OpenSea

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OpenSea
OpenSea Logo.png
OpenSea Logo 2.png
OpenSea Official Logos [1]
Type NFT Marketplace
Launch Date 2017
Status Active
Product Line Service
Platform Web
Website OpenSea

OpenSea, is a online marketplace that allows individuals to buy and sell Non-fungible tokens (NFTs). The founders Devin Finzer (CEO) and Alex Atallah (CTO) launched the OpenSea beta version of the marketplace December 2017, the first open marketplace for any non-fungible token on the Ethereum blockchain.[1] OpenSea is currently among the largest NFT marketplaces today, with popular NFT categories including art, music, photography, trading cards, and virtual worlds.[2] Opensea has charged a fee of 2.5 percent for each transaction since the release in 2017. [2] OpenSea continues to expand it reach to new NFTs across blockchain and keep a straightforward marketplace for users.[2] OpenSea has created a popular marketplace, with everything it has to offer, it is also important to know the concerns regarding to personal privacy, access rights, liabilities, and other ethical issues. [3]



History

Funding

The company OpenSea was founded by Devin Finzer and Alex Atallah December, 2017. Over the next couple of months into 2018, OpenSea raised $2 million during their seed round (first real cash injection a startup receives)to make true digital ownership more accessible. This was from the help of Y Combinator (YC), a technology startup accelerator company. Notable investors include: Coinbase Ventures, Founders Fund, and Chernin Group.[4] Now with OpenSea, there is an option of exchanging digital collectibles between a third party that was originally done between two "untrusted" parties. Over those first months in 2018, OpenSea had over half a million dollars in Ethereum a Cryptocurrency transferred through their smart contract.[5] In March 2021, OpenSea raises $23 million to scale what is known as the largest marketplace for NFTs and a few months later raised $100 million in series B. Documented as Series A funding (a stage of fundraising that a business completes after the seed round). [6] [7] Their last known funding is in January 2022, series C, with $300 million raised, this was led by Paradigm and Coatue along with other new and previous investors. Allowing them to acelerate product development, improve customer support and safety and grow their team. During that time, they were at a $13.3 billion post money valuation. [8]

Features & Services

OpenSea has added many features since the opening of their marketplace. In 2018, OpenSea announced the ability to bid on NFTs. This allowed buyers and sellers a new option to obtain NFTs on OpenSea. OpenSea worked with a team at Wyvern protocol to create this new marketplace option.[9] The team continued working with Wyvern protocol to build many other features: sellers of NFTs could now list their collectables without paying gas fees. Paying gas is a fee when making transactions over the blockchain. [10] The introduction of bundles: a requested feature where users have the ability to sell a group of NFTs as a package rather than individual listing. [11] OpenSea acquired Atomic Bazaar to bring real time trading to users of the marketplace. [12] January 2019, OpenSea announces zero fee private auctions and bulk transfers allowing users to move their collectibles from one wallet to another in one transaction. [13] In February 2019, OpenSea operates the largest marketplace for digital goods, also maintaining the most comprehensive API's powering the facets of many wallets: Coinbase, Trust, Balance, and many other wallets. [14] They created a service where you could create your own marketplace to sell NFT's you created as the artist. [15]

In 2021, with over $14 billion in transactions which was over 600 times the previous year's total, came with introductions to OpenSea's mobile app to make NFT's available to a larger audience. The mobile app allows users to discover and manage their NFTs, check what is popular on the OpenSea rankings page, visit their help center, and many other features, listening to community ideas to improve on their "feature-filled roadmap". [16] [17] Other 2021 features and services include: A way to manage offers to exclude "low-ball" offers on their items which flood their email inboxes, making counter offers as negotiation, set minimum offers accepted, and listing your NFTs within seconds by improving the flow, user interface, and clearer specification on what features do. [18]


Supported Blockchains

At launch, OpenSea's marketplace for non-fungible tokens were specifically NFTs on the Ethereum blockchain. Now they support many other blockchains for trading and other uses. Polygon, an EVM-compatible (Ethereum Virtual Machine compatibility) blockchain allowing scalability within NFT projects. Klaytn, an open-source, public blockchain focused on the metaverse, gaming, and creator economy. Solana, a high-speed and low-cost blockchain with low environmental impact. OpenSea released a beta in April 2022 for use of the Solana Blockchain, mentioning "Solana has emerged as one of the fastest growing NFT ecosystems in the world", along with many requested for the blockchain from the OpenSea community.[19] Arbitrum, for use of rapid and inexpensive transactions, it's parent chain being Ethereum. Optimism, a EVM equivalent to arbitrum for specific purposes of sending transaction data to Ethereum mainnet in batches. Avalanche, an open-source platform for launching decentralized finance applications, using a Proof-of-Stake consensus mechanism to consume minimal energy. BNB, stands for build and build, building infrastructures that power the world's parallel virtual ecosystem.[20]

Social Media

Competitors

Ethereum Blockchain

Solana Blockchain

Ethical concerns

Insider trading

Nathaniel Chastain, a former employee of OpenSea, was responsible for choosing which NFTs would be featured on OpenSea's homepage. Chastain used confidential information of NFT's that was soon to be featured on OpenSea homepage to purchase dozens of the NFTs before they were featured. This occurred for several months before the employee was caught and legally punished. According to the Department of Justice "CHASTAIN, 31, of New York, New York is charged with one count of wire fraud and one count of money laundering, each of which carries a maximum sentence of 20 years in prison."[21] "From at least in or about June 2021 to at least in or about September 2021, CHASTAIN used OpenSea’s confidential business information about what NFTs were going to be featured on its homepage to secretly purchase dozens of NFTs shortly before they were featured." [22]. Chastain was also forced to return any money that was made from these actions.[23] This leads to harmful actions against OpenSea users. [24]

Wash Trading

NFT Marketplace Competitors have little to no trading fees. Causing traders to buy and sell the same NFT repeatedly. This caused manipulation in the trading volume and analytics on OpenSea. [25]

Email scam

Some OpenSea users reported Wednesday receiving emails from “team@opensea.io”. According to @0xQuit on Twitter, the phishing link redirects users to a scam site that attempts to steal their seed phrase. [26] " A seed phrase is a master key that unlocks access to all your crypto assets. It’s like giving someone your bank account username and password." [27]

Contract vulnerability

OpenSea was subject to an exploit with the use of Wyvern Protocol, used for most NFT smart contracts. "One explanation (linked by CEO Devin Finzer on Twitter) described the attack in two parts: first, targets signed a partial contract, with a general authorization and large portions left blank. With the signature in place, attackers completed the contract with a call to their own contract, which transferred ownership of the NFTs without payment. In essence, targets of the attack had signed a blank check — and once it was signed, attackers filled in the rest of the check to take their holdings." [28]

OpenSea users move there nfts from one wallet to another for many reasons. The discovery of not desired feature linked to it. If users had an NFT listed on a wallet which they transfered, the new wallet would now have this NFT and with no listing shown to the NFT. If a user was to send the NFT back to the wallet it was listed on, the listing would show back up and allow buyers to purchase. This caused many users to be harmfully affected by this unknown fact. Many collectors of the Bored Ape Yacht Club NFT lost large amounts of money due to this. As the price of an NFT collection raises, users who transferred their NFT to an old wallet where it was listed would soon realize there NFT was purchased under the current value within seconds by bots for such events. [29]

Marketplace Issues

Malicious NFTs

Another incident where a hacker could steal user's assets after sending a maliciously crafter NFT that the user interacted with. The situation occurs when you notice the new NFT in your collection on OpenSea, if you click on the image to view it, it initiates a popup linked to your wallet asking you if you to connect to the site, that deceivingly has opensea in the name, if you click yes, the attacker can then contact the wallet with a popup asking to approve all assets to be transfered. If the user signs the popup, the attacker can now transfer all assets from the user's wallet. [30]

Fake NFTs

OpenSea has many projects with NFT imitations and rip-offs, with the endless amount of copycat NFTs, OpenSea has struggled to keep up with emerging security incidents. These NFTs can be create on OpenSea using their shared marketplace contract. Whoever would like to create a copy of the NFT can simply save the image to their computer and then go to OpenSea service to create the NFT using the saved image. This is done for many purposes often involving unethical intent. Some are use to trick someone into thinking they found a good price, quickly buying the NFT without checking authenticity. Users may purchase the knock-off knowingly so they "feel" like they own it not having the finances to purchase an authentic. There have been many cases where the creator of the NFT uses social engineering with a potential trader contacted through social media sites such as discord and twitter, they set up a trade on a NFT trading platform making it hard for the other party to check authenticity, when the trade goes through, the scammer now has a NFT of value he can sell for profit, leaving the other with nothing but a rip-off. OpenSea has tried to handle this in different ways, some ending in backlash, such as ending free, unlimited minting, limited collections with limit NFTs per collection rules. However, this did not go into affect due to artist who used the services being harmed.[31] OpenSea mentioned in a tweet, "However, we've recently seen misuse of this feature increase exponentially. Over 80% of the items created with this tool were plagiarized works, fake collections, and spam." [32]

Stolen NFTs

  • Frozen Assets

OpenSea tried to prevent stealing NFTs on their platform by "freezing" these asset, making these stolen NFTs unable to be sold or bought. Whomever the stolen item belonged to could submit a ticket to report the item as stolen, it would then be frozen for 7 days and then re-enabled on OpenSea if the user did not send a police report within the 7 days. OpenSea also mentions they are not able to recover lost funds or NFTs that have been transferred out of the victims wallet in addition to not being able to prevent these stolen NFTs on OpenSea being traded, sold, and bought on other marketplaces. [33] The main purpose is to "prevent" the thief from selling the item. This is a problem, usually the thief can sell the item in under a minute by accepting an offer on the item or selling it under valued price before the victim has finished reporting the item. Leaving the user who bought the NFT from the thief with a marked stolen NFT in their collection which they can no longer sell on OpenSea. [34] [35]

See also

References

  1. ↑ OpenSea. (n.d.). About. OpenSea. Retrieved February 16, 2023, from https://opensea.io/about
  2. ↑ 2.0 2.1 2.2 Rodeck, D. (2023, February 1). Top NFT marketplaces of February 2023. Forbes. Retrieved February 16, 2023, from https://www.forbes.com/advisor/investing/cryptocurrency/best-nft-marketplaces/
  3. ↑ Images, R. R. A. F.-P. G. (2022, February 17). OpenSea's NFT free-for-all. The Wall Street Journal. Retrieved February 16, 2023, from https://www.wsj.com/articles/openseas-nft-free-for-all-11644642042
  4. ↑ Finzer, D. (2022, November 23). OpenSea raises $2 million to make true digital ownership more accessible. OpenSea. Retrieved February 16, 2023, from https://opensea.io/blog/articles/opensea-raises-2-million
  5. ↑ Finzer, D. (2022, November 23). OpenSea raised $2 million to make true digital ownership more accessible. OpenSea. Retrieved February 16, 2023, from https://opensea.io/blog/articles/opensea-raises-2-million
  6. ↑ Finzer, D. (2022, November 23). OpenSea raises $23M to scale the largest marketplace for NFTS. OpenSea. Retrieved February 16, 2023, from https://opensea.io/blog/articles/opensea-raises-23m-to-scale-the-largest-marketplace-for-nfts
  7. ↑ Finzer, D. (2022, November 23). Announcing our $100m raise, led by A16z. OpenSea. Retrieved February 16, 2023, from https://opensea.io/blog/articles/announcing-our-100m-raise-led-by-a16z
  8. ↑ Finzer, D. (2022, November 23). Announcing OpenSea's new funding. OpenSea. Retrieved February 16, 2023, from https://opensea.io/blog/articles/announcing-openseas-new-funding
  9. ↑ Finzer, D. (2022, November 23). Bid on your favorite crypto collectibles! OpenSea. Retrieved February 17, 2023, from https://opensea.io/blog/articles/bid-on-your-favorite-crypto-collectibles
  10. ↑ Finzer, D. (2022, November 23). _Sell your crypto collectibles without paying gas!_ OpenSea. Retrieved February 16, 2023, from https://opensea.io/blog/articles/sell-your-crypto-collectibles-without-paying-gas
  11. ↑ Finzer, D. (2022, November 23). _Introducing bundles_. OpenSea. Retrieved February 16, 2023, from https://opensea.io/blog/articles/introducing-bundles
  12. ↑ Finzer, D. (2022, November 23). _We've acquired Atomic Bazaar to bring real-time trading to OpenSea users_. OpenSea. Retrieved February 16, 2023, from https://opensea.io/blog/articles/atomic-bazaar
  13. ↑ Viau, D. (2022, November 23). _OpenSea announces zero-fee private auctions!_ OpenSea. Retrieved February 16, 2023, from https://opensea.io/blog/articles/zero-fee-private-auctions
  14. ↑ Viau, D. (2022, November 23). Imtoken and OpenSea collaborate on a seamless mobile NFT experience. OpenSea. Retrieved February 16, 2023, from https://opensea.io/blog/articles/imtoken-and-opensea
  15. ↑ Finzer, D. (2022, November 23). How to create your own NFT Marketplace on OpenSea in three minutes or less. OpenSea. Retrieved February 16, 2023, from https://opensea.io/blog/articles/how-to-create-your-own-marketplace-on-opensea-in-three-minutes-or-less
  16. ↑ Lindzon, J. (2022, March 30). OpenSea is one of the 2022 time100 most influential companies. Time. Retrieved February 16, 2023, from https://time.com/collection/time100-companies-2022/6159399/opensea/
  17. ↑ Crew, O. S. (2022, November 23). Introducing the OpenSea Mobile app. OpenSea. Retrieved February 16, 2023, from https://opensea.io/blog/articles/introducing-the-opensea-mobile-app
  18. ↑ Crew, O. S. (2022, November 23). Hello Better Offer Management Features & New Listing Flow. OpenSea. Retrieved February 16, 2023, from https://opensea.io/blog/articles/hello-better-offer-management-features-new-listing-flow
  19. ↑ Crew, O. S. (2022, November 23). Check out Solana - now in beta on OpenSea. OpenSea. Retrieved February 16, 2023, from https://opensea.io/blog/articles/check-out-solana-in-beta-on-opensea
  20. ↑ Which blockchains are compatible with OpenSea? (n.d.). Retrieved February 16, 2023, from https://support.opensea.io/hc/en-us/articles/4404027708051-Which-blockchains-are-compatible-with-OpenSea-
  21. ↑ Biase, N. (2022, June 1). Former employee of NFT Marketplace charged in first ever Digital Asset Insider Trading Scheme. The United States Department of Justice. Retrieved February 16, 2023, from https://www.justice.gov/usao-sdny/pr/former-employee-nft-marketplace-charged-first-ever-digital-asset-insider-trading-scheme
  22. ↑ Biase, N. (2023, February 7). Former COINBASE Insider pleads guilty in first-ever cryptocurrency insider trading case. The United States Department of Justice. Retrieved February 16, 2023, from https://www.justice.gov/usao-sdny/pr/former-coinbase-insider-pleads-guilty-first-ever-cryptocurrency-insider-trading-case
  23. ↑ Brandom, R. (2022, June 1). Disgraced OpenSea manager arrested for insider trading. The Verge. Retrieved February 16, 2023, from https://www.theverge.com/2022/6/1/23150429/opensea-insider-trading-nathaniel-chastain-arrested-homepage-nfts
  24. ↑ Sigalos, M. K. (2022, June 1). Former OpenSea employee charged in first-ever NFT insider trading case. CNBC. Retrieved February 16, 2023, from https://www.cnbc.com/2022/06/01/former-opensea-employee-charged-in-first-ever-nft-insider-trading-case.html
  25. ↑ Fernau, B. O. (2022, December 23). Wash trading accounted for over half of NFT Volume in 2022: Report. The Defiant. Retrieved February 16, 2023, from https://thedefiant.io/nft-wash-trading-2022
  26. ↑ Kitonyi, N. (2022, August 26). OpenSea users warned about a new email phishing scam. NFTgators. Retrieved February 16, 2023, from https://www.nftgators.com/opensea-users-warned-about-a-new-email-phishing-scam/
  27. ↑ Sjouwerman, S. (2022, April 28). Council post: Four crypto and blockchain phishing scams to be aware of before you get excited about Web3. Forbes. Retrieved February 16, 2023, from https://www.forbes.com/sites/forbestechcouncil/2022/04/27/four-crypto-and-blockchain-phishing-scams-to-be-aware-of-before-you-get-excited-about-web3/?sh=4a820ba125c5
  28. ↑ Clark, M. (2021, October 13). OpenSea fixes vulnerabilities that could let hackers steal crypto with malicious nfts. The Verge. Retrieved February 17, 2023, from https://www.theverge.com/2021/10/13/22723092/opensea-nft-vulnerability-gift-security-researchers-wallet-hack
  29. ↑ Birch, D. G. W. (2022, March 9). NFTS: New fraud targets. Forbes. Retrieved February 17, 2023, from https://www.forbes.com/sites/davidbirch/2022/02/20/nfts-new-fraud-targets/?sh=814ff304f377
  30. ↑ Clark, M. (2021, October 13). OpenSea fixes vulnerabilities that could let hackers steal crypto with malicious nfts. The Verge. Retrieved February 17, 2023, from https://www.theverge.com/2021/10/13/22723092/opensea-nft-vulnerability-gift-security-researchers-wallet-hack
  31. ↑ Volpicelli, G. M. (2022, February 10). Why OpenSea's NFT Marketplace can't win. Wired. Retrieved February 16, 2023, from https://www.wired.com/story/opensea-nfts-twitter/
  32. ↑ Pearson, J. (2022, January 28). More than 80% of nfts created for free on OpenSea are fraud or spam, Company says. VICE. Retrieved February 16, 2023, from https://www.vice.com/en/article/wxdzb5/more-than-80-of-nfts-created-for-free-on-opensea-are-fraud-or-spam-company-says
  33. ↑ What is OpenSea's stolen item policy? – opensea help center. (n.d.). Retrieved February 18, 2023, from https://support.opensea.io/hc/en-us/articles/4815371492499-What-is-OpenSea-s-stolen-item-policy-
  34. ↑ Ravenscraft, E. (2022, March 12). NFTs don't work the way you might think they do. Wired. Retrieved February 17, 2023, from https://www.wired.com/story/nfts-dont-work-the-way-you-think-they-do/
  35. ↑ Times, T. C. (2022, January 5). Popular NFT marketplace freezes transactions on stolen nfts. Medium. Retrieved February 17, 2023, from https://thecointimes.medium.com/popular-nft-marketplace-freezes-transactions-on-stolen-nfts-7366018f818f
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