OpenSea is a peer-to-peer marketplace backed by a blockchain where goods such as gaming items, trading cards, domain names, and digital art can be purchased. The company was founded by Devin Finzer and Alex Atallah after Finzer noted the popularity of the NFT CrypoKitties phenomenon.OpenSea makes the bulk of its revenue through a 2.5% service fee. The fee is collected whenever a NFT is sold on the platform. OpenSea charges gas fees to buyers and sellers to cover the cost of applicable blockchain transactions. There are also account registration and contract approval fees when a new account is opened and a new cryptocurrency is used, respectively.
| Business Model Element | Analysis | Implications | Examples |
|---|---|---|---|
| Value Proposition | OpenSea’s value proposition includes: – Access to NFTs: Providing a platform where users can discover, buy, and sell a wide range of digital collectibles and NFTs. – Ownership and Provenance: Offering blockchain-based ownership records to prove the authenticity and scarcity of digital assets. – Creative Freedom: Empowering creators to tokenize and monetize their digital art and creations. – Community and Engagement: Fostering a community of collectors, creators, and enthusiasts interested in digital collectibles. OpenSea appeals to collectors, creators, and NFT enthusiasts seeking access to a diverse marketplace for digital assets. | Attracts users interested in owning and trading digital collectibles. Establishes trust and authenticity through blockchain-based ownership records. Provides a platform for creators to monetize their digital creations. Builds a vibrant community of collectors and creators. Offers a unique value proposition in the NFT space. | – Access to a wide range of digital collectibles and NFTs. – Ownership and provenance verification through blockchain. – Empowering creators to tokenize and monetize their work. – Fostering a community of collectors and creators. |
| Customer Segments | OpenSea serves the following customer segments: 1. Collectors and Investors: Attracting individuals interested in acquiring and trading NFTs as digital assets. 2. Creators and Artists: Providing a platform for artists, game developers, and content creators to tokenize and sell their digital work. 3. Enthusiasts and Curators: Catering to NFT enthusiasts who curate and promote digital collectibles. 4. Developers and Innovators: Engaging developers interested in building on top of OpenSea’s platform through APIs and smart contracts. OpenSea targets collectors, creators, enthusiasts, and developers within the NFT ecosystem. | Targets individuals and investors looking to own and trade digital assets. Provides artists and creators with a marketplace to monetize their work. Engages NFT enthusiasts who curate and promote digital collectibles. Collaborates with developers to expand the NFT ecosystem. Addresses diverse customer segments within the NFT market. | – Individuals and investors interested in NFTs. – Artists and creators seeking to monetize digital work. – Enthusiasts who curate and promote digital collectibles. – Developers looking to build on OpenSea’s platform. |
| Distribution Strategy | OpenSea’s distribution strategy includes: – Online Marketplace: Operating a user-friendly online platform accessible to users worldwide. – Mobile Apps: Offering mobile apps for iOS and Android devices to facilitate NFT trading on the go. – APIs and Smart Contracts: Providing tools and resources for developers to build on top of the OpenSea platform. – Social Media and Community Engagement: Leveraging social media and community outreach to engage with users and creators. OpenSea focuses on a user-friendly online marketplace, mobile apps, developer tools, and community engagement to distribute its services. | Ensures accessibility to users worldwide through an online marketplace. Enhances user convenience with mobile apps for NFT trading on mobile devices. Expands the NFT ecosystem by providing APIs and smart contracts for developers. Engages users and creators through social media and community activities. Implements a multi-faceted distribution strategy within the NFT space. | – User-friendly online marketplace for NFT trading. – Mobile apps for iOS and Android devices. – Developer tools, APIs, and smart contracts. – Social media engagement and community outreach. |
| Revenue Streams | OpenSea generates revenue through the following channels: 1. Transaction Fees: Earning a percentage of the sale price when users buy or sell NFTs on the platform. 2. Listing Fees: Charging fees for creators who want to list their NFTs on the marketplace. 3. Premium Features: Offering premium features and services for collectors and creators for a fee. 4. Partnerships: Collaborating with brands and artists for promotional campaigns and partnerships. OpenSea diversifies its revenue streams through transaction fees, listing fees, premium features, and partnerships within the NFT market. | Generates income from transaction fees on NFT sales and purchases. Collects fees from creators who list their NFTs on the platform. Offers premium services for a fee, catering to collectors and creators. Collaborates with brands and artists for additional revenue opportunities. Diversifies income within the NFT ecosystem. | – Income from transaction fees on NFT sales. – Fees from creators listing their NFTs. – Revenue from premium features and services. – Income from brand partnerships and promotional campaigns. |
| Marketing Strategy | OpenSea’s marketing strategy involves: – Artist and Creator Engagement: Collaborating with artists, creators, and influencers to promote their NFTs on the platform. – Community Building: Fostering an active and engaged community of NFT collectors and enthusiasts. – Social Media Promotion: Leveraging social media platforms to showcase NFT listings, artist profiles, and platform updates. – Educational Content: Providing educational resources and guides to help users navigate the NFT space. OpenSea focuses on engaging artists, creators, communities, and providing educational content to promote its platform and NFT ecosystem. | Attracts artists and creators to showcase their NFTs on the platform. Builds an active and passionate NFT community. Utilizes social media for effective promotion and user engagement. Educates users about NFTs and the OpenSea platform. Implements a comprehensive marketing strategy within the NFT industry. | – Collaboration with artists and creators. – Active and engaged NFT community. – Social media promotion of NFT listings and updates. – Educational resources to inform users about NFTs. |
| Organization Structure | OpenSea’s organizational structure includes: – Executive Leadership: Comprising executives responsible for strategic direction and decision-making. – Technology and Development Teams: Managing the platform’s technology, blockchain integrations, and smart contract development. – Marketplace Operations: Overseeing the day-to-day operations of the online marketplace, including user support and dispute resolution. – Community Management: Engaging with and moderating the NFT community on the platform and social media. – Partnerships and Business Development: Collaborating with brands, artists, and developers to expand the NFT ecosystem. OpenSea maintains an organized structure to support its online marketplace, technology development, marketplace operations, community management, and partnerships. | Led by executive leadership for strategic direction. Manages technology, blockchain integrations, and smart contract development. Oversees day-to-day marketplace operations, including user support. Engages and moderates the NFT community. Collaborates with partners to expand the NFT ecosystem. Maintains a structured organization aligned with its NFT marketplace mission. | – Executive leadership for strategic direction. – Technology and development teams. – Marketplace operations for user support. – Community management and engagement. – Partnerships and business development. |
Table of Contents
History of OpenSea
OpenSea is a peer-to-peer marketplace backed by a blockchain where goods such as gaming items, trading cards, domain names, and digital art can be purchased.
The company was founded in 2017 by Devin Finzer and Alex Atallah at a time when non-fungible token (NFT) projects were just starting to attract interest.
Finzer became interested in NFTs after witnessing the CryptoKitties project, a tech culture phenomenon where people were paying hundreds of thousands of dollars for collectible video game cats.
More broadly speaking, Finzer also wondered if there was more to crypto than simply finance and currencies.
A few months later, he teamed up with software developer Atallah, a Stanford graduate who also had a burgeoning interest in cryptocurrency.
They presented a rough idea to a Techcrunch Hackathon in September and were then accepted into the Y Combinator program to take the project further. After an initial pivot, Finzer and Atallah returned to CrypoKitties and its underlying infrastructure.
Using something similar, they decided to build a digital marketplace where users could buy or sell NFTs in multiple categories. The OpenSea platform launched in February 2018, describing itself as “eBay for cryptogoods.”
Initially, the OpenSea marketplace relied on game developers to drive business – though new categories were continuously added.
The company managed to secure a $2 million round of funding early and acquired competitor marketplace Atomic Bazaar in December.
By the end of 2019, OpenSea was considered to be the leading NFT marketplace.
This position was solidified after the COVID-19 pandemic forced people to stay at home, with the NFT market itself experiencing rapid growth.
In fact, NFT sales for 2020 were $94.8 million, equivalent to 30,000% year-on-year growth.
During this time, the company had just seven employees and struggled to scale its operations to meet demand.
OpenSea is on track to surpass $27.5 billion in sales volume for 2021 with average daily fee revenue amounting to $4.2 million.
OpenSea revenue generation
OpenSea has a rather simple revenue generation strategy.
The company makes most of its money by charging service fees whenever a digital asset is sold on its platform.
The service fee is 2.5%, which means an NFT selling for $200 earns OpenSea $5.
Gas fees
OpenSea also charges gas fees which cover the cost of the computing energy required to process and validate Ethereum blockchain transactions.
Buyers pay the gas fee when purchasing fixed-price items, while sellers pay the same fee when accepting offers.
Gas fees are also payable when canceling a listed NFT, canceling a bid, converting WETH to ETH (and vice versa), and freezing metadata.
Account registration fees
New sellers to the OpenSea platform must pay an account initialization fee before they can list.
Ostensibly, these fees are charged to enable trading between the seller’s wallet and OpenSea.
The fee also allows the company to access transfer items after a sale occurs.
Contract approval fees
Users wishing to sell an item minted through a custom NFT contract will also need to pay a one-time approval fee for authorizing transactions.
This fee is also payable whenever a new cryptocurrency is used for the first time and includes currencies such as DAI and USDC.
Is OpenSea a blockchain business model?
While OpenSea offers users the ability to interact with the blockchain by purchasing NFT by itself, the tech platform is not a blockchain business model.
In fact, OpenSea works mostly as a centralized platform business model/marketplace. As a digital business, it leverages network effects dynamics to grow its user base.
Therefore, there are two sides to the platform.
On the one hand, the underlying platform is a marketplace enabling users to list their NFTs. On the other hand, for users to list, purchase or exchange NFTs, they have to connect their crypto wallets.
Therefore, OpenSea interacts with the blockchain through the crypto wallet, which is a sort of browser for crypto businesses.
For instance, some popular wallets comprise MetaMask, which enable users to connect their accounts, and therefore interact with the blockchain at various level (from purchasing, exchange to accessing various services).
At the same time, OpenSea enables creators to mint their NFTs (thus saving their ownership into the blockchain) when closing the sales.
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