OpenSea is the first and largest general marketplace for trading non-fungible tokens (NFTs).
In 2021, NFTs suddenly took the world by storm, and there has been no looking back since then. Currently, NFT trading volumes have practically gone through the roof. So, expectedly, the momentum of NFTs has attracted the attention of many and helped OpenSea to skyrocket.
However, most people do not understand what NFTs are still or how to use NFT trading platforms like OpenSea. This article will clearly walk you through some basic things you need to know about NFTs. We will also examine the biggest NFT trading platform, OpenSea, and give you a detailed guide on how it works, its strengths, and its weaknesses.
What Are NFTs and How Did They Get So Popular?
In simple terms, NFTs are digital assets that represent real-world objects. These assets are built on blockchain technology and are mainly traded using crypto. Some of the common types of NFTs include Art, Music, Video Game Items, Collectible Items, and even Memes. These are all basically media files that are represented on the blockchain through metadata files. The metadata file is a unique and permanent record that describes what the NFT represents, its ownership, and transaction history. The metadata of an NFT also contains a link to where the media file is hosted on the internet.
The utility of NFTs is seemingly endless across various industries, and this is precisely why they are so popular. Similarly, more people are beginning to view NFTs as investment assets that can turn a profit, contributing to their growing popularity. For example, Bored Ape Yacht Club is one of the most popular NFT collections. It comprises 10,000 unique Bored Ape characters. Other popular collections include CryptoPunks and ArtBlocks. Like Bored Ape Yacht Club, CryptoPunks consists of 10,000 characters stored on the Ethereum blockchain as NFTs. The highest bidding price for a piece is pegged at about $23 million. And our own collection North Park Club, see it here on OpenSea.
With the increasing popularity of NFTs, many more trades are being conducted. It is essential to note that the bulk of NFT trades takes place on dApps. So, what exactly are dApps?
What Are dApps?
Decentralized Apps (dApps) are blockchain-backed digital applications that run on a peer-to-peer network. The primary distinguishing factor of dApps is that they are not operated by a single entity, unlike conventional applications. Instead, they are automatically operated through the use of smart contracts. Most dApps are centered and built on the Ethereum blockchain, although some dApps run on other public blockchain platforms.
The primary benefit of dApps (over conventional applications) is the low risk of manipulation. dApp systems are more trustworthy given that they are not modifiable, and they are equally free from centralized control. The most popular dApp for trading NFTs is OpenSea.
You can see more dApps and track their progress on stateofthedapps.com.
What Is OpenSea?
OpenSea is the first and largest general marketplace for trading non-fungible tokens (NFTs). Essentially, OpenSea is like an online retail store, but for unique and collectible digital assets. Thus, OpenSea acts as a decentralized platform where users can directly transact with one another. Similarly, creatives and content creators can leverage the platform to mint NFTs, create NFT collections, and organize auctions to sell these assets.
Notably, OpenSea was founded in 2017 by Daven Finzer and Alex Atallah after the pair witnessed the birth of Cryptokitties. Since then, the company has experienced exponential growth. For instance, between July and August 2021 alone, the platform experienced a more than 10 times increase in its transaction volume.
How does it work?
OpenSea is a peer-to-peer marketplace. This means that buyers and sellers transact directly without any intermediaries. Nevertheless, OpenSea makes its money by charging service fees on transactions. Currently, OpenSea’s fee is 2.5% of every transaction.
Ethereum smart contracts initially powered OpenSea. The platform, however, now supports the Klaytn and polygon chains. Transactions on OpenSea are mainly carried out using Ethereum’s token Ether (ETH). The platform also supports 150 other payment tokens like DAI, UNI, and WHALE. However, you cannot use non-crypto currencies like the US dollar and Euro.
To begin using OpenSea, you would have to connect a wallet. The platform supports a couple of wallets, the most popular of which is MetaMask. It typically takes a few minutes to install your MetaMask wallet on your OpenSea account. Other supported wallets you can use include Coinbase Wallet, Trust Wallet, Portis, Venly, Bitski, and Authereum.
Once you have connected and funded your wallet, it is pretty straightforward to buy an NFT. You can simply click ‘Explore’ and browse through various options till you find something that catches your eyes. It is worthy of note that there are two main kinds of NFT listings on OpenSea. The first is a fixed sale listing where you can buy an NFT for a fixed price. Another form of listing is a timed auction, where you have a fixed period to bid for an NFT. In most cases of the timed auction, the highest bidder at the end of the stipulated period walks away with the NFT.
How to use it
For any newcomer, using the OpenSea can be a bit overwhelming. With the right guide, however, you will find that most of the processes on OpenSea are not that complicated. Here are seven essential things you must know to use the OpenSea platform properly:
Listing Your NFT
Listing an NFT you already own, whether minted or bought, is pretty straightforward. All you are required to do first is to choose the NFT in question from your profile and click ‘sell.’ At this point, you will have to choose the kind of listing you want. As mentioned earlier, this could be a fixed-price sale or a timed auction. You can also choose between an auction that sells to the highest bidder (English Auction) or an auction with a declining price (Dutch Auction).
While listing an NFT on OpenSea, paying attention to the blockchain you are using is essential as it could heavily impact the cost of sale. The popular chains on OpenSea are Ethereum and Polygon. Notably, Ethereum is characterized by generally expensive gas fees for transactions. On the other hand, people who use Polygon can create, buy or sell NFTs without gas fees.
When using the Ethereum chain, first-time sellers on OpenSea have to pay two one-time fees in addition to the recurring transaction fees. These fees are not fixed and can fluctuate based on demand and supply. It is also worth noting that the minting fees are separate from OpenSea’s 2.5% cut on transactions.
Search Options to Discover NFTs
There are thousands of NFTs on the OpenSea platform. As such, it is crucial to know how to search effectively for what you want. You can click ‘Explore’ from the landing page to see the various NFTs on the platform. If you know the specific NFT you are after, you can search directly for it using the search bar.
There are also a couple of sort options to make searching easier. For example, you can search by “Recently Listed,” “Expiring Soon,” “Highest Price,” “Most Viewers,” and so on. In addition, if you prefer a particular buying style, you can also choose between ‘Buy Now’ or ‘On Auction.’ This way, you can go through NFTs that best suit your desired description.
Making an Offer
Once you have found an NFT you are interested in, you can make an offer for it. What you have to do is to select the option “Make Offer” on the item page. Afterward, you would have to select the currency you’d like to make the offer in. You can select currencies like WETH (equivalent to ETH), DAI, and USDC. If the NFT is a Polygon item, you can make an offer using Polygon ETH. Once you have selected a currency, you can enter the amount of your offer and select ‘Make Offer.’
To view a list of all the active offers you have made, you can select the ‘Offers’ tab in your profile.
Purchasing an NFT
To purchase an NFT on OpenSea, the first thing to do is sufficiently fund your wallet. It is important to buy enough crypto to cover not only the cost of the NFT but also the various gas fees that you may incur. You can easily buy the crypto you need through popular crypto exchanges like Coinbase. Once you have enough money in your wallet, you can go to your desired NFT item and click the “Buy Now” button. Then, all that is left to complete is agree to the terms of the marketplace, click ‘Checkout’ and confirm the purchase.
If the NFT in question is on auction, you can simply follow the ‘making an offer’ guide to bid for it. In this case, you’d have to wait for the seller to accept your offer before you can finalize your purchase.
Locating Your NFTs on OpenSea
To locate the NFTs you have collected, click on the OpenSea menu. Afterward, go to Account and click on profile. Click the collected tab to locate all the NFTs you have collected so far. It is important to note that your OpenSea account is merely a gateway to your crypto wallet. If you follow these instructions and yet cannot locate your NFTs, it may be helpful to confirm whether your MetaMask is connected. For recently concluded transactions, it will also be helpful to wait for some time, as transactions are rarely completed instantly.
Analytics for Sellers
OpenSea provides several analytics features that ease its users’ purchase and listing process. One of such features is the rankings page. This feature provides relevant information on the most popular NFTs in real-time. Such information includes trading volume and changes in value over a time window. The feature also gives users the opportunity to filter results according to different categories.
Another key analytics feature is the rarity traits. This feature analyses NFTs and identifies their specific properties. It subsequently compares these properties with the properties of other NFTs. As a seller, you can use this feature to discover how rare your NFT creations are. In addition to this, users (or potential buyers) are allowed to like listed NFTs. As a seller, the number of likes on your NFTs often shapes perceptions of how popular the NFTs are.
Some of the issues OpenSea users face at this moment
The proliferation of NFT clones
The major problem with OpenSea is the prevalence of NFT clones. As the prices of specific NFTs continue to get higher, more developers are minting NFTs that are a replica of popular ones. While this raises many ethical issues, the bottom line is that creators are losing funds to these clones. This prevalence of NFT theft has been ascribed to the lack of solid vetting systems for NFT creators on OpenSea. Compounding this, OpenSea does not require that NFTs be written on the blockchain before they are listed. This flaw is often exploited by users who seek to list stolen NFTs.
To combat this, OpenSea banned two NFT clone developers last year. However, there was considerable outrage, given that OpenSea is inherently a decentralized platform. Too many people in the crypto community, the ban amounted to censorship that only applied to centralized applications.
Exploitation through the use of bots
While OpenSea has functioned as a viable platform for NFT sellers to make profits off their creations, it would appear that bots are continually influencing OpenSea’s NFT marketplace. These bots are employed to reduce or increase the prices of NFTs. To reduce prices, these bots place bids and cancel right before the bids are accepted. Because the NFT has to be listed upon cancellation, the price drops. In this situation, developers scoop the NFT assets at lower prices. A similar technique is also employed to drive up NFT prices.
Another problem is the susceptibility of the OpenSea users to phishing attacks. NFT investors lost about $1.7 million to an extensive phishing attack.
The growing popularity of NFTs and the existence of platforms like OpenSea have undoubtedly been beneficial for many creators. Regardless, just like every other marketplace, there are risks to be wary of. As such, more NFT users need to be particularly cautious with their assets. In addition, platforms like OpenSea equally need to strengthen their security systems. This would significantly increase the overall user experience.
Click here to read our whitepaper and see what we plan on doing when it comes to Web3 and NFTs.