OpenSea NFT Marketplace: What Is It & How Does It Work?
If you’re still not quite sure what the buzz around non-fungible tokens (NFTs) and marketplaces like OpenSea is all about, you’re not alone. The invention of and subsequent dramatic rise in the popularity of NFTs are relatively recent — a burgeoning digital phenomenon catching fire only in the last few years.
OpenSea's platform was first on the scene as a dedicated online marketplace for these digital tokens, and it remains the largest NFT marketplace to date. The following article will describe in detail everything essential you need to know about OpenSea and its primary position in the world of NFT markets.
What Is OpenSea?
OpenSea is the world's largest decentralized peer-to-peer exchange marketplace for the acquisition and trade of NFTs. It permits users to transact with one another in a trustless, immediate and absolute manner.
How Does OpenSea Work?
A specialized marketplace for NFT buying, selling and trading didn’t exist initially after these unique digital tokens entered the mainstream. OpenSea's creation was the first of its kind. It’s frequently compared to eBay when conveying its workings to beginners. This comparison is apt, since OpenSea essentially operates like eBay, Etsy or any other well-known buying/selling platform.
The only difference is this site transacts exclusively with digital items — NFTs. You can use OpenSea’s platform to set fees on your tokens, and to create custom marketplaces for NFT art projects and auctions for selling them.
As OpenSea’s marketplace is noncustodial, the transactions made on the platform are facilitated by self-executing smart contracts. This means that fair trade is guaranteed. Transactions for both buyer and seller achieve win-win situations — or the parties don’t transact at all.
Even though there’s no middleman between buyer and seller, since OpenSea offers P2P exchanges, the platform still charges a 2.5% fee for every successful transaction. While this may seem like a large amount, OpenSea certainly offers a lower transaction fee than most NFT marketplaces, some of which charge up to 15%.
The OpenSea network utilizes the Wyvern Protocol for its transactions. For the uninitiated, it’s a decentralized digital asset exchange protocol that runs on Ethereum and it is made to facilitate the exchange of NFTs.
What Is an NFT?
To understand the function of such online platforms, you have to be at least passingly familiar with NFTs first. In brief, NFTs are unique digital items made discrete and securable by code identifiers, and they exist transparently on a blockchain.
NFTs are, by definition, not interchangeable. On NFT marketplaces like OpenSea's, they function like items/objects, not currency. For example, individuals may use a cryptocurrency like Bitcoin to buy NFTs. But unlike bitcoins, NFTs are not perfectly equivalent or exchangeable with one another by design.
The average layman might be aware of the art market associated with NFTs. Digital art projects can indeed be tokenized, but so can a variety of other digital properties, such as:
In-game assets for online games
Proof of ownership for real-world assets like real estate
Digital real estate
The above list isn’t exhaustive, either. The number of things that can become NFT art projects is growing all the time and is potentially infinite.
Getting Set Up
To participate in an NFT marketplace, you’ll first need to acquire a web-based, cryptocurrency-enabled wallet. MetaMask is a leading example of this type of tool. A crypto wallet allows you to interact with blockchains, and to complete transactions involving NFTs or cryptocurrency.
Regardless of whether you intend to buy, sell or trade NFTs on OpenSea, you’ll need to select and create an account with one of the wallets supported by the OpenSea marketplace to access the blockchain underpinning it. Fortunately, the platform is compatible with an impressive array of wallets, so most wallets will likely interface just fine with the site.
The OpenSea marketplace supports the following wallets:
Connecting to OpenSea
Once you have your wallet, the next step is to connect it to the site's blockchain. After establishing an account on the platform and linking your wallet to it, any assets that you own should display on your account page. For example, if you already own any NFTs in your wallet, they'll show on your account page for you to trade or sell.
Searching for NFTs
Like eBay, Amazon or any other online marketplace, many aspects of OpenSea are conspicuously user-friendly. Its Browse page is no exception. This page is the main window into the market's activity. If you only want to look at what’s available and trending, you can head right to the primary listings and either scroll around or toggle the search and filter features. When browsing the main page with no parameters selected, you’ll typically see the most popular collections and trending OpenSea NFTs appear at the top of the results by default.
You have many options for sorting and filtering. Foremost, OpenSea has six overarching filter categories called "status pills," which can narrow things down quickly and easily. You can find these status pills located at the top of the sidebar. They are:
Displays only OpenSea NFTs that are currently for sale
Useful since many items are viewable on the site but not on the market for purchase
Displays OpenSea NFTs that already have offers
Filters search for items labeled "pre-sale"
These might be items listed for sale before another related item is launched
Example: In-game items for sale before a game is released
Shows items that have bounties attached to them
Bounties are currency earned when users refer others to a particular item or bundle
This filter shows listings for active English auctions only
Displays bundle listings only
Bundles are listings with multiple items for sale to be bought together in one transaction
If you want to narrow your search further, you may also select additional filters and refine by shareable traits, currency, collection, etc. Sort using parameters such as "most viewers," "highest price," "expiring soon" and "recently listed" to bring items of greatest interest to you to the top of the results.
To buy OpenSea NFTs, you can use ETH, as described previously. However, because of interoperability requirements, this currency needs to undergo an additional transformation to become usable in a transaction.
ETH must be converted to wrapped ETH (WETH). On other platforms, transforming one kind of crypto into even a slightly different one might be tricky. You would need to use a centralized or decentralized exchange. However, it’s not much of a hurdle on OpenSea, as you can make the change easily without ever leaving the site.
How Listings Work
There are three listing options for sellers to choose from when they’re ready to put an NFT up for sale. A seller can post an item as a fixed price, English auction or Dutch auction listing.
Fixed-price listings are intuitive. They’re the same as what we typically see with everyday products. The seller assigns an item a price, and a purchase is made when the buyer agrees to pay that price. A fixed-price NFT remains available until it’s either purchased, or the seller cancels the listing.
English Auction Listing
An English auction listing functions like the type of auction you’d customarily see on eBay. The seller assigns an item its minimum price in the hope that more than one person will bid, pushing the final purchase amount much higher.
Sometimes, sellers set the minimum at zero dollars to stoke the initial bidding. The platform also allows sellers to create a reserve price, meaning the NFT will not sell unless bidding comes up to a certain amount. However, the seller can accept a bid at any time if they’re ready.
Dutch Auction Listing
Another name for a Dutch auction listing is "declining price listing." As the nickname suggests, Dutch auctions function somewhat opposite to English ones. A seller sets the price for an item artificially high at the start of the auction, and lets it decline with time.
To create the listing, the seller must input a starting price, ending price and the duration that the auction will last. The idea behind this auction strategy is that once a price reaches an acceptable amount, a buyer will hastily purchase it to beat out everyone else. In this way, the NFT theoretically sells for what the highest bidder will pay for it.
Creating and Selling NFTs
Even without any previous experience creating NFTs, beginners can easily create a collection on OpenSea's platform. They only need to have a digital item like a piece of art or music, or a document available in an accepted format. From there, they can follow OpenSea's guidelines for uploading so that the site can generate the NFT version of the content.
To sell newly created NFTs, sellers just need to select the Sell button and fill in the parameters for their listing. Most follow the strategy of selling lower-priced items as fixed-price or Dutch auction listings, and higher-end items in English auctions. You can always change or cancel a listing if your NFT hasn’t yet sold.
Transactions on OpenSea's platform are referred to as "atomic" because the entire deal happens immediately and completely. Compare this to an Amazon purchase. The buyer pays on faith that the seller will ship their items in a timely manner. Since NFTs are digital wares, the buyer receives them instantaneously when the deal is struck, simultaneous to when the seller is paid. Neither third-party intermediaries nor trust is required to transact on this site. Sales and transfers are handled by a series of automated smart contracts, collectively known as the Wyvern Protocol. This tried and tested system reliably facilitates the secure transfer and exchange of NFTs for currency.
Another thing that’s remarkable about OpenSea's marketplace is that it’s noncustodial. In other words, there is no central authority controlling the market activity on the site. The company behind the platform is responsible for maintaining the infrastructure, but not for managing transactions. Neither does it own anyone's digital assets at any stage. Wallets "own" NFTs, and the individuals with access keys own the wallets.
What Is OpenSea Gifting?
Like other NFT marketplaces, OpenSea's platform includes an optional gifting function. While most of the activity on the site is transactional, it’s also possible for you to send an NFT to another user as a gift. You may do so with their username on the site or their ETH address. Recipients will see gifts delivered directly to their wallets.
What Is OpenSea Minting?
Another benefit of trading on OpenSea's marketplace is that it permits creators and sellers to mint their NFTs. This function is free, but sales and gas fees still apply.
Joining OpenSea's platform and creating NFTs is free, but the site does impose a 2.5% sales fee on every transaction. In the context of NFT marketplaces overall, this charge is relatively low, though not the smallest. Additionally, if you’re interacting through the Ethereum blockchain or trading Ethereum NFTs, you may be subject to additional "gas" fees. You can avoid these fees by opting for the Polygon blockchain.
Because of the way OpenSea's platform is designed, with everyone connecting their wallets to store NFTs, sellers are inherently vetted by the site. That is, users cannot post NFTs for sale that they do not have — because the platform must recognize an NFT’s existence in the seller's possession before it can be listed. This fact, coupled with the certainty of atomic transactions, should give all parties peace of mind when buying and selling NFTs on the site.
Statistics and Analysis
Outside of OpenSea's marketplace, getting a handle on critical NFT or crypto data can be challenging. Fortunately, OpenSea's platform makes it far easier to review marketplace data, statistics and analysis, relative to others. It compiles all of this information on its site so that it’s easily accessible by anyone.
OpenSea’s Launch to Fame
Software engineers Devin Finzer and Alex Atallah created OpenSea's founding company in 2017. Finzer and Atallah were inspired by the successful Ethereum game Cryptokitties, and conceived of a market that would allow users to buy and sell Ethereum NFTs like those in the game. However, their vision and OpenSea's capabilities soon expanded well beyond this starting point, as the full potential of digital ownership became evident.
Artists quickly recognized the fresh potential to establish and protect their intellectual property. In 2020, the platform only saw about $21 million in trading volume, but this increased several fold by the next year, partly due to high-profile investors publicly taking interest in the platform.
The following year, OpenSea's trading volume skyrocketed to a total of $12.5 billion, representing approximately 88% of the total for NFTs in 2021. While many NFT marketplaces have formed since OpenSea's arrival (at least one has begun to surpass it regarding trading volume), this forum remains the best NFT marketplace owing to its unmatched total sales volume and number of unique traders.
OpenSea's Security Issues
OpenSea recently revealed that its security was compromised after an employee of their email vendor, Customer.io, misused their access to download and share email addresses of OpenSea users and newsletter subscribers.
While OpenSea is working with Customer.io and law enforcement to resolve this issue, all OpenSea users are encouraged to be alert when viewing emails. This is because the data compromise can lead to an increase in email phishing attempts.
Ways to Safeguard Yourself
In order to ensure that you don't fall victim to malicious actors, OpenSea recommends doing the following:
- Always be wary of phishing emails from OpenSea impersonators (OpenSea will only send emails from the domain: 'opensea.io').
- Never download any attachments from an OpenSea email.
- Always check the URL of any links included in an OpenSea email (OpenSea will include hyperlinks to 'email.opensea.io').
- Never share or confirm your passwords or seed phrases.
- Never sign a wallet transaction that doesn't list the origin of https://opensea.io if you were directed from an email.
How to Use OpenSea
Now that the basic questions about OpenSea are answered, let’s look at how to get started. Some of the basics for how to use the site were touched upon broadly in an earlier section. The following is a simple, direct guide on the specifics of how to use OpenSea's platform step-by-step.
Step 1: Navigate to a currency exchange and purchase some ETH. You’ll need this currency to make any purchases and pay fees.
Step 2: On OpenSea.io, click on the Create button.
Step 3: Choose from a list of compatible wallets and install one by following the prompts.
Step 4: Add your ETH cryptocurrency to the wallet.
Step 5: Browse NFT projects, or conduct a search if you’re looking for something specific by toggling the Sort and Filter functions (or typing keywords in the search bar). When you find an NFT that you’d like to purchase, click on its name or thumbnail image to view more information and options.
Step 6: Verify all pertinent details before making the purchase or bid. When you’re ready, click on the Buy Now or Bid button.
Step 7: A prompt will appear asking for payment details. Verify the amount of ETH you’ll be charged, and take note of the NFT token address.
Step 8: Confirm and complete the transaction by entering the private key for your wallet and clicking on Submit. Do note that once the transaction is completed, it cannot be canceled. However, if the site shows that it’s still pending, you may still be able to click on Cancel Transaction and stop it before it goes through.
Step 9: You can view any NFTs you’ve purchased on your dashboard.
Step 10: If you run into problems, you can navigate to the Help Center and search through the information provided for basic troubleshooting. You can also use the Submit a Request option and fill out the provided form if you still need more assistance.
Pros and Cons of Using OpenSea
Pros of Using OpenSea
OpenSea Now Offers a Gas-free Marketplace Option
One of the downsides to using the Ethereum blockchain or purchasing Ethereum NFTs is the potential for high gas fees. This issue spurred OpenSea's owners to add the option of trading on the Polygon blockchain instead. Doing so permits creators to conduct business and mint NFTs on the OpenSea network while avoiding those heavy gas fees.
OpenSea has also recently announced that it will be migrating to Seaport. Users can look forward to 35% lower gas fees and the removal of new account initialization fees. This will give rise to higher savings when users conduct transactions on the network.
Creators Can Opt for Royalties
One game-changing advantage that OpenSea's blockchain-based marketplace provides is the option for creators to receive royalties on their original NFT projects. Not only can they profit once from a direct sale or auction of original work, but they can also set a royalty percentage for themselves for all future sales of that NFT.
This feature is made possible by both the discrete quality of NFTs and OpenSea's technology, which tracks each digital item's entire sale history. It’s a boon to artists and other digital creators, allowing them to make the kind of compounding gains off their work that otherwise usually eludes them in the digital realm.
Broad Compatibility With Currencies and Wallets
OpenSea's site supports over a dozen wallets, including the most popular ones, such as those offered by MetaMask and Coinbase. The platform can also exchange hundreds of different cryptocurrencies for ETH, its in-platform currency, making it accessible to the majority of the crypto community.
Cons of Using OpenSea
Ethereum Blockchain Fees
The site initially relied solely on Ethereum-based NFTs and Ethereum's blockchain for its business, which meant users sometimes had to pay high fees, especially during times of heavy congestion. It has relieved this problem somewhat with the introduction of cross-chain support via Polygon. However, it hasn’t eliminated the original network or Ethereum NFTs entirely. Ethereum is taking steps to address issues of cost and energy efficiency with a second iteration of the blockchain.
Despite OpenSea's popularity, impressive features and ease-of-use, it suffers from some performance problems. According to OpenSea's status tracker, both the site and API frequently experience degraded performance. Additionally, the platform has:
At least once sustained a service provider outage
Ongoing database issues
Elevated API errors
To address concerns over performance issues, the company has begun posting a site reliability report each month. It overviews concerns from the previous month and indicates what actions the platform is taking to correct them.
Attacks and Improper Use Issues
The site and its customers have experienced losses due to cyberattacks and improper use. For example, in January 2022, a bad actor managed to steal 332 ETH worth about $800,000 from OpenSea's customers. The company reimbursed those affected and advised all users on how to limit their vulnerability, but ultimately said that this type of threat was intrinsic to any blockchain marketplace.
"Improper use" refers to incidents like the one in September 2021, when misconduct by OpenSea's head of product, Nathaniel Chastain, came to light. Chastain found a way to buy NFTs before they appeared on the homepage, and then sell them once they became viewable to the public. This prompted accusations of insider trading, and the company had to respond by blog post to say the representative had resigned — and that they were looking into ways to strengthen their controls.
Chastain currently faces one count of wire fraud and one count of money laundering, each of which carries a maximum 20-year sentence.
Popular NFT Projects You Can Purchase on OpenSea
A collection of 10,000 unique Bored Ape NFTs
Among the most popular NFT collections available
Floor price is close to 100 ETH (equivalent to thousands of U.S. dollars)
A collection of 10,000 pixelated character NFTs
Inspired by London punk culture and cyberpunk novels and films
Created by Larva Labs (development team of just two people), which focuses on numerous digital art projects
Players can purchase cute creatures as NFTs, which they can battle against other player's NFT creatures
Game allows players to earn SLP tokens, which they can trade for other currencies at an exchange
Has inspired growth of play-to-earn (P2E) as a popular crypto phenomenon
Solana is one of the most popular NFT blockchains
OpenSea's platform has recently begun featuring Solana NFTs, allowing users to view, buy and sell them
Accepted Cryptocurrencies on OpenSea
While ETH is the default currency on OpenSea's platform, there are over 200 payment options to choose from. As a seller, you can alter your settings regarding which cryptocurrencies you’ll accept for your items. Examples of other accepted currencies include:
Whale (a social token)
WBTC (Wrapped Bitcoin)
MEME (part of the Meme collection)
MANA (in-game currency for Decentraland)
SAND and REVV (in-game currencies)
Customized ERC20 crypto tokens
Other NFT Marketplaces
Bybit NFT Marketplace
Bybit doesn’t require users to have or import a crypto wallet to engage in transactions. Rather, they can just use their spot accounts if they wish. Like OpenSea's site, the Bybit NFT Marketplace tracks the ownership history of each NFT, which is displayed on the item's profile page.
Bybit NFT marketplace currently charges zero transaction fees for buyers, and only 1% per trade for sellers. Not being able to withdraw an NFT into a crypto wallet might be a downside for some, but the company is planning to offer that capability soon.
Magic Eden is a marketplace based solely on the cryptocurrency Solana. While other Solana-based marketplaces exist, Magic Eden is the standout leader among them. This platform is prized for several special features that set it apart from other NFT marketplaces.
One example is the Launchpad function, which greatly expedites and simplifies the process of creating NFTs for beginners (such that they can make an NFT in minutes, with no prior experience). NFT traders appreciate this feature for its intuitive and user-friendly design — and for lower fees of only 2% per transaction.
However, Magic Eden isn’t without its issues. Since it’s an open platform, it’s frequently besieged by copying and plagiarism (which can skew its statistics, among other things). Additionally, it lacks wallet integration, so users cannot view the contents of their wallets through the Magic Eden app.
The Future of OpenSea
The NFT market has rapidly taken the world by storm, just as the arrival of crypto did before it. OpenSea was an early major player and it has managed to hold onto its crown, owing to the platform's impressive accessibility, easy-to-use features, high-profile supporters, and — as a result — its sheer volume of activity. Now that enough time has passed to allow competitors to evolve, it’s facing a stiff challenge concerning that last point.
Magic Eden recently surpassed the reigning NFT marketplace in its raw number of daily trades with projects such as Okay Bears and Trippin’ Ape Tribe. OpenSea's platform now offers Solana NFTs as well, but Solana-based trading lags well behind Magic Eden's. That said, the original NFT marketplace still boasts many more unique users, and continues to be well ahead in total capital spent on its platform. Arguably, Magic Eden hasn’t yet knocked the leader off its perch.
While competition may accelerate in explosive and unpredictable ways, OpenSea's system has proven adaptable. That — and its inertia as the largest, go-to primary NFT marketplace — makes it entirely plausible that this platform will hold onto its hegemony and prosper for the foreseeable future.
The Bottom Line
NFTs are a new breed of asset that has electrified tech, finance and other industries with its potential. With an unprecedented class of sellable goods comes the need for an equally unprecedented forum in which to trade them. OpenSea arose to fulfill that role.
Its smart, practical and approachable design has inspired enthusiastic participation in everyone, from beginners to industry bigwigs. If the company stays sharp and on-trend, it should continue to earn its place as the number-one NFT marketplace.