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OpenSea launches the NFT app amid insider buying and selling controversy

opensea-launches-the-nft-app-amid-insider-buying-and-selling-controversy

A smartphone and screen show the OpenSea website, which sells digital works of art via NFT. NFTs, non-fungible tokens, are unique cryptographic access data that are written into the blockchain attached to a file (picture, music, video).

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The largest NFT marketplace, OpenSea, is launching an app for users in the Google Play and Apple App Store this week.

The app rollout comes after an extremely busy month for the platform: In August, OpenSea’s website recorded two million transactions with a total trading volume of $ 3.4 billion, and activity tripled from July. According to Dune Analytics, daily trading volume fell significantly in September from its high in late August. Still, the app could build on the company’s dynamics and provide a way for users to easily review non-fungible token holdings, sales, and trade histories on the phone. The app should appear in the app stores on Friday.

OpenSea’s app launch follows news that one of the company’s employees has participated in an NFT insider trading program. The $ 1.5 billion company admitted the incident, and co-founder and CEO Devin Finzer tweeted an apology to users on Wednesday:

“We’re doing a thorough review of yesterday’s incident and we’re committed to doing what’s right for OpenSea users.”

In a statement emailed to CNBC, Finzer wrote, “I was incredibly disappointed with the news and this behavior does not represent our values ​​at OpenSea. We are working with an outside law firm to conduct an internal review. “

To date, the company has received financial backing from big names in the crypto community, including Coinbase Ventures, Blockchain Capital, and Mark Cuban. At the age of just four, OpenSea achieved unicorn status with its latest funding round led by Andreessen Horowitz ‘a16z, with the participation of Coatue, Ashton Kutcher and Shopify CEO Tobi Lutke.

OpenSea is riding the current wave of interest in non-fungible tokens – unique, collectible digital assets based on the blockchain. Flashy deals like the $ 69 million Beeple sale at Christie’s have caught mainstream attention, but for co-founders Finzer and Alex Atallah, as well as others in the industry, the excitement lies in what’s still possible. “We’re bringing a new technology to a mainstream audience,” Finzer told CNBC. The company is focused on delivering an experience for consumers that is “quick, easy and really fun at the end of the day”.

Sound familiar? The brokerage app Robinhood began with similar hopes of bringing the masses closer to a seemingly sealed off and closely guarded world, and in part Finzer is satisfied with this comparison. Both OpenSea and Robinhood know that a smooth consumer experience is key to platforms operating in worlds that seem complicated to outsiders. However, the products are different: OpenSea is a marketplace, emphasized Finzer. The OpenSea website currently provides a place to buy, sell, explore and showcase NFT collections, and the app will offer integrations with social media and a feature to “follow” other users.

Scott Duke Kominers, Associate Professor at Harvard Business School, emphasized that ease of use is a key to the success of platforms in the NFT space. “Many of the most successful players are those who have submerged some of the system’s crypto properties in such a way that the consumer experience feels more like a normal online shopping experience,” Kominers told CNBC.

OpenSea competitors include Nifty Gateway, FTX, and Mintable.

NFTs were originally touted as a means of supporting artists, and entrepreneurs like Gary Vaynerchuk have since used digital collectibles as opportunities for branding, marketing, and advertising.

“That’s all,” said Finzer. “It’s a brand new paradigm shift in the internet.”

Ticketing and gaming as well as the art industry could find a home in the Metaverse.

According to Kominers, the barriers to entry into the NFT area remain high. Significant costs and a long chain of mechanics are just two challenges for industry players. At the moment, aspiring NFT collectors must first open an account on a cryptocurrency exchange, open at least one crypto wallet, send money to a crypto exchange account, send to the wallet, connect the wallet to the corresponding platform, a “gas fee” pay ”for the processing power that the transaction consumes on the blockchain and finally buy the NFT in question, incurring an additional fee and risk of transaction failure. The sheer length of the logistical process is enough to discourage hesitant consumers.

The environmental impact is another sticking point for critics pointing out Bitcoin’s carbon footprint. According to Digiconomist, the carbon footprint of Ethereum, the blockchain preferred by the NFT space, is comparable to that of Denmark. Ethereum relies on a “Proof of Work” system that requires a lot of computing power, but OpenSea co-founder and CTO Atallah points to the company’s recent transition to the “Proof of Stake” polygon blockchain as a way to prevent the outflow of the Fight metaverses on energy resources.

Kominers says there is great risk for early leaders in this area. The first players in an industry are not necessarily the most successful – take Vine and Tiktok, for example. “Your network has to be strong enough to overcome competitors who later borrow the successful parts of your business model and appeal to a slightly different audience.”

Still, he says the overall commitment is an understatement, meaning that NFTs, OpenSea, and its competitors may still have room.

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