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.
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 businessmodel.
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.
Web3 describes a version of the internet where data will be interconnected in a decentralized way. Web3 is an umbrella that comprises various fields like semantic web, AR/VR, AI at scale, blockchain technologies, and decentralization. The core idea of Web3 moves along the lines of enabling decentralized ownership on the web.
A blockchain protocol is a set of underlying rules that define how a blockchain will work. Based on the underlying rules of the protocol it’s possible to build a business ecosystem. Usually, protocol’s rules comprise everything from how tokens can be issued, how value is created, and how interactions happen on top of the protocol.
In software engineering, a fork consists of a “split” of a project, as developers take the source code to start independently developing on it. Software protocols (the set of rules underlying the software) usually fork as a group decision-making process. All developers have to agree on the new course and direction of the software protocol. A fork can be “soft” when an alteration to the software protocol keeps it backward compatible or “hard” where a divergence of the new chain is permanent. Forks are critical to the development and evolution of Blockchain protocols.
A Merkle tree is a data structure encoding blockchain data more efficiently and securely. The Merkle tree is one of the foundational components of a Blockchain protocol.
The nothing-at-stake problem argues that validators on a blockchain with a financial incentive to mine on each fork are disruptive to consensus. Potentially, this makes the system more vulnerable to attack. This is a key problem that makes possible underlying blockchain protocols, based on core mechanisms like a proof-of-stake consensus, a key consensus system, that together the proof-of-work make up key protocols like Bitcoin and Ethereum.
A 51% Attack is an attack on the blockchain network by an entity or organization. The primary goal of such an attack is the exclusion or modification of blockchain transactions. A 51% attack is carried out by a miner or group of miners endeavoring to control more than half of a network’s mining power, hash rate, or computing power. For this reason, it is sometimes called a majority attack. This can corrupt a blockchain protocol that malicious attackers would take over.
A Proof of Work is a form of consensus algorithm used to achieve agreement across a distributed network. In a Proof of Work, miners compete to complete transactions on the network, by commuting hard mathematical problems (i.e. hashes functions) and as a result they get rewarded in coins.
An Application Binary Interface (ABI) is the interface between two binary program modules that work together. An ABI is a contract between pieces of binary code defining the mechanisms by which functions are invoked and how parameters are passed between the caller and callee. ABIs have become critical in the development of applications leveraging smart contracts, on Blockchain protocols like Ethereum.
A Proof of Stake (PoS) is a form of consensus algorithm used to achieve agreement across a distributed network. As such it is, together with Proof of Work, among the key consensus algorithms for Blockchain protocols (like the Ethereum’s Casper protocol). Proof of Stake has the advantage of security, reduced risk of centralization, and energy efficiency.
Proof-of-Activity (PoA) is a blockchain consensus algorithm that facilitates genuine transactions and consensus amongst miners. That is a consensus algorithm combining proof-of-work and proof-of-stake. This consensus algorithm is designed to prevent attacks on the underlying Blockchain.
According to Joel Monegro, a former analyst at USV (a venture capital firm) the blockchain implies value creation in its protocols. Where the web has allowed the value to be captured at the applications layer (take Facebook, Twitter, Google, and many others). In a Blockchain Economy, this value might be captured by the protocols at the base of the blockchain (for instance Bitcoin and Ethereum).
A Blockchain Business Model is made of four main components: Value Model (Core Philosophy, Core Value and Value Propositions for the key stakeholders), Blockchain Model (Protocol Rules, Network Shape and Applications Layer/Ecosystem), Distribution Model (the key channels amplifying the protocol and its communities), and the Economic Model (the dynamics through which protocol players make money). Those elements coming together can serve as the basis to build and analyze a solid Blockchain Business Model.
Blockchain companies use sharding to partition databases and increase scalability, allowing them to process more transactions per second. Sharding is a key mechanism underneath the Ethereum Blockchain and one of its critical components. Indeed, sharding enables Blockchain protocols to overcome the Scalability Trilemma (as a Blockchain grows, it stays scalable, secure, and decentralized).
A decentralized autonomous organization (DAO) operates autonomously on blockchain protocol under rules governed by smart contracts. DAO is among the most important innovations that Blockchain has brought to the business world, which can create “super entities” or large entities that do not have a central authority but are instead managed in a decentralized manner.
Smart contracts are protocols designed to facilitate, verify, or enforce digital contracts without the need for a credible third party. These contracts work on an “if/when-then” principle and have some similarities to modern escrow services but without a third party involved in guaranteeing the transaction. Instead, it uses blockchain technology to verify the information and increase trust between the transaction participants.
Non-fungible tokens (NFTs) are cryptographic tokens that represent something unique. Non-fungible assets are those that are not mutually interchangeable. Non-fungible tokens contain identifying information that makes them unique. Unlike Bitcoin – which has a supply of 21 million identical coins – they cannot be exchanged like for like.
Decentralized finance (DeFi) refers to an ecosystem of financial products that do not rely on traditional financial intermediaries such as banks and exchanges. Central to the success of decentralized finance is smart contracts, which are deployed on Ethereum (contracts that two parties can deploy without an intermediary). DeFi also gave rise to dApps (decentralized apps), giving developers the ability to build applications on top of the Ethereum blockchain.
The history of Bitcoin starts before the 2008 White Paper by Satoshi Nakamoto. In 1989 first and 1991, David Chaum created DigiCash, and various cryptographers tried to solve the “double spending” problem. By 1998 Nick Szabo began working on a decentralized digital currency called “bit gold.” By 2008 the Bitcoin White Paper got published. And from there, by 2014, the Blockchain 2.0 (beyond the money use case) sprouted out.
An altcoin is a general term describing any cryptocurrency other than Bitcoin. Indeed, as Bitcoin started to evolve since its inception, back in 2009, many other cryptocurrencies sprouted due to philosophical differences with the Bitcoin protocol but also to cover wider use cases that the Bitcoin protocol could enable.
Ethereum was launched in 2015 with its cryptocurrency, Ether, as an open-source, blockchain-based, decentralized platform software. Smart contracts are enabled, and Distributed Applications (dApps) get built without downtime or third-party disturbance. It also helps developers build and publish applications as it is also a programming language running on a blockchain.
An imaginary flywheel of the development of a crypto ecosystem, and more, in particular, the Ethereum ecosystem. As developers join in and the community strengthens, more use cases are built, which attract more and more users. As users grow exponentially, businesses become interested in the underlying ecosystem, thus investing more in it. These resources are invested back in the protocol to make it more scalable, thus reducing gas fees for developers and users, facilitating the adoption of the whole business platform.
Solana is a blockchain network with a focus on high performance and rapid transactions. To boost speed, it employs a one-of-a-kind approach to transaction sequencing. Users can use SOL, the network’s native cryptocurrency, to cover transaction costs and engage with smart contracts.
In essence, Polkadot is a cryptocurrency project created as an effort to transform and power a decentralized internet, Web 3.0, in the future. Polkadot is a decentralized platform, which makes it interoperable with other blockchains.
Launched in October 2020, Filecoin protocol is based on a “useful work” consensus, where the miners are rewarded as they perform useful work for the network (provide storage and retrieve data). Filecoin (⨎) is an open-source, public cryptocurrency and digital payment system. Built on the InterPlanetary File System.
BAT or Basic Attention Token is a utility token aiming to provide privacy-based web tools for advertisers and users to monetize attention on the web in a decentralized way via Blockchain-based technologies. Therefore, the BAT ecosystem moves around a browser (Brave), a privacy-based search engine (Brave Search), and a utility token (BAT). Users can opt-in to advertising, thus making money based on their attention to ads as they browse the web.
Uniswap is a renowned decentralized crypto exchange created in 2018 and based on the Ethereum blockchain, to provide liquidity to the system. As a cryptocurrency exchange technology that operates on a decentralized basis. The Uniswap protocol inherited its namesake from the business that created it — Uniswap. Through smart contracts, the Uniswap protocol automates transactions between cryptocurrency tokens on the Ethereum blockchain.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
