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Opensea: the most popular marketplace for NFTs

October 27, 2022

13 min

Opensea: the most popular marketplace for NFTs
Beginner

What is Opensea and how does this platform for buying and selling NFTs work? Let’s try to answer these questions by starting from the beginning, reconstructing the history of the marketplace that was created for the exchange of CryptoKitties. It has since grown to become a hub in the Web3 world, where you can also create your own NFTs for free.

What is Opensea: the values of the foundation

To understand what Opensea is, we have to go back in time. It is 2017 and Layne Lafrance, together with the Axiom Zen team, launched the CryptoKitties project. This DApp, built on the Ethereum blockchain, is a game based on the breeding of kittens in the form of NFTs. The verifiable ownership of NFTs, created by ‘pairing’ CryptoKitties, opened up the possibility of monetising players’ efforts. These kittens could be sold in exchange for cryptocurrencies: one of the first forms of Play-to-Earn. However, to buy and sell Non-Fungible Tokens, you need a platform. That’s what Opensea is, the marketplace for NFTs founded in December 2017 by Devin Finzer and Alex Atallah. It was inspired precisely by CryptoKitties.

Reconstructing the history of Opensea, the founders present the potential of blockchain technology as the motivation behind the creation of the platform. In their view, NFTs are a fundamental building block in a new form of economy. They are decentralised and based on the ownership of digital content, thus restoring freedom and power to users. A vision shared by Web3, the new era of the Internet, where the values of DeFi will be made possible. OpenSea has contributed from that standpoint too:

  1. Trust and security: Opensea is committed to protecting NFT creators and collectors, so that a climate of trust is maintained. Buying, selling and creating NFTs on Opensea is supported by tools, guidelines and support services to introduce any type of user to the new world of blockchain.
  2. Inclusiveness and accessibility: on Opensea anyone can create and sell NFTs, there are no barriers to entry for artists.
  3. Breadth and variety: Opensea is the most popular marketplace for NFTs, offering the most varied and richest catalogue ever. Users can browse through thousands of crypto projects, an offer so broad as to justify the name ‘open sea’.

These principles, coupled with innovation, have led Opensea to a valuation of over USD 13 billion in 2022. Over the years, many venture capitalists and angel investors have believed in the NFT marketplace by excellence: among them are actor Ashton Kutcher and venture capitalist Andreessen Horowitz (a16z). Chris Dixon, a renowned partner of a16z, even joined the board of Opensea.

In spite of this, Opensea may have ‘forgotten’ some of its ideals: it has not yet distributed governance powers among its users, announcing instead its intention to organise an IPO (Initial Public Offering). At the end of 2021, CFO Brian Roberts expressed the idea of opening up to public investment: the issue of shares would in fact replace the long-awaited airdrop of the governance token. The disappointed community therefore objected to Opensea’s abandonment of the decentralised model. A governance token would give voting rights to real users on the platform, who create and exchange NFTs, as is already the case in competing marketplaces Rarible (RARI) and SupeRare (RARE).

The community’s irritation was followed by Brian Roberts’ prompt rectification, but the lack of a DAO and governance token still exposes Opensea to criticisms of centralisation. Uncertainty about the company’s future plans is albeit matched by the Opensea team’s conviction that ‘one day almost everything we own will be recorded on a blockchain’, probably ‘tokenised’ as an NFT: this is mainly why it has developed a dedicated platform. Now that we know what Opensea is and know its history, let’s can study how it works and also find out how to create, buy and sell NFTs on Opensea.

How does Opensea work?

Understanding how Opensea works is not complex, at least for those who have already used an online marketplace. Buying and selling on the Internet is now commonplace: you can think of Opensea as an ‘Ebay for NFTs‘, only that non-fungible tokens can be minted on the platform itself, which is impossible for physical goods.

Like any ‘e-commerce’ platform, the Opensea homepage has an ‘explore’ section where you can find NFTs divided by category. These can be collectables, photography, NFT domains and even objects from the metaverse (such as assets from The Sandbox). If you love statistics, the ranking section collects NFT collections by trade volume, base price and number of sales. You can also discover current trends and add the collections you like best to your personal Watchlist. To do so, however, you must first create an account on Opensea.

You do not need to be registered to explore opensea.io, but to buy, sell, create or ‘favourite’ an NFT, you need an account. On Opensea, you don’t just need a username and password: you need a crypto wallet, which is essential for sending, receiving and storing cryptocurrencies, and therefore also for trading NFTs on Opensea. By creating a wallet address and connecting it to Opensea, you will then have your account ready for any operation. Opensea provides several solutions to create your crypto wallet: MetaMask is the most popular, but you can find the full list of supported wallets here.

Memo

When creating a crypto wallet, always store the Seed Phrase: 24 words with which you can always retrieve the wallet and your cryptocurrencies. It is important to do so in case you have forgotten your login password or need to import the wallet to a new device.

There are many blockchains that now allow for the creation of NFTs, in addition to Ethereum. Opensea supports several of them, which means that buying and selling transactions will also take place on the same blockchain where the NFT was minted. So, before opening a wallet address, assess which blockchain the NFT you intend to buy is located on. While for Ethereum and its Layer 2s, such as Polygon, there are plenty of compatible wallets, for other ‘younger’ blockchains there are fewer options: Phantom for Solana (SOL), Core for Avalanche (AVAX), Kaikas for Klaytn (KLAY), for example.

MetaMask, in particular, supports Ethereum, Polygon and Klaytn NFTs. It can be installed as a browser extension or mobile application. After that, you can finally create your account on Opensea by linking the wallet address you have just generated. You will need the wallet to buy and create NFTs on Opensea, so that you can store them safely. In addition, the wallet is needed to approve all your actions on Opensea: each interaction requires a ‘signature‘, initialled through a browser pop-up, automatically opened by your wallet.

Your profile dashboard will therefore allow you to monitor your activities on the platform, but for the time being it will be empty. Opensea will automatically show NFTs in the “collected” section, but only if the connected wallet already contains them. If not, it is time to explore the marketplace, looking for your first digital artwork to collect: let’s find out how to buy NFT on Opensea.

How to buy NFTs on Opensea

Now that you have found out how Opensea works and linked the wallet to your account, you may be interested in this guide to figuring out which NFT to buy. Define your budget, find out about the creators of the collection, understand what type of NFT it is and use the Rarity Tool to assess its rarity. Finally, you’ll need to figure out where and how to buy the NFT you want, depending on the marketplace and the sales methods chosen by the creators.

On Opensea, you have three options to buy NFTs

  • Buy now“: some NFTs are on sale at a fixed price and, as on any e-commerce site, they can be bought at any time.
  • Auctions: auctions can be organised to sell NFTs on Opensea, in which anyone can participate by making a bid. The seller can accept any of the bids received before the auction closes, or once the time has expired the NFT will go to the highest bidder.
  • Bidding: you can also bid for items that are not for sale, that are in the collections of other users on Opensea, or bid for a different amount than the ‘buy now’ price set by the seller.

Now that you know the methods, we can understand in practice how to buy NFT on Opensea. On the marketplace’s official page we can find a step-by-step guide: let’s summarise it in points by giving an example of ‘buy now’:

  • Connect your crypto wallet to Opensea, if you haven’t already done so;
  • Choose your payment method: to buy an NFT on Opensea you need cryptocurrencies, often ETH or MATIC. You can buy them on an exchange and then transfer them to your wallet. In some cases, it may also be possible to pay directly by credit card;
  • Evaluate the commissions: the total price is always higher than the price set for the NFT, because there are commissions (gas fees) associated with any transaction on the blockchain that are required by the specific network you are using. If you pay with a card, there are also processing fees. These Opensea fees are not imposed by the marketplace. In fact, they are not paid to the platform, but to the blockchain or circuit that processes the payment;
  • “Sign” the transaction or enter your card details: if you have connected your wallet to Opensea, accepting the payment should open a pop-up with which you approve the transaction. Or, you will have to enter your card details if you do not pay with cryptocurrency.

Congratulations, the NFT is now yours! The property has been registered on the blockchain and you should see the digital object in your profile collection. You can simply leave it in the ‘shop window’, proud of your purchase. Or, you can use it in compatible protocols, such as games in the metaverse, or sell it!

So let’s find out how to sell NFT on Opensea, perhaps by creating our own original work.

How to create and sell NFT on Opensea

Let’s go over the basic steps of how to create and sell NFTs. First of all, what is an NFT? Any digital content can be tokenized as an NFT, i.e. registered on a blockchain: an image, a GIF, a video, three-dimensional objects, a piece of music, internet domains, the list is potentially endless. However, if we want to understand how to create an NFT on Opensea, we must first define the minting process.

To mint an NFT means to record its ‘metadata’ immutably on a blockchain, so as to prove its authenticity and ownership. Thus, simply screenshotting an NFT does not make it yours. You can create an NFT directly on Opensea:

  • The wallet linked to your account will be the destination of the NFTs created, make sure it is compatible with the blockchain where you want to mint your work.
  • Choose a blockchain: each network has different characteristics, such as gas fees, speed, scalability, interoperability. Evaluate them according to the purpose of your NFT.
  • Create a collection: each NFT must be part of a collection, even if it is a unique piece. This is free of charge, you can find it in the drop-down menu of your account: define the name and category and add useful links to your project.
  • Upload the file to be transformed into an NFT in the ‘Create‘ section. The object cannot be larger than 100 MB. There you can set all the properties and metadata of your NFT, including the supply and blockchain on which it will be registered.

All set? Press ‘create’ and you will have your NFT. Please note: creating an NFT on Opensea usually has a cost, namely the gas fees already mentioned. On Ethereum and Polygon, on the other hand, you can do lazy minting. In a nutshell, you can create an NFT for free by putting it up for sale without minting it, so that a user only registers the NFT on the blockchain when it is purchased. This way, the buyer will pay both the purchase commission and the gas fees for minting.

Now that you understand how to create an NFT on Opensea, selling is very easy. Search for the NFT you want to sell in your profile and, opening the dedicated page, click “Sell” in the top right hand corner. You can set up one of the 3 selling modes we have already discussed, so it only remains for us to talk about the Opensea costs associated with the process.

Opensea retains 2.5% of each sale as a service fee. In addition, sellers pay a gas fee for accepting bids in an auction. Finally, there may be a Creator Fee: the creator of an NFT receives royalties from each sale of his work, a commission of up to 10% of the sale, then subtracted from the total received by the seller.

If you understand what Opensea is, how it works and have read how to sell and create NFTs on Opensea, you are ready for the adventure into the world of non-fungible art. 

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