OpenSea, the non-fungible token (NFT) marketplace brainchild of Devin Finzer and Alex Atallah, opened its doors in New York City in 2017. It is Ethereum-based and on the platform, NFTs can be auctioned or traded at a fixed price.
In February 2021, OpenSea’s revenue reached $95 million and in January 2022, it reached $13.3 billion. OpenSea now dominates the NFT marketplaces. However, due to the newfangleness of the industry, the marketplace still has issues to be resolved.
Piracy on the OpenSea
Decentralization led to an environment for copycats. Now, OpenSea must go against its freedom and crack down on these security incidents.
Others say OpenSea does not far go enough. @NFTTheft remarks with a pun, “This is now the main place for piracy.”
In December 2021, OpenSea prohibited Phunky Apes Yacht Club (PAYC) and PHAYC, the infamous fake versions of the Bored Apes.
OpenSea seems conflicted. On one hand, its origin and appeal was based on a desire for less rules. Now, on the other hand, OpenSea feels it needs to clamp down.
Part of its rapid growth is due to its lack of regulation. In December 2020, one will find the culprit: the allowance of free “minting.”
This was followed by NFT collections no longer requiring OpenSea’s permission. OpenSea’s success skyrocketed. Monthly trading volumes in August 2021 reached $3.4 billion, with OpenSea earning $85 million.
On January 26 this year, a series of back-and-forth decisions by OpenSea followed.
First, it was stamping down on free, limitless “minting”. It’d only allow each user to mint a maximum of five collections, with each limited to 50 NFTs.
Then, due to mass disapproval, OpenSea quickly backpedaled, later stating that there were bots actively acquiring NFTs at below-market prices, due to a listing design flaw. OpenSea returned $6.2 million to affected community members.
OpenSea’s rapid rise came at a cost. First, too much freedom led to forgery.
Second, in 2017, OpenSea was at the forefront of the NFT excitement. OpenSea grew too fast.
In 2020, there was no one in charge of security, hence, its tardy response to fraud. @NFTTheft states that OpenSea is not motivated to rid its platform of pirated art, because it would not be fair to customers who inadvertently bought illegitimate NFTs. Why?
Because those patrons would up end with no NFTs and no refunds.
OpenSea is walking a tight rope between the Internet we know, Web2, the one with rules, and Web3, the blockchain wilderness. On one scale, freedom means more profits and piracy, and on the other scale, regulation means legitimacy and less profits. OpenSea’s competitor, Rarible, also has issues with fraud.
Is there a way forward for OpenSea where high profits can be met without rampant piracy? Only time will tell.