OpenSea.io offers the easiest way to purchase and sell digital collectibles. The platform is powerful and innovative, and it makes buying and selling crypto-collectibles easy and enjoyable. It also enables anyone to enter the lucrative market for the first time, giving collectors an incredible place to showcase their collections and allowing traders to make money by exchanging items.
How does OpenSea earn revenue? What is their revenue stream? In this post, I’ll go through the answer to these two most common questions about OpenSea’s business. As an investor, it’s important to understand how they’re earning revenue so you can decide if they’re worth your investment.
As a platform for selling non-fungible tokens (NFTs) and rare digital assets, OpenSea uses transaction charges to generate revenue. For example, if you sell something for $100 worth of Ethereum, you’d get $97.50 back, and OpenSea would get $1.50.
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About OpenSea
OpenSea is the world’s largest peer-to-peer online marketplace for non-fungible tokens (NFTs) that was founded in 2017 with $2m in start-up funds. They recently raised another $23M in April 2020 with the support of the Andreessen Horowitz VC Fund.
To understand how OpenSea makes its money, imagine it as an escrowed blockchain collectibles.
OpenSea is free for anyone who buys NFTs. Anyone selling their own NFTs pays a 2.5 percent fee on any transactions they make through the OpenSea platform.
OpenSea Business Model
OpenSea makes money by selling NFTs through its platform. An NFT is a digital asset created using open-source software.
Once the code has been written, it is “mined” by adding it to the Ethereum blockchain.
The business model for Opensea is straightforward and fair. They take a 2.5% commission from every transaction that occurs on their exchange.
This company aims to bring together blockchain game developers, NFT creators, crypto traders, and crypto fans on one platform.
How much money is OpenSea making?
Dune Analytics shows reports for the monthly fees generated by OpenSea.
From August 2018 onwards, we started tracking our monthly income. We didn’t expect it to be so high at first. However, it was just one month before November when the monthly fee exceeded $50,000.
It was not until September 2020 that the monthly fee exceeded $100,000. Since then, however, the monthly fee has increased dramatically, reaching around $200,000 at its peak.
In January 2021, when the fees reached $600,000, the government began to raise taxes. By February 2021, the fees had increased to over $5 million, and in March 2021, the fees went up to over $10 million. In April and May 2021, the fees rose to over $5 million per month, and in June 2021, the fees hit $10 million. In July 2021, the fees are expected to reach over $10 million again, so far surpassing last year’s record high.
OpenSea is a privately held company that doesn’t disclose its finances. By rough estimate, OpenSea has been profitable for years now, having collected more than $35 million from its clients in total, and continues to grow.
OpenSea Competitors
Influencer Marketing Hub reports that Rarible has the largest market share of NTF auctions among all platforms.
Daytrader reports that they charge 2.5 percent as a listing fee and another 2.5 percent as an additional sales fee. These fees are passed onto the NFT seller via the Ethereum network.
The top 10 most popular NFT market places are:
- OpenSea
- Raible
- SuperRare
- Foundation
- AtomicMarket
- Myth Market
- BakerySwap
- KnownOrigin
- Enjoy Marketplace
- Portion
How does the OpenSea system work?
We’ll start by looking at an EFT transaction between two buyers on OpenSea. Then we’ll move on to looking at the same transaction from the seller’s perspective.
OpenSea from a Buyer’s Perspective
Buyers use the open sea platform for free. All the purchases they conduct using the platform are done in the cryptocurrency called Ethereum. The OpenSea platform wraps Ethereum into WITH and sells them at a premium.
After the launch of Ethereum Classic (ETC), we decided to create an ETC/WETH trading pair so that people could easily convert their ETC holdings to WETH for easy storage and transfer.
To buy an NFT on Open Sea, a user must have a digital asset account that holds enough ETH or WETH to either pay the fixed cost of the NFT if it has one or pay for a winning bidder in an auction of that particular NFT.
An owner of an NFT buys the right to use his/her digital asset in any way he/she wants, but there might be some restrictions, such as the asset cannot be used on a particular platform or that certain royalties remain due to the original author.
A smart contract is a piece of software code that runs on top of blockchain technology. It enables two parties to create a transaction between them without any third-party involvement.
It’s important to understand that only one NFT or limited edition of that NTF represents the ownership of the right to digital content. The secure documentation and permanent tokenization of smart contracts on the Ethereum blockchain make each NFT valuable to some people who collect them.
OpenSea from a Seller’s Perspective
You can sell any NFT on OpenSea regardless of where it was originally created.
OpenSea supports different blockchain networks that contain smart contract codes for digital goods. These goods include art, music, domains, virtual world tokens, digital collectibles, sports cards, software, utilities, etc.
OpenSea enables the secure exchange of digital assets between two parties without the requirement for trust between them or an intermediary. Each tokenized asset has its own unique contract which is stored on the peer-to-peer Ethereum network.
If the user who created the NFT is new to the Open Sea platform and wants to sell his/her first NFT on the Open Sea marketplace, follow these steps.
Here are the steps:
A digital wallet is an online account where you store your cryptocurrency
To participate in an ERC20 token sale, you need a digital currency account (e.g., Coinbase) and some ETH in it or you can purchase ETH on a crypto exchange.
On the OpenSea platform, by default, the MetaMask digital asset management tool is used for trading, but you can choose another digital asset management tool if it contains some ETH.
If you want to buy Ethereum using Coinbase, you first need to create an account at Coinbase. You can purchase Ethereum by linking your Coinbase account to your MetaMask account. MetaMasks charges a small fee of 0.875%.
You need to install the MetaMask Chrome plugin before using MetaMask.
Create an account on OpenSea
To create an OpenSea account, two transactions are necessary: one for initialization and another for creating your first NFT.
You can buy an Initial Coin Offering (ICO) with your own funds and use the open-source collection manager to offer multiple copies of your token.
Create a Collection
Use relevant words in the title and description to create a collection category for your products.
Upload the Item
Create your first digital item that becomes an NFT by uploading it to your new collection on OpenSea. You can create an NFT using almost any digital item.
Digitally Sign
Verify the digital signature from your digital wallet to ensure that the funds were sent by you.
Info
Add information about the product and give it an estimated value in Ether. You could use a fixed rate for the whole lot or the highest auction bid (if there is one).
Pay for gas
You need to pay the fees to the miners who run the Ethereum network, which are called “GAs.” GAs are the fees that are used to execute transactions on the Ethereum blockchain.
The price for Ethereum (ETH) is constantly changing and depends on demand. To create an initial token sale using OpenSea, you need to purchase some Ether (ETH), which is priced in Wei (10 million Wei is equal to 1 ETH). You then use the Ether to buy tokens from our platform. Once you’ve created the initial token sale, you may want to spend additional Ether to sell your tokens again later.
Creating an initial coin offering (ICO) usually costs anywhere from US$100 to $200 per token.
Get Approval
To get approved by OpenSea, submit your token sale contract (NFT) to them. Then, once they’ve reviewed it, you can start selling it
You can choose between receiving payments in Ethereum (ETH) or any of the other 199+ cryptocurrencies supported by OpenSea.
OpenSea Growth
Self-reported growth by Opensea is extraordinarily high. In the second half (June–December) of 2020, artistic NFTs, sold through OpenSea, increased from around the equivalent of $1 million per day to almost $20 million per day. This is an increase of 20 times in just six months.
From 1,395 artists selling their own music in June 2020 to 8 770 artists by December 31st, 2020. Artists on OpenSea continue to increase exponentially.
According to statistics from the NFT market, average monthly revenues for NFT artists were approximately $3,500. For art NFTs, the average was $6,300, and for NFTs, the median was $4,200. Furthermore, 45 NFT artists made more than the average monthly income of $28,000.
There have been 12 NFT millionaires so far, with the most successful one earning $6 million by creating collectible digital trading cards for a popular fantasy soccer game.
OpenSea Future Prospects
The OpenSea NTF market is quite different than the pure speculation occurring in most other cryptocurrencies. Artwork represented by NFTs has been shown to be highly sought after among collectors.
OpenSea is the market leader in the NFT market because it has the lowest fees for selling NFTs.
The innovation by Open Sea is clever and remarkable in how it simplifies the process of buying and selling collectibles. The first transaction sets up the account and its first token on the Ethereum blockchain. Additional purchases can then be made without having to go through another transaction. This prevents the unnecessary work and cost of adding tokens to the Ethereum blockchain until they sell.
One of the main criticisms of the OpenSea platform is that it is still too complicated to set up an account. However, many NFT developers and NFT traders have shown that this complexity is not enough to prevent people from entering the exciting market for NFTs.
If you’re willing to put in some time building out your own OpenSea account, significant profits are possible.
Conclusion: How Does OpenSea Make Money?
At the moment, there isn’t much we know about how OpenSea will develop its own company in the coming months. We can only guess what might happen.
Even though this marketplace is still relatively new, it has already proved to be quite innovative. One reason for its success is its unique approach to selling collectible digital assets (NFTs).
They seem interested in buying other Ethereum-based assets and they’re interested in promoting themselves, so we might see them making some big moves soon.
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