018 to become today's ERC-721 protocol standard.)
It was this standard that changed Devin Finzer's entrepreneurial direction. They decided to abandon the original "Wificoin" project and launched the NFT trading platform OpenSea in February 2018.
According to The Generalist, Devin Finzer said, "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 space was still in its early stages, with the NFT concept not yet widespread, and the entire NFT market was virtually a barren land.
Despite this, OpenSea was not the only NFT trading platform at the time. Also launched on Product Hunt on the same day was Rare Bits, which described itself as a "zero-fee crypto asset marketplace similar to eBay," a more advantageous competitor. Interestingly, OpenSea also described itself as the "eBay for crypto goods." (Techub News notes that eBay is an online auction and shopping website that allows people worldwide to buy and sell items.)
OpenSea's Seven-Year Roller Coaster: The Former NFT Exchange "King" Chooses to Issue Tokens
In May 2018, OpenSea raised $2 million from investors including 1confirmation, Founders Fund, Coinbase Ventures, and Blockchain Capital. However, Rare Bits had secured $6 million in funding a month earlier, with investors including Spark, First Round, and Craft.
From a VC investment perspective, OpenSea was at a disadvantage, but Richard Chen, a partner at 1confirmation, favored OpenSea. He believed that "Rare Bits did not understand NFTs as well as OpenSea. OpenSea's team was more capable and combative. Devin and Alex did a great job in discovering new NFT projects and getting them listed on OpenSea. Moreover, when we invested in April 2018, OpenSea's trading volume was already four times that of Rare Bits."
In addition to this, the two companies had different sales strategies. OpenSea insisted on charging a 1% transaction fee (which later gradually increased to 2.5%), maintaining operations with stable revenue. Rare Bits, on the other hand, adopted a "zero-fee" policy in 2018 and promised to refund users for the Gas fees incurred in transactions, attempting to attract traffic by reducing user costs. This strategy initially attracted some attention and seemed more user-friendly, but it was not conducive to the platform's long-term development. The high operating costs also doomed Rare Bits to be unsustainable, especially when the "2018 cryptocurrency winter" arrived.
During this period, in an effort to expand its user base and increase platform trading volume, Rare Bits also tried to expand its business from NFTs to a broader range of virtual goods trading. For example, it partnered with the anime platform Crunchyroll to launch "digital stickers" and explored the trading of non-NFT assets such as in-game items.
Unlike Rare Bits' diversification, OpenSea remained focused, with its primary focus always on improving NFT trading operations.
However, on the long road to dawn, OpenSea's situation was not good either. The platform's early trading volume remained low, and early projects were limited to a few NFTs such as 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 were not for the "lifesaving funds" of $2.1 million injected by strategic investors such as Animoca Brands at the end of 2019, this startup might have already disappeared in the industry winter. As for Rare Bits, it had shown signs of being in trouble since 2019 and eventually exited the market in 2020.
In retrospect, OpenSea's rise to become the king of the NFT field was inseparable from its operational decisions to focus on core business and streamline operations. Devin Finzer once said in an interview, "We are willing to develop in this field in the long term, no matter what the growth trajectory looks like. 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 said to be a watershed in OpenSea's destiny. With the gradual recovery of the Crypto market in the second half of the year, OpenSea, as a pioneer in the NFT market, was the first to reap the benefits, and its platform trading volume began to soar rapidly. Dune data shows that in October 2020, OpenSea's monthly trading volume reached about $4.18 million, an increase of about 66% from $2.46 million in September.
OpenSea's Seven-Year Roller Coaster: The Former NFT Exchange "King" Chooses to Issue Tokens
To have a more diverse range of NFT assets on the platform 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," which allowed users to mint NFTs without fees (with Gas fees borne by the buyer). The platform dubbed this feature "Lazy Minting," separating on-chain issuance from metadata. Users could upload their items' metadata to OpenSea for free, and the items would only be minted as on-chain ERC-1155 NFTs when they were first sold.
This feature significantly lowered the barrier for creators and, combined with OpenSea's non-custodial NFT listing, allowed every user to directly mint and issue NFTs on OpenSea. Besides this advantage, OpenSea also covered the broadest range of trading categories among similar platforms, including digital avatars, music, domains, virtual worlds, trading cards, artworks, and various other NFT collectibles. Its strategy maximized the supply of creators' works, attracting more and more users from both primary and secondary markets.
Objectively speaking, the potential of the NFT market, which was ready to explode, contributed to OpenSea's later success. However, the rapid outbreak of the NFT market could not have happened without OpenSea's contributions.
In 2021, the Crypto market entered a comprehensive "bull market," and OpenSea, which had been lying low for two years, began to truly show its potential.
NFTs experienced a meteoric rise, with OpenSea reaching the throne with monthly trading volumes in the billions of dollars.
According to Dune data, in February 2021, OpenSea's data saw its first explosive growth. On February 2, OpenSea's daily trading volume exceeded $5 million, while the entire month of January saw a trading volume of just over $7.5 million. Ultimately, OpenSea's trading volume for the entire month of February approached $95 million, a more than tenfold increase month-over-month.
It was also at the beginning of 2021 that a large number of commemorative NFTs began to be issued on OpenSea. Bands, entertainers, sports stars, and well-known artists all started to launch their own NFTs, and many well-known brands also began to issue commemorative NFTs or use NFTs to launch user loyalty programs. It can be said that NFTs, which started with CryptoKitties, for the first time brought Web3 together with traditional industries and allowed many people who were previously unaware of Crypto to come into contact with this new "species."
OpenSea's Seven-Year Roller Coaster: The Former NFT Exchange "King" Chooses to Issue Tokens
Budweiser's NFT Series
As the largest NFT trading platform, OpenSea finally caught the wind. Data shows that in March 2021, the trading volume on OpenSea exceeded the $100 million mark for the first time, and in July it surpassed $300 million. In August, the figure grew more than tenfold month-over-month to $3.44 billion. 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 in fact begun rapid development from the beginning of 2021, with the floor price of CryptoPunks NFTs rising from single-digit ETH at the beginning of the year to tens to twenties of ETH by mid-year, the main narrative of the market in the first half of 2021 was still centered around DeFi. At that time, people's attention had not yet fully shifted to NFTs. The reason was that, in addition to the rising popularity of DeFi, there were no tradable targets or concepts in the NFT field.
OpenSea's Seven-Year Roller Coaster: The Former NFT Exchange "King" Chooses to Issue Tokens
In the second half of the year, the launch of a series of PFPs represented by BAYC completely ignited the market's passion, and NFTs were considered another phenomenon-level concept after DeFi. With the increasing heat of NFT trading, OpenSea's monthly trading volume also remained at a high level of billions of dollars, and in January 2022, the figure even exceeded $5 billion. OpenSea's product manager, Nate Chastain, tweeted in late August 2021 that the company had only 37 employees, yet OpenSea's transaction fee income alone exceeded $80 million that month, with an average contribution per person of over $2 million, which is extremely terrifying in any industry.
By the end of 2021, OpenSea had been accelerating non-stop for most of the time, and apart from the aforementioned Nate Chastain, who resigned due to an insider trading scandal, OpenSea had virtually no other negative news. Other NFT trading platforms, even with substantial funding, could not shake OpenSea's position, and almost all NFT trading platforms' products more or less referenced OpenSea.
Challengers Lurking, OpenSea "Betrayed" Web3 with IPO Plans?
Beneath the prosperous scene, a turning point arrived quietly, starting with rumors of OpenSea's IPO...
In early December 2021, Bloomberg reported that Brian Roberts, CFO of the US ride-hailing company Lyft, would join OpenSea as CFO. Roberts also stated that he was planning an IPO for OpenSea. This seemingly ordinary news sparked discussions within the Web3 industry, with many arguing that OpenSea should issue a token to reward its users, as this is what Web3 projects should do.
Perhaps feeling some pressure, two days later, Brian Roberts personally clarified that there were no IPO plans, saying, "There is a big difference between thinking about what an IPO would look like and actively planning for one. We have no plans for an IPO, and if we did, we would seek community involvement."
This somewhat ambiguous statement did not allay the community's concerns but rather reinforced their belief that OpenSea would eventually go public, as he did not mention token issuance at all.
If OpenSea had decided to issue tokens at that time, the NFT trading platform space might not have had the subsequent exciting stories. It was precisely this "selfish" decision to go public that opened a crack in the seemingly impenetrable wall.
At that time, OpenSea held over 90% of the Ethereum NFT trading market share, and its stance against token issuance provided entrepreneurs with an opportunity. They 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 influence after OpenSea's IPO preparations was clearly significant.
On January 10, 2022, LooksRare officially launched. The team stated that users who had traded at least 3 ETH on OpenSea could list a single NFT on LooksRare to receive an airdrop. Additionally, users could stake the LOOKS airdrop to share in all platform trading fees. Within two days of LooksRare's launch, its daily trading volume exceeded that of OpenSea, and by January 19, 2022, its 7-day trading volume was more than triple that of OpenSea.
OpenSea's Seven-Year Roller Coaster: The Former NFT Exchange "King" Chooses to Issue Tokens
When the crack was torn open and the market realized that OpenSea was not invincible, everyone began to show their skills. X2Y2, which launched in February 2022, Element, which focused on the BNB Chain, Zora, which focused on artistic NFTs and took a high-end route, and Magic Eden, which focused on the Solana NFT market, all continued to erode OpenSea's existing market and potential expansion areas. Perhaps it is somewhat exaggerated to say that OpenSea was arrogant, but at least its failure to guard against potential dangers at the height of its success was indeed a significant strategic mistake for OpenSea.
Nevertheless, OpenSea's market influence remained unshakable. By the second quarter of 2022, on one hand, Yuga Labs was about to issue the APE token, and on the other hand, the trading of "blue-chip NFTs" such as Moonbirds and Doodles remained active. As the most liquid NFT trading market, OpenSea still held the key to the NFT market.
The main person responsible for changing the entire NFT track or causing the NFT market crash quietly emerged at this time, and its appearance fundamentally changed people's stereotyped impression of what the NFT market should look like.
Blur Emerges, NFT Market "Top One" Changes Hands
At the end of March 2022, Blur announced the completion of an $11 million funding round. At that time, many people still wondered why a new NFT trading platform would emerge at this point, but when Blur officially launched at the end of October, it gave everyone a wake-up call.
A completely different UI, with clear airdrops for listing, bidding, and trading, and the airdrop being an unknown number of tokens in a "treasure chest." The purely trading-focused UI and the clear yet ambiguous airdrop made Blur's product and gameplay design impeccable. Although many people initially criticized Blur's UI as being very difficult to use, after getting used to it, they found that this design was indeed much more user-friendly for trading than OpenSea. To put it in perspective, if OpenSea is the NFT e-commerce platform, then Blur is the NFT exchange.
