the NFT Dip
the NFT Dip When we started OpenSea in late 2017, we were realistic about a range of potential outcomes – from a niche community to buy and sell CryptoKitties, to a destination where people could explore a brand new economy on the Internet. The GDP of the Internet was already quite large on an absolute basis, but there was a growing feeling that there were still critical building blocks missing — building blocks that could provide foundations for more vibrant, open economies in the digital world.
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In less than five years, the range of outcomes has shifted drastically, and NFTs have ushered in a new Internet economy. The only remaining question is: “what will the world do with this limitless, blank canvas?”
The Vision for NFTs
NFTs are the first mainstream application of the blockchain. They’re unique, provably scarce, openly transferable, user-owned, and usable across multiple applications. They’re a basic primitive for an open digital economy – where users have greater freedom and ownership over their data, and developers can build powerful, interoperable applications to provide real economic value to users. Simply put, NFTs are foundational technology that will underlie thousands of use cases and industries – and their applications are constrained only by human ingenuity, imagination, and patience.
The proliferation of NFTs is growing the GDP of the blockchain economy, and OpenSea’s vision is to accelerate this new economy to its full potential. And while, today, some may see NFTs as simply jpegs, we dream much bigger: we see a world where artists and creatives make their living selling digital art; where dedicated fans buy collectibles from their favorite athletes and musicians, and influencers deck themselves out in virtual clothing; where developers launch access passes to their software as NFTs; where decentralized, sometimes pseudonymous groups find membership, community, and belonging via shared ownership; and where new jobs, like “virtual world real estate agent” or “virtual reality sculpture designer” spring up inside of open, free market game economies.
We believe that eventually, the physical economy will shift in this direction; and it’s possible that one day, nearly everything we own will be owned and transferrable on the blockchain in the form of an NFT. We have conviction that this technology will eventually power the biggest markets on the planet and fundamentally transform society. That’s the vision we’re rallying around at OpenSea.
Some Context on the Growth of OpenSea and the NFT Market
In Q1 of this year, the NFT space exploded and volume on OpenSea grew 600x from the January prior. At the time, it often felt like we were running in place: we were scrambling to keep the website up, stay in tune with our community, and work through our customer support queue.
Q2 was a massive step function improvement. We shipped Seaport – a new open source, decentralized protocol that’s unlocked tons of new features for the community (including collection and trait offers), redesigned our core pages and launched featured shelves, rolled out systemic platform safety improvements, improved site stability and performance, scaled our customer support operation, and so much more.
The amount of application layer development that’s happened – even during a “winter” – is staggering. And because the foundation layer for NFTs gets more advanced each cycle, the ebbs and flows of the market are – and will continue to be – less extreme. We’ve seen these exact cycles play out before. And in the next wave (which you’re starting to see even today), broader use case development will emerge, along with innovation that simplifies the experience for mainstream consumers.
We Don’t Mind the Dip(s)
It’s easy to get distracted by sensationalist headlines in the news. And since the press is determined to focus on the numbers, let’s talk about them!
The recent market conditions have affected almost every sector, and web3 is no exception. Of course, since NFTs are denominated in cryptocurrencies, crashes in the market have an impact (in fact, the year we started building OpenSea, the price of Ether dropped from $1300 to $90). But a closer look at the data tells a more nuanced story. For example, our volume is still 10x higher than it was in January 2021, and 40x higher than it was just 24 months ago. And between August 2021 (in the midst of the first NFT boom) and August 2022 (well into the 2022 “winter”), monthly on-chain participants on OpenSea grew more than 80%.*
While the excitement of late 2021 and early 2022 was great for the platform and community, we can’t lose sight of the long-term promise and trajectory of NFTs – it’s important to separate our long-term vision from short-term market volatility. There is still a lot more work to do, but integrating NFTs into established ecosystems means accessing markets such as the $500B dollar gaming industry or the $50B ticketing industry. In the long-term, the addressable market for NFT creation and consumption is basically every single person on the planet.
Big dreams must be coupled with patience and persistence – change this massive takes time. Right now, the first NFTs (PFP projects, collectibles, generative art) may feel small, or even like toys, and the use cases many of us have dreamed about (ticketing, gaming, music, real estate) are still in their infancy.
But we know that much, much more is coming – and we’re using today’s use cases to build out foundational infrastructure for the future Internet economy. These foundational bets will build a virtuous cycle among projects, buyers, and sellers. They are the bricks that will allow rapid innovation, creativity and experimentation as we move into the next phase of NFT evolution.
Not only is OpenSea used to bear markets, these are the conditions that made us what we are today. We have a huge opportunity in front of us, and our long-term vision makes it possible to separate good ideas from hype, builders from speculators, and signal from noise. During this winter, I expect that we’ll see an explosion of innovation and utility across NFTs (and there’s a lot we’re excited about…more on that soon).
*Data sourced from rchen8’s Dune Analytics dashboard