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The New York-based OpenSea said it has become the largest digital marketplace for crypto collectibles and NFTs. It sells NFTs, which are uniquely identifiable digital items that can be authenticated through blockchain (the transparent and secure digital ledger behind cryptocurrencies).
Andreessen Horowitz, also called A16z, led the second institutional funding round, with participation from angel investors Michael Ovitz (CAA cofounder) and actor-investor Ashton Kutcher. The funding amount means that the OpenSea is a unicorn, or startup with a $1 billion valuation. It is one of 900 unicorns valued at a cumulative $3 trillion.
With this capital, OpenSea will continue to scale its NFT platform, with immediate focus on hiring engineering talent, expanding internationally to new markets and audiences, and overall making more ways users can easily access, buy, and sell digital assets.
CEO Devin Finzer said in an interview with GamesBeat that we’re experiencing one of the biggest fundamental changes the internet economy has seen in decades, and he is proud to have been leading it for a while now as what he considers the best user experience and entry point for NFTs.
“The fundraise is really all around bringing widespread adoption to NFTs,” Finzer said. “And it’s about growing the platform that we’ve built, which has seen significant volume growth over the last the first half of the year. We think NFTs are really one of those once every couple-of-decades paradigm shifts that is just incredibly exciting.”
The new injection of funding comes as OpenSea NFTs are expanding to more mainstream audiences, and represent an entirely new economy based on digital ownership. Today, OpenSea is the largest marketplace for NFTs, representing gaming items, digital art and collectables, event tickets, domain names, and millions of other assets backed by blockchains.
Expansion to gas-free Polygon
Previously, OpenSea was restricted to Ethereum, the popular cryptocurrency platform that has been criticized for using a lot of computing power and wasting energy. Now it is adding transactions on the Polygon platform, which enables transactions with no huge transactions fees related to computing usage.
Today, the company announced that all Ethereum gas fees (those associated with the computing costs for minting NFTs on the blockchain) have been removed for creators, buyers, and sellers on the OpenSea marketplace. These are the kind of steps that OpenSea has to take to make blockchain less esoteric and more palatable for the mainstream.
“We’re now the first cross-blockchain NFT marketplace,” Finzer said. “We announced support of our Polygon integration, which is a Layer 2 platform for Ethereum. That enables zero transaction costs for creators, buyers and sellers. And we’re rolling out new blockchain integrations in the future.”
Over time, the company wants to lower transaction costs across platforms (as it has done with the addition of Polygon), enable people to use whatever payment method they have, and then educate the market about NFTs. Users can use any crypto wallet they want with OpenSea.
“We’re making the product more accessible to a mainstream consumer by building out kind of the core marketplace onboarding and really solidifying OpenSea as the brand directly tied to NFTs, very similar to how Coinbase established itself as the brand around cryptocurrency,” Finzer said.
In June alone, OpenSea sold $160 million in digital assets on its NFT marketplace, and it experienced a 45 times increase in volume growth during the first half of 2021 from just $8 million in sales in January.
High-growth collectible avatar projects like Hashmasks, Bored Ape Yacht Club, and Meebits, which combine elements of art, blockchain tech, and social clubs, have also taken off on OpenSea in 2021.
“What’s exciting with NFTs is that the use case is not just purely financial or purely speculative,” Finzer said. “Folks from all sorts of different industries have started getting curious. It’s true that a lot of these are the early adopter crowd. But it’s really expanding beyond people who are really interested in trading stocks or what have you, to people who are more interested in creative work.”
NFTs have exploded in applications such as art, sports collectibles, and music. NBA Top Shot (a digital take on collectible basketball cards) is one example. Built by Dapper Labs, NBA Top Shot has surpassed $700 million in sales. And an NFT digital collage by the artist Beeple sold at Christie’s for $69.3 million in March. Gaming has a couple of new unicorns, or startups valued at $1 billion, in Animoca Brands and Forte. NFTs are now selling at a rate of $62 million a week, though the initial hype around NFTs is dying down from a peak in May of $175 million a week, according to Nonfungible.com.
“There has been a bubble mechanic going on there. But now as you pointed out we’re sort of seeing a rise of a more sustainable growth in terms of the market,” Finzer said. “OpenSea has been doing particularly well in this environment.”
A multifaceted market
OpenSea provides both a marketplace and platform where users can easily connect their crypto wallets to instantly purchase or list their NFTs for sale.
With OpenSea’s new injection of capital, the company plans to invest in its next phase of ecosystem growth with cross-blockchain support, enabling an open data economy.
“We think this is an opportunity for those who maybe were curious about crypto and blockchain but didn’t really feel like there was a platform with real utility that could take this beyond financial speculation,” Finzer said. “We think NFTs and OpenSea are really, extremely well-positioned to drive the next wave of adoption of blockchains.”
OpenSea’s marketplace supports multiple blockchains, such as Polygon and Ethereum, and will announce support for Flow and Tezos in the near future. Investing in the interoperability and scalability of OpenSea’s cross-chain marketplace is part of the company’s larger vision to bring users closer to Web3. Users can pay with stablecoins such as USDC, but they can’t pay with U.S. dollars just yet.
OpenSea launched in 2017, announcing a $2 million round a few months later from Founders Fund alongside industry-leading crypto firms. In March 2021, the company announced a $23 million institutional round led by A16z, with participation from existing investors and angels including Ron Conway, Mark Cuban, Belinda Johnson, Naval Ravikant, Ben Silbermann, and more. The company is hiring engineers and other staff.
Finzer said games such as Axie Infinity, The Sandbox, F1, and Crypto Voxels are taking off with NFT sales.
“We’re really excited about NFT’s representing a paradigm shift in technology where most of consumer tech has been dominated by a few large companies,” Finzer said. “We think NFTs are bringing back a Renaissance, where creators, collectors, developers, and all sorts of projects will emerge, very analogous to the paradigm shift where the birth of the internet really brought thousands of new early applications and ultimately, billions of people, changing their lives in a big way.”
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