By Ben Weiss
Compiled by: TechFlow
On a cloudy spring afternoon in April, I attended the seventh annual NFT.NYC, a gathering of all those who believe in APE JPEG and other NFTs. This event, which has been called the "Super Bowl of NFTs," seemed a little deserted.
“There are definitely fewer people here than last year,” Ric Johnson, who was promoting an NFT that lets people vote on whether Trump should go to jail, told me politely. Attendee Big Mac, who only identified himself by his online pseudonym (anonymity is prized in crypto culture), said the conference was more like a “preseason” than the “Super Bowl” of NFTs. Tom Smith, a booth worker promoting an anthropomorphic marijuana plant NFT, was more blunt: “It looks really dead in here.”
OpenSea, perhaps one of the most well-known companies in the industry, was one of the conference’s sponsors, but co-founder and current CEO Devin Finzer, 33, did not show up. OpenSea co-founder Alex Atallah, who has since distanced himself from the company, did appear at a main event at the first conference, but he didn’t want to talk about the technology that has made him and Finzer billionaires on paper twice. Instead, he mostly talked about AI.
While cryptocurrencies have recovered in value, one storyline that was hyped during the last crypto mania, NFTs, has yet to recover. In January 2022, total monthly sales for the asset class topped $6 billion, according to CryptoSlam. Now, as of July, that number is below $430 million. NFTs are still hanging on, but they’re struggling. “My mom thinks I’m a fraud,” I heard one attendee say.
OpenSea, once the largest NFT marketplace, is facing more challenges. One of the most valuable private startups to emerge from the incubator Y Combinator, it is now facing a lawsuit from the Securities and Exchange Commission, an unreported “matter” with the Federal Trade Commission, an investigation from U.S. and international tax authorities, intense market competition, allegations of gender discrimination, and employee turnover.
Through interviews with 18 current and former employees, as well as internal company documents and conversations with investors, artists and other stakeholders in the NFT industry, we can see how the startup inspired by JPEG the cat transformed into a company that former employees call a "lite" version of Meta, seemingly lost between big tech and crypto culture.
Finzer once described OpenSea as a gateway to a vast new internet. But now, as the NFT craze fades, that description seems a bit shallow.
In 2017, Finzer, then in his twenties, teamed up with Stanford graduate Atallah to create a startup
Initially, they planned to encourage people to share Wi-Fi with strangers through cryptocurrency. In January 2018, they successfully entered the famous incubator Y Combinator, which has nurtured technology giants such as Airbnb.
At the time, blockchain technology (decentralized databases) was experiencing a new wave of enthusiasm, and developers were promoting a new way to permanently store data. These tokens are "non-fungible," meaning that they are all different and not interchangeable like Bitcoin. In other words, NFT holders can proudly claim to be the sole owner of a cartoon ape because this is proven in an unchangeable database.
Proponents of the industry believe that these tokens can represent almost anything: property deeds, patents, contracts, and even rights to virtual real estate. But in late 2017, Dapper Labs launched an application that is closer to ordinary users: CryptoKitties, a game where users can buy and sell cartoon cats on the Ethereum blockchain.
It’s not just cartoon cats. JPEG-formatted digital assets are all the rage in the so-called next generation of the internet. There are CryptoPunks, pixelated images of characters with mohawks and sunglasses; digital trading cards inspired by Pepe the Frog, an emoji with a complicated history; and EtherTulips, virtual tulips that can even battle each other.
Finzer and Atallah noticed the buzz and decided to pivot. John Caraballo, a contractor they hired to write the initial code for the OpenSea site, told me, “They were very ambitious, and what they were building was very cutting-edge and had never been done before.”
After graduating from Y Combinator, which included a class that developed cannabis soda and VR psychotherapy programs, Finzer and Atallah announced they had raised $2 million in funding for their NFT marketplace, with backing from high-profile investors like Peter Thiel’s Founders Fund.
“The economy of the future will shape things beyond our wildest imagination, and we want to help drive them forward,” Finzer wrote in a blog post announcing the funding. “Things are just beginning to get exciting…”
In the past three years, there has not been much exciting news in the NFT industry
According to DappRadar data, OpenSea's platform had only a few hundred active traders per day during 2020, and according to a former employee, the company had fewer than 10 employees.
(OpenSea’s website was being visited by tens of thousands of people each week in mid-2020, according to Joshua Galper, a spokesman for OpenSea.)
“Their lives pretty much revolve around OpenSea,” the employee said of the team, which includes Finzer and Atallah. “It’s been a fun, challenging, and very intense time.”
However, the NFT market suddenly became hot in March 2021. Artist Mike Winkelmann, widely known as Beeple, auctioned an NFT for $69 million, and NFT sales on the OpenSea platform more than tripled from the previous month, according to data from DappRadar.
As revenue grew, so did investor interest, as OpenSea took a commission of up to 10% on each trade. That same month, Finzer announced that OpenSea had raised $23 million from investors including venture capital giant Andreessen Horowitz at a valuation of $123 million. OpenSea's influence was unprecedented, and the company began to expand. "It was a really crazy time," recalls a former employee. "Each of us wore multiple hats."
The NFT craze continues. Following the huge sale of Beeple’s artwork, a company called Yuga Labs launched the Bored Ape Yacht Club, a collection of 10,000 cartoon apes that give owners access to exclusive events, perks, and products. People are willing to pay millions for ownership of an ape with blond hair or heart-shaped sunglasses. “When I first saw Bored Apes, I thought, ‘What is this?’ ” said one former employee. “It was incredible to see the amounts of money people paid for it.”
As more images of apes, punks, cats and penguins were traded, OpenSea’s fee revenue grew. Revenue surged from $9 million in the second quarter of 2021 to $167 million in the third quarter and $186 million in the fourth quarter, according to internal company documents. “It was a really interesting period,” another employee said. “Every time we launched a new feature, it sparked a lot of discussion.”
Suddenly, Finzer and Atallah’s marketplace was generating serious revenue, and investors were excited. In July, the startup raised another round of funding, raising $100 million at a $1.5 billion valuation. “Celebrities were showing up, money was pouring in, and it was really exciting,” said one former employee. “People I hadn’t spoken to in years started emailing me. … Everyone saw an opportunity to get rich quick.”
However, as funding increases, OpenSea also faces more challenges.
“Everything that was stressful felt like the most important thing in the world,” Finzer told employees in 2023, recalling the company’s early days.
In September 2021, OpenSea asked its head of product, Nate Chastain, to resign after industry observers discovered that he used insider information to trade NFTs. Chastain's strategy was simple: OpenSea recommended new collectibles on its homepage every few days, and as a major NFT trading platform, the prices of these tokens usually rose after being recommended. Chastain used this information to buy in advance and sell after the price rose to make a profit. "During that time, Nate's approach was not uncommon in the industry," said a former employee.
Chastain was ultimately sentenced to three months in prison, the first time the Department of Justice successfully prosecuted an NFT insider trading case. However, this was just one of the problems OpenSea faced. Users also complained about glitches on the site, bad or fraudulent NFT collections, and stolen NFTs. "The company was facing more and more difficulties," one former employee recalled. Another former employee mentioned that users even jokingly called OpenSea "BrokenSea."
“OpenSea strives to be fast in responding to user needs and stay connected,” Galper said.
To address the surge in trading volume and other issues, Finzer and Atallah began expanding OpenSea’s team and bringing in talent with backgrounds at large tech companies or enterprises. “The company wasn’t promoting from within,” one employee said, according to multiple former employees.
“They recruited a lot of professionals from Amazon, Facebook, Google,” another former employee said. “Like the White Walkers in Game of Thrones, they just poured in.”
Most of OpenSea’s current leadership team joined in the second half of 2021 and the first half of 2022, including COO Shiva Rajaraman and CTO Nadav Hollander. At its peak, OpenSea had about 300 employees, which was a considerable expense, and it didn’t take long for Finzer and Atallah to start scaling back.
“Our priority has always been to find and hire the best talent, whether they come from large tech companies, small businesses, or experts in the cryptocurrency space,” Galper wrote.
Yet the money keeps pouring in. OpenSea brought in a record $265 million in revenue in the first quarter of 2022. The co-founders also closed their largest round ever: $300 million from top venture capital firms, which valued OpenSea at a staggering $13.3 billion. According to Forbes, Finzer and Atallah each owned 19% of OpenSea at the end of 2021, making them billionaires on paper. (Galper said the report about the co-founders’ stake in OpenSea was inaccurate. However, Forbes has not yet corrected this.)
OpenSea’s investors are not limited to cryptocurrency-focused venture capital firms, but also include celebrities from Silicon Valley and beyond. The public list of investors includes “Shark Tank” star Mark Cuban, basketball star Kevin Durant, actor Ashton Kutcher and DJ 3LAU. According to internal company documents, OpenSea’s shareholders also include James Musk, YouTube co-founder Jawed Karim, Adobe Chief Strategy Officer Scott Belsky and former Microsoft strategy director Charlie Songhurst.
Finzer, Atallah and a handful of early employees quietly cashed out a portion of their equity in the massive funding round, according to a source familiar with the deal.
Galper confirmed to me that some employees did sell their shares in the Series C round, but he wouldn’t specify how much Finzer and Atallah took.
“The team and investors felt it was appropriate to provide some liquidity to those who have worked hard to get the company to this milestone,” Galper added.
Five former employees told me that the co-founders had not disclosed the secondary stock buyback to all employees. “That was a little surprising to me, because they’ve been very transparent about other decisions,” one person said, while also expressing little reaction to the news.
Two former employees said that employees whose equity matured after the Series C round were prohibited from selling their shares. (“The company does not recall any employee asking to sell shares to a designated investor after the Series C round,” Galper said.)
“The biggest news is definitely the secondary market transactions,” said one former employee. “The rest is less notable.”
OpenSea seems to be going mainstream, but problems still arise
Shortly after current CTO Hollander joined the company, his team discovered a serious vulnerability in the company's code that could allow attackers to receive payments without delivering NFTs. Although no attacks occurred, Finzer told employees in 2023: "This is one of the most worrying things."
In March 2022, just as Finzer was celebrating OpenSea being named one of Time magazine’s 100 most influential companies of the year, the NFT craze began to wane. According to CryptoSlam data, total market sales plummeted from about $6 billion in January 2022 to just over $1 billion in June. OpenSea’s quarterly revenue also fell, to $171 million in the second quarter.
Even more unfavorable is that until the first half of 2022, most of OpenSea's cash reserves were in the form of Ether, the second largest cryptocurrency by market value. At an all-staff meeting, Finzer introduced the company's financial situation to employees and said that OpenSea hopes to support the cryptocurrency industry through practical actions rather than converting these crypto funds into more stable assets. However, the problem is that by June 2022, the price of Ether has fallen by nearly 80% since November 2021.
After deducting price declines and other debt losses, OpenSea’s net loss reached $170.7 million in the second quarter of 2022, even though the company still brought in $171 million in revenue. (Galper disputed the figure but did not provide specific financial information.) “I was like, ‘You’re not someone’s personal investor. Why take a risk when there are so many opportunities?’ ” one former employee thought after Finzer’s financial missteps were announced.
Despite its financial challenges, OpenSea remained active at the NFT.NYC event in summer 2022. “I heard OpenSea took over a whole hotel in Midtown,” conference co-founder Jodee Rich asked during an event at Radio City Music Hall. Finzer smiled and replied, “That sounds right.”
That same week, with many OpenSea employees in the city, Finzer held a companywide meeting to ease concerns about the company’s future. The main message of the meeting, according to two former employees, was: Don’t worry.
However, less than a month later, OpenSea laid off 20% of its staff.
Around that time, Atallah announced that he would be stepping down from day-to-day operations at OpenSea, but would remain on the board. Former employees were puzzled by Atallah's departure. "There was always some subtle tension between Devin and Alex, and I felt like they didn't really get along," one employee said. "I heard they didn't see eye to eye on a lot of things," added another.
An OpenSea investor who requested anonymity said Atallah told him he was leaving on good terms. “I think Atallah is the kind of guy who likes the early stages of a startup,” the investor said. “As the company got bigger and more corporate, I think he was like, ‘I want to pursue the next thing.’ ”
In a statement, Atallah denied any conflict with Finzer and agreed with the investor: “I have always been passionate about early-stage startups and finally decided to explore new directions for myself again.”
However, when Atallah left to pursue new ventures, Finzer chose to stay and continue to lead a company that seemed to be in a very different place than it was just a few months ago. By the third quarter of 2022, OpenSea's revenue had plummeted to just $32 million and its deficit exceeded $27 million. "Employee morale quickly became low," said one former employee.
By October, OpenSea was facing a new challenge: a new NFT marketplace called Blur. OpenSea, which once dominated the multibillion-dollar NFT trading market, now had to compete fiercely for market share.
Blur was founded by a programmer who goes by the pseudonym "Pacman"
He later revealed himself to be Tieshun Roquerre, a 20-something MIT dropout and Y Combinator alumnus. Blur emphasized the concept of financialization of NFTs, viewing them as assets that traders can buy and sell for profit.
Many professional traders want to maximize their gains, and the royalties charged in markets such as OpenSea reduce their profits. Blur focuses more on the interests of traders rather than art creators, and does not give artists a share of each time a work is sold on the platform. Coupled with its promise to distribute cryptocurrency to active users - equivalent to "free money" - this has attracted a large number of NFT speculators to this new market.
Blur quickly eroded OpenSea’s market share. By February 2023, Blur, on the promise of an upcoming cryptocurrency launch, surpassed OpenSea in terms of trading volume, nearly tripling the monthly volume of the company founded by Finzer, according to DappRadar. Meanwhile, OpenSea’s quarterly revenue continued to decline, falling to $23 million in the fourth quarter of 2022 and $19 million in the first quarter of 2023.
Finzer felt the need to act. Blur’s meteoric rise “destroyed all of our product plans,” said one former employee. “It was like a chaotic disaster.”
One current employee sees it differently. “Technically speaking, Blur’s arrival didn’t really affect my job,” they told me. “I continued to develop projects and run my business as normal.”
Multiple former employees revealed that OpenSea quickly abandoned its mission to popularize NFTs and instead catered to speculators. According to a person familiar with the matter, Finzer even discussed the possibility of the company launching its own cryptocurrency with founders and lawyers in the cryptocurrency field.
“OpenSea has always been focused on the long term, rather than pursuing short-term milestones in a competitive environment,” Galper said. He confirmed that company executives had discussed plans to issue a cryptocurrency.
However, launching a token is risky because the U.S. Securities and Exchange Commission (SEC) has repeatedly stressed that most cryptocurrencies are unregistered securities. Since the collapse of FTX in November 2022, the SEC has launched a broad crackdown on cryptocurrencies and has reached settlements or filed lawsuits with some industry giants including Coinbase and Binance.
According to former employees, after NFT.NYC in May 2023, OpenSea conducted another round of small-scale, undisclosed layoffs. "The joke is that everyone is afraid of NFT.NYC because layoffs always take place after the event," said a former employee.
Galper wrote that “the company underwent a minor reorganization, which resulted in some team structure changes and, as a result, several employees leaving.”
In August, OpenSea announced that it would stop enforcing creator royalties, which disappointed some employees. Former employees said this sparked internal dissent. "I feel like OpenSea hasn't really figured out their target audience and market development in a targeted way," one former employee added. "They're just groping in the dark."
Amid the controversy surrounding OpenSea’s decision to eliminate royalties, Finzer and his partner, former crypto hedge fund manager Yu-Chi Kuo, left New York City for a “desert expedition” at Burning Man, as reflected on Kuo’s Instagram
(Galper said this was Finzer's first vacation in more than a year.)
While Finzer and Kuo were enjoying a party in the desert, the SEC filed its first enforcement action against the NFT industry, stating that NFTs issued by Impact Theory, a media company created by the founder of Quest Nutrition, were unregistered securities. Just a few weeks later, the SEC charged Stoner Cats 2, the company responsible for the Mila Kunis-backed animated series featuring Ashton Kutcher and Jane Fonda, with issuing NFTs that were deemed to be unregistered securities. Impact Theory and Stoner Cats 2 agreed to cease and desist orders and paid legal penalties of $6.1 million and $1 million, respectively.
Unbeknownst to some OpenSea employees, the company was in the middle of two separate regulatory “matters.” The SEC had issued a third-party subpoena to OpenSea seeking information related to other entities. In addition, according to internal documents, OpenSea also had an SEC-appointed lawyer working on its “case” and engaging in “managed document production” with the agency.
Legal counsel referred to the representations as “SEC matters” and detailed OpenSea’s defenses in an internal document. Those arguments included arguments that NFTs are not securities, that OpenSea is not a securities exchange or broker-dealer, and that OpenSea is protected by the First Amendment and Section 230 of the Communications Decency Act, which holds online platforms not liable for third-party content. “The SEC does not comment on the existence or non-existence of an investigation,” said SEC spokesman David Ausiello.
Galper, the OpenSea spokesman, confirmed that OpenSea has been receiving information requests from the SEC since 2022. He said: "Cooperating with regulators and law enforcement is our standard process, and we are committed to complying with applicable laws and regulations."
Although some employees are not clear about the SEC's affairs, a vocabulary guide instructs employees to use appropriate terminology when discussing NFTs and OpenSea with others or the public. Legal counsel advises employees to avoid using terms such as "buy, sell, or pay on OpenSea" and instead use "buy on the blockchain," "buy through MoonPay" (a crypto payment company), or "buy through OpenSea." The guide states: "This distinction is important because it affects our tax and legal responsibilities."
Employees should also avoid using words such as "exchange," "broker," "market," "profit," "shares," "stock," "trading," and "trader" when talking about OpenSea, as these words are often associated with securities and fall under the SEC's regulatory scope.
There is also an “FTC matter” that OpenSea filed with the regulator. The internal documents I obtained only show the existence of this transaction without providing further details, and the FTC has not commented on it.
Galper confirmed that OpenSea had received a document request from the FTC and said they last submitted documents to the agency in August 2023. He declined to say why the FTC and SEC requested documents from OpenSea and did not comment on whether OpenSea had received a Wells notice from the SEC (indicating that a company or individual faces potential litigation).
The day after I told OpenSea we planned to publish this story, Finzer announced on X that his startup had received a Wells notice. “We are shocked that the SEC would take such a broad action against creators and artists,” he wrote. “But we are prepared to fight.”
“Usually, when an agency asks for documents from a business, it’s because they suspect there’s a problem,” Christopher Odinet, a professor at Texas A&M University who studies legal issues surrounding cryptocurrency, told me.
Christa Laser, a professor at Cleveland State University who studies the intersection of cryptocurrency and the law, said the FTC’s request for information from OpenSea could be motivated by skepticism about the company, but it could also be an effort to better understand the emerging market.
“The FTC is more likely than the SEC to make document requests that are not based on an investigation,” she said.
At the same time, OpenSea is also dealing with ongoing inquiries from domestic and foreign tax authorities. For example, the Australian Taxation Office (ATO) is in discussion with OpenSea about whether the company needs to pay tax on the fees it charges for each NFT sale on the platform and the full price of the NFT.
In early October, OpenSea’s legal team traveled to Australia to fight to shield their platform from higher taxes, according to company documents. If the ATO decides against OpenSea, Finzer’s startup could face a tax bill of about $130 million, based on figures discussed internally in August 2023. In addition, tax authorities in Washington state, India and Taiwan are also making inquiries.
The ATO declined to comment on OpenSea, citing confidentiality and privacy laws. Washington state declined to comment for similar reasons. Tax authorities in India and Taiwan did not respond.
Galper, the OpenSea spokesman, declined to comment on the company’s communications with tax authorities.
“We do receive a lot of attention from policymakers and regulators, and ultimately, the courts and the public will see how we respond,” Gina Moon, OpenSea’s former general counsel, said at a general meeting, according to a document I obtained.
On Halloween, when OpenSea’s quarterly revenue hit its lowest point since the early days of the NFT craze, Finzer and his partner attended Heidi Klum’s annual Halloween party at Marquee nightclub in New York City.
According to Kuo's Instagram post, Finzer was dressed as an "AI hacker," wearing glasses, a hoodie with the OpenAI logo, and carrying a keyboard, while his partner was dressed as his "AI girlfriend," complete with a bloody knife and mechanical-style prosthetics.
OpenSea spokesman Galper said Finzer's outfit was improvised and he was just there for the photo shoot. After walking the orange carpet, he hurried home to answer a work call and continue planning a major change for the company.
Three days later, the day after former FTX CEO Sam Bankman-Fried was convicted of fraud, OpenSea announced a massive layoff, resulting in the departure of more than 100 employees, accounting for about 56% of the total number of employees. On the social media platform X, Finzer said he was reorganizing the team around "OpenSea 2.0," a strategic and product change, but he did not reveal many details. He later told employees: "This is a big bet, and it's pretty intense."
According to a memo Finzer sent to employees, departing employees will receive benefits such as four months of cash severance and six months of health insurance.
Finzer invited remaining employees to an external meeting to discuss the company’s new direction. “The real purpose of these changes is to move us from followers to leaders,” he said during the all-hands meeting, held in a Hollywood mansion once owned by Katy Perry and Russell Brand, according to a document obtained by me.
According to executive team member Lorens Huculak's speech at the general meeting, OpenSea plans to "become the gateway to Web3," meaning the future internet will be built on blockchain. The startup plans to rewrite most of its code to make it easier for users to track crypto transactions on the platform without having to visit other websites. "We will be an aggregator, not only of chains, but also of protocols, markets, various liquidity and tokens," Huculak said.
According to people familiar with the matter, the product revamp also includes some new features that allow OpenSea to better compete with Blur. "This is just a repackaging of OpenSea Pro," they said, referring to the part of the OpenSea platform dedicated to NFT speculators. However, a current employee refuted this claim, saying that the relaunch is more than just providing traders with upgrades and adding transaction tracking capabilities. However, the employee declined to disclose further details about the relaunch.
“Plans regarding 2.0 are confidential,” Galper said in a statement.
Apparently, the new product vision and massive layoffs did not initially inspire employees or investors. Shortly after the strategic realignment, The Information reported that Coatue Management, one of OpenSea’s main backers, had reduced the startup’s valuation to just $1.4 billion in the second quarter of 2023, a significant drop from its $13.3 billion valuation less than two years ago.
Subsequently, several members of OpenSea's executive team left after layoffs, including the general counsel, vice president of operations, head of human resources, and head of communications. According to internal company communications, OpenSea offered an additional 20% cash bonus to retain existing employees. (Galper said: "If they don't want to stay in OpenSea, we pay them to leave, and those who believe in the future of the company choose to stay and help us build.")
Amid the exodus, management was concerned about the lack of women among the remaining engineers and product managers, especially because some of the departing employees had complained about gender discrimination, internal documents show. (OpenSea previously hired an outside investigator to look into one of the complaints, which it found to be without merit.)
"If we receive employee complaints, we take them seriously and investigate them promptly," Galper said in a statement. "To date, no allegations of sex discrimination have been substantiated, and we have not engaged in litigation, arbitration or mediation on this issue."
However, morale has gradually recovered since the initial shock of the layoffs, according to three current employees. “There’s less clutter, like Slack messages and meetings,” said one. “I’ve been pleasantly surprised at how quickly people have gotten back to work,” said another.
On the same spring day that I visited NFT.NYC, I headed to a pier on the Hudson River.
OpenSea competitor Magic Eden hosted an event called the “Degen Yacht Party” on a floating casino-turned-party boat. As the rain fell, I waited in the boarding line and talked to a collector named James Woods. His T-shirt featured an image of an NFT he owns: a pink dog wearing black sunglasses, a sailor hat, and a brown hoodie. “I try to dress like this at any NFT-related event or important event in my life,” Woods said. He even wore the outfit to his first date at the casino: “It worked out great.”
Finally, we boarded the yacht, which had ice sculptures, a DJ, free food (similar to a Jewish bar mitzvah, one participant described it), free alcohol, a gold-coated elevator, and energy drinks. I talked to a man who called himself “Breads,” another named “Toast” (the two were enthusiastically reunited), a man who said “Cyber Frogs” had changed his life, and a woman with a stuffed animal named “Chonky.”
Most people I spoke with were unhappy with OpenSea. After all, I was at a competitor’s event. “Instead of continuing to support the creators that made them the market leader, they turned their backs on us,” Woods said of OpenSea’s decision to no longer enforce royalties.
The yacht swayed gently in the rain, but the storm was too severe to keep us from leaving the dock. Finally, I spoke on the third deck with Zhuoxun Yin, co-founder and COO of Magic Eden. Like OpenSea, Magic Eden is backed by well-known venture capital firms and was valued at more than $1 billion in its most recent funding round. “This industry is not something you can just sit back and wait for,” Yin told me. “Everything is changing very fast.”
While Blur has lured many of the core NFT traders away from OpenSea, Magic Eden appears to be winning over creators. In February, Yuga Labs, the company behind Bored Ape Yacht Club, partnered with Magic Eden to launch a competing marketplace. In April, Yin’s company surpassed both OpenSea and Blur in monthly NFT trading volume, according to DappRadar.
Despite the market volatility, most people I spoke to who have investments in the NFT industry remain optimistic about its future. “It would be a mistake to think that OpenSea’s decline means the end of NFTs,” TJ Fuller, co-founder of Forgotten Runes, told me. He believes the technology remains innovative: “It doesn’t matter where we trade NFTs.”
Most of the former OpenSea employees I spoke with also saw future use cases for tokens: for example, tickets for live events or items in video games that users can more clearly claim to own. However, some pointed out that the current culture of pure speculation for speculation’s sake can’t scale beyond cryptocurrency enthusiasts. “I think there are some problems with the current model,” said one former employee. “I don’t think it’s worth just selling JPEGs.”
As the yacht party drew to a close, I walked to the dance floor, squeezed past a guy who was playing the flute like a member of Metallica, and said goodbye to Woods, who was wearing a sailor hat. When I asked him his final thoughts on NFTs, he replied: "Buy them as collectibles. Don't expect to make money from them."
That might be good advice for OpenSea, which lost about $30 million in the first three quarters of 2023, according to an internal document I obtained. (It expects layoffs in November to reduce the company’s operating costs in 2024, though.) In June, trading volumes on its platform reached lows not seen since before the NFT craze in early 2021, according to DappRadar.
OpenSea still has ample funds in reserve. According to an internal document, as of November 2023, the company has $438 million in cash and $45 million in cryptocurrency reserves, and they are relying on these capitals to cope with market fluctuations through the "2.0" transformation.
Finzer once said he wanted his startup to create an ocean, not just an aquarium.
However, if the NFT market continues to be sluggish, OpenSea will not be able to lead the wave of digital collectibles and it will face the dilemma of stagnation.
