Explained | OpenSea’s story on the future of NFTs

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How has the NFT industry dealt with the fallout from the crypto market? What are some of the issues users have with OpenSea?

How has the NFT industry dealt with the fallout from the crypto market? What are some of the issues users have with OpenSea?

The story so far: The writing is on the wall for the crypto market. Popular cryptocurrencies plunged after a meteoric rise last year. Several crypto exchanges have laid off a significant portion of their employees, and lending platforms are struggling to stay solvent. As part of this ecosystem, non-fungible tokens, or NFTs, have also been impacted following the crypto fallout.

What are NFTs?

NFTs are digital assets whose ownership is verified through transaction records stored on blockchains. Artwork, digital avatars, and accessorized monkeys are some of the most commonly traded NFTs. OpenSea is considered one of the largest NFT marketplaces in existence. Earlier this year, the platform was valued at over $13 billion after raising around $300 million in venture capital. As of August 2022, based on data from the Ethereum blockchain, OpenSea was used by two million merchants who made at least one transaction on the network.

What is OpenSea’s place in the sector?

OpenSea was built on the Ethereum blockchain to trade NFTs. Sales of digital goods on the platform surged in August 2021, according to analytics platform Dune Analytics. In November, Bitcoin and Ether hit all-time highs as the market reached a state of ecstasy. OpenSea monthly volumes skyrocketed between December 2021 and January 2022. In January, OpenSea monthly volumes for Ethereum exceeded $4.8 billion. In February and March, monthly transactions plunged before rebounding in April. This recovery was brief as the collapse of TerraUSD [UST] stablecoin and its partner coin LUNA wiped billions of dollars of shareholder wealth from the market in May 2022. As a result, Bitcoin and Ether plummeted and more than halved in value in the first six months of 2022. daily on OpenSea have been steadily declining since then.

OpenSea’s trading volume in June fell to around $695 million. It fell another roughly 30% in July to $528 million. Adding to the heavy loss in volume, the number of NFTs sold (Ethereum blockchain) has also been declining since January 2022, which saw over two million NFTs sold. As of July 2022, approximately 1,702,302 NFTs have been sold at the time of writing. However, this follows increases in May and June 2022. But NFT transactions on OpenSea for the Polygon blockchain show even fewer transactions. Monthly volumes fell to around $6.4 million from nearly $80 million between January and July 2022.

Can users trust OpenSea?

While proponents of NFTs praise these assets as a way to revolutionize the art scene or explore new models of proof of ownership, OpenSea users complain about excessive downtime on the platform. Security vulnerabilities and vulnerabilities have also been reported. In one such case, an employee of the platform’s email provider had caused the security breach.

“We recently learned that an employee of Customer.io, our email delivery provider, abused their employee access to upload and share email addresses – provided by OpenSea users and subscribers to our newsletter – with an unauthorized external party. If you’ve shared your email with OpenSea in the past, you should assume you’ve been impacted. We are working with Customer.io in their ongoing investigation, and have reported this incident to law enforcement,” OpenSea said on June 29.

At the end of February 2022, at least 17 OpenSea users were targeted by an alleged phishing attempt. There are also ethical issues. A number of artists have complained that OpenSea users frequently steal their work, mount them as NFTs, and start profiting from them without their consent. These artists have castigated the NFT platform for not doing enough to combat art theft and also making the process of removing stolen art inconvenient for unencrypted users.

Can influencers do it all for NFTs?

Celebrities have played a key role in boosting NFT sales, either buying their own assets or minting them and listing them for sale on platforms like OpenSea. One of the best-known OpenSea collections was musician Shawn Mendes’ collaboration with Genies to feature NFT versions of himself and virtual props such as his guitar, a shirt, and even a decorative vest. One such NFT was priced at 5.5 ETH (over $10,000 on August 19). But its last sell was 0.6942 ETH (less than $2,000 on August 19). Coming to mainstream fame, OpenSea and Twitter Blue have teamed up to allow Twitter users to upload their Ethereum-minted NFTs and have them verified with a special hex frame. Within days, if not hours, Twitter evolved to show which celebrities and influencers were still firmly behind the NFT boom.

Yet, while celebrity endorsements or digital celebrity collectibles can lead to brief surges in popularity, they fall far short of what is needed to keep the industry financially viable.

Is OpenSea finally falling?

Perhaps no development can better encapsulate the rise and fall of OpenSea than the incident that took place on July 14.

The crypto bull run and NFT boom of 2021 has seen Web3 companies go on a hiring spree in order to scale their operations at a rapid pace. However, as Bitcoin and Ether more than halved in value after the May 2022 crash, a long list of global crypto companies began laying off huge swaths of their workforces.

On July 14, OpenSea co-founder and CEO Devin Finzer announced that it was a “tough day” for the company, which was laying off 20% of its team.

“Nevertheless, the reality is that we have entered an unprecedented combination of crypto winter and general macroeconomic instability, and we need to prepare the business for the possibility of a prolonged downturn,” he said in a message shared on Twitter.

Mr. Finzer pointed to OpenSea’s strong balance sheet and its ability to survive the ongoing crypto winter with the available track. He claimed OpenSea was “even better positioned to capture what will soon become the biggest market on the planet.”

While many might conclude that the era of NFTs is over and it is time to exit their positions and abandon their creations, there are still others in the crypto world who believe that sellers of panic give them generous discounts.

THE ESSENTIAL

OpenSea is considered one of the largest NFT marketplaces. Earlier this year, the platform was valued at over $13 billion after raising around $300 million in venture capital.

In January, OpenSea’s monthly volumes for Ethereum topped $4.8 billion. However, after the crypto crash in May, both Bitcoin and Ether plummeted and their value more than halved in the first six months of 2022. Daily transactions on OpenSea have been gradually declining since then.

On July 14, OpenSea co-founder and CEO Devin Finzer announced that it was a “tough day” for the company, which was laying off 20% of its team.

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