Millions of avatars are sweeping the Internet, revealing the super platform OpenSea behind NFT

"Crazy, crazy." Xia Jiahuan, the founder of Solestage, a sneaker store with 140,000 Weibo followers, typed these four words on Weibo on the morning of August 31. The accompanying picture showed "Your product has been successfully sold" with a transaction amount of 7.39 ETH, equivalent to about 24,000 US dollars.

Three days before Xia Jiahuan posted on Weibo, people discovered that the Twitter profile of NBA top star Stephen Curry had become a monkey. This is not an ordinary monkey, but a monkey picture on the blockchain. Through the transparent path of the blockchain, people discovered that Curry spent $180,000 on this monkey picture as his profile picture.

For Curry, who earns $44 million a year, he only needs to play 16 minutes of the game to earn $180,000. However, compared to a picture that can be right-clicked and saved as, the figure of $180,000 obviously shocked the Internet. The news did not take long to ferment, and it became the number one trending search on Douyin.

Xia Jiahuan is no exception. The picture he sold for $24,000 is a monkey picture from the same series as Curry. As a veteran sneaker player who is at the forefront of fashion and has seen many sneakers that cost hundreds of thousands of dollars a pair, he was obviously dumbfounded by the price of this picture.

You know, when these monkey pictures first appeared, they only cost 0.08 ETH, which is a few hundred yuan. In a few months, the yield was ridiculous.

This is a microcosm of the current cryptocurrency world. The cryptocurrency world has always been synonymous with the wealth effect, and hot spots rotate from time to time. "People outside the circle are starting to get interested." NFT player Zhou Lan said, "Some people are starting to ask me how to play NFT."

Under the NFT trend, the NFT trading platform OpenSea, which originated from Y Combinator, has seen exponential growth in transaction volume, with a monthly GMV of 3 billion US dollars, ranking among the top 1,000 traffic websites in the world. In the crazy wealth effect of NFT, OpenSea has become the biggest beneficiary of this story.

A textbook Silicon Valley startup

This is a Silicon Valley investment case that can be written into textbooks.

An investor once said that in recent years, YC has adopted the form of investing $125,000 in exchange for 7% equity when incubating projects. After obtaining YC investment, YC uses its influence and appeal in the market to help the invested companies obtain higher valuations. Generally speaking, three months after obtaining YC investment, the valuation of the worst company can reach $8 million, and the valuation of the average company can reach between 10 million and 12 million. If it is a star company, the valuation will increase by at least 20 times to 40 million to 50 million.

OpenSea's activities in the capital market almost follow the path that YC has taken for its incubated companies.

Devin Finzer graduated from Brown University. During his college years, he interned at Wikipedia Media Foundation, Google Cloud, and Flipboard. After graduation, with his internship experience, he joined Pinterest, the hottest waterfall image display platform in Silicon Valley at the time. During Devin Finzer's time at Pinterest, Pinterest was the third largest social platform in the United States after Facebook and Twitter. After leaving Pinterest, Devin Finzer decided to work only for himself. OpenSea is Devin Finzer's third startup.

Before winning YC's favor, Devin Finzer originally planned to apply for YC's incubation with a shared WiFi broadband project using blockchain. However, after entering YC, he was influenced by CryptoKitties and established OpenSea.

At the beginning of its establishment, OpenSea received $120,000 in financing from YC, and the valuation of OpenSea at that time was about $1.8 million. Four months after receiving the investment from YC, OpenSea received another $2 million in financing. In an interview, Devin Finzer said that YC created an environment that allowed the company to gain more attention from investors. In such an environment, the financing of enterprises is more likely to attract fomo from institutions.

Under the YC model, although OpenSea's angel round financing amount was only 2 million US dollars, 8 institutions including Foundation Capital, The Chernin Group, Founders Fund, Coinbase Ventures, Blockchain Capital, Blockstack, The Stable Fund, and 1confirmation participated. After completing the angel round of financing, OpenSea did not soar in development, but still quietly waited for the day when the wind would come. In terms of positioning, Devin Finzer believes that OpenSea is more like Ebay, and will develop from the long tail of small games and projects that need a market.

The other founder and CTO graduated from Stanford University. While in school, Alex, like Devin, chose to intern at Apple and other large Silicon Valley companies. Later, he served as a technical director in several technology-driven companies.

The resume of the founder of OpenSea is like that of a typical Silicon Valley entrepreneur. He graduated from a famous university such as Ivy League or Stanford, and used his college time to join FAANG for internship. After graduating from college, he worked for a short period of time before starting his own entrepreneurial journey.

In terms of corporate structure, OpenSea has always adhered to the principle of small and beautiful. For most of 2020, the team had only 7 members. Even in 2021, the team only had 37 people.

And these 37 people are now processing hundreds of millions of dollars in NFT transactions every day.

Silicon Valley Bad Boys Support

In March 2021, against the backdrop of global liquidity, influenced by the Metaverse story, and as Generation Z players entered the mainstream, the number of OpenSea user addresses began to grow explosively, from 15,000 to 48,700, an increase of 224%. At the same time, trading volume also began to increase, with monthly trading volume exceeding $100 million for the first time, reaching $147 million.

Seeing the data rising sharply, A16Z, known as the bad boy of Silicon Valley, began to reach out to OpenSea, just like they participated in Coinbase's financing 8 times, but this time, A16Z was more decisive and generous. In March, A16Z led the $23 million Series A financing of OpenSea.

The market was too hot, and early users' dissatisfaction with OpenSea's downtime and lag began to spread. On social media and in the market, "suggestions" were seen for OpenSea to upgrade its servers.

OpenSea's downtime and freezes did not cool down the market. More and more users are pouring into the NFT field. Modern artist Takashi Murakami, fireworks artist Cai Guoqiang, boxing champion Tyson, Argentine star Messi, VISA, Coca-Cola, beer brand Budweiser, etc. have announced the launch of NFT-related businesses. At the same time, the spread of "play to earn" NFT games such as Axie Infinity and meme culture NFTs such as Bored Ape Yacht Club and Pudgy Penguins are also driving the development of the industry. What's even more absurd is that some nonsensical, completely blank pictures can also be bought by people at a price of 4 ETH, equivalent to 85,000 RMB.

It all seems like going back to IC0 in 2017, when investors frantically snapped up NFTs at all costs in the primary market and sold them off in the secondary market. In their eyes, the current NFT avatars have no possibility of breaking the issue price, and buying them is making money.

The frenetic market has allowed the leading NFT platform to gather global liquidity, and the platform has become more mature.

According to NFT Stats, at its peak, the daily trading volume of Curry's monkey NFT (Bored Ape Yacht Club) exceeded 500. If it is calculated as a stock or token, its turnover rate is 5%. From the data, it is easy to find traces of market makers and capital entering the market. The turnover rate quickly increased to stimulate trading volume, and then the floor price continued to rise. From time to time, there are one or two transactions of selling monkeys at sky-high prices, which stimulate subsequent users to enter the market, and finally the floor price becomes higher and higher.

Data source: NFT Stats

In July, A16Z continued to lead OpenSea's B round of financing, with an amount of up to $100 million. After the B round of financing, OpenSea's valuation also reached $1.5 billion.

Looking back four years ago, the shares that YC obtained in exchange for its $120,000 investment were valued at nearly $100 million three years later, bringing a return of more than 800 times.

In August, OpenSea's cumulative transaction volume reached 3.057 billion US dollars, which exceeded the total transaction volume of OpenSea in the past four years. According to OpenSea's charging rules, OpenSea will charge a fee of 2.5% of the transaction amount, which means that in August, OpenSea's revenue exceeded 76 million US dollars. If OpenSea's transaction volume can maintain the growth of August's data, then the valuation of 1.5 billion US dollars is far lower than OpenSea's true value.

In such market sentiment, NFT has actually deviated somewhat from its original intention, evolving from a metaverse virtual asset with verifiable ownership to the current hype.

No matter how good the IP, how beautiful the work, or how hardcore the concept, it is not as satisfying and rapid as the wealth effect. After experiencing IP operation and the baptism of crypto art, NFT has completely exploded with the classic wealth effect. IP has audience restrictions, art has aesthetic thresholds, and wealth effect is universal.

But only under the wealth effect can giants emerge, just like the altcoins of the past have become Binance, which now has a profit of 3 billion US dollars in a single quarter, and the NFTs that are blooming in many places, OpenSea's monthly GMV of 3 billion US dollars is just the beginning.