Founded in December 2017, OpenSea was the first-ever peer-to-peer NFT marketplace. Its founders saw an opportunity in the emerging NFT market and seized it. Making NFT art is relatively easy, so why not facilitate a decentralized marketplace where people could trade their art? They set to work, and by December 2017, they had a test version of their website ready.
The site went from zero to hero within months, reaching levels of activity never seen before in the crypto market. To date, the total trading volume is approximately $6.5 billion USD. The biggest peak in trading volume exceeded $300 million USD in one day, with a record number of NFT transactions made on August 29, at over 110,000. Despite many new competitors, OpenSea maintains its "Oldie but Goldie" status, holding the upper hand in nearly all respects. That said, time may also turn the tide—OpenSea has major technical limitations and suffers frequent downtimes.
One of the biggest limitations of OpenSea is the number of supported blockchains and Ethereum gas constraints. As of 2017, Ethereum ERC721 was the only smart-contract protocol available on the marketplace, which was reasonable at the time, with the idea being that it would suffice until better options became available. As we’ve seen in recent weeks, Ethereum is plagued with problems. The network is slow and inconsistent, which creates trading risks when the market is highly volatile. Plus, there's the perennial gas problem: transfer fees on Ethereum are through the roof. Prices ranging from $100 to $300 to interact with a smart contract are common.
Today, new crypto networks like Solana, Tezos, Flow, Wax and Algorand are faster, more efficient and have low fees. OpenSea has so far implemented the Polygon network, but may have to implement other blockchains to maintain its market share. Many of OpenSea’s competitor platforms have already adapted to developments in crypto networks, and even exchanges like Binance and FTX have broken into the NFT market.
To make things worse, OpenSea has recently started to experience a series of technical issues. Many incidents have been reported over the last few months, including a couple of general system crashes. On October 16, a massive server failure shut the site down for hours. The same occurred on November 8. OpenSea has fewer than 40 employees, many of whom do not have the technical knowledge to deal with programming emergencies. The company has opened vacancies to fill the gaps, but bugs continue to appear as OpenSea plugs the holes in its personnel.
In addition, there have been reports of funds and assets virtually evaporating. These strange events have largely been due to previously-unknown bugs. In addition, suspicious permission request pop-ups have also been reported. It is unclear whether losses were incurred this way; the issue was discovered by accident and supposedly resolved immediately.
Although it’s still currently on top, OpenSea needs to be investing heavily into its infrastructure and back-end in order to maintain the stability the market has come to expect of it.
