As I wrote over my winter vacation, the company takes a 2.5% cut of transactions on its service. That means we can track its aggregate trading volume and come up with ballpark estimates for its scale.
Can we get precise? Nope. Can we learn enough to better understand why OpenSea managed to command such a huge check and towering valuation? Yes, I think so.
I want to figure out how the new OpenSea valuation squares up with its revenues. From there, we’ll ask if the company feels underpriced or overpriced. This will be a fun journey of collecting data and executing minor math magic. Let’s do some thinking!
OpenSea’s NFT business
The simplest way to get a handle on the scale of OpenSea is to simply check its trailing 30-day trading volume and apply its 2.5% take rate to the sum.
OpenSea users in Iran will no longer be able to access the services of the leading NFT marketplace, thanks to US sanctions.
Although the company is yet to release an official statement regarding the restrictions, a representative of OpenSea reportedly told Decrypt that the users are located in sanctioned territories.
OpenSea blocks users and territories on the U.S. sanctions list from using our services—including buying, selling, or transferring NFTs on OpenSea—and our Terms of Service explicitly prohibit sanctioned users or users in sanctioned territories from using our services […] If we find individuals to be in violation of our sanctions policy, we take swift action to ban the associated accounts. A number of OpenSea users with Iran IP addresses took to Twitter (NYSE:TWTR) to complain about the issue.
On Saturday, attackers stole hundreds of NFTs from OpenSea users, causing a late-night panic among the site’s broad user base. A spreadsheet compiled by the blockchain security service PeckShield counted 254 tokens stolen over the course of the attack, including tokens from Decentraland and Bored Ape Yacht Club, with the bulk of the attacks taking place between 5PM and 8PM ET.
Molly White, who runs the blog Web3 is Going Great, estimated the value of the stolen tokens at more than $1.7 million.
OpenSea initially said 32 users had been affected, but later revised that number to 17, saying 15 of the initial count had interacted with the attacker but not lost tokens as a result.
The attack appears to have exploited a flexibility in the Wyvern Protocol, the open-source standard underlying most NFT smart contracts, including those made on OpenSea.
OpenSea, which is a term in decentralized finance (DeFi) suggesting that a competitor aims to entice users by offering superior incentives.
To lure OpenSea traders, LooksRare decided to airdrop LOOKS tokens to anyone with a combined ETH 3 trading volume or more on OpenSea over a six-month period between June and December 2021), according to LooksRare Docs.
The marketplace, which also has a better fee structure compared to rival OpenSea, claims that “100% of LooksRare’s trading fees are redistributed proportionally to LOOKS stakers.” It also offers token rewards for users who buy and sell NFTs on the site, which appears to have resulted in an aggressive amount of wash-trades.
Notably, per CryptoSlam, most of the wash trading comes from royalty-free NFT projects that don’t take a cut of the trades in secondary marketplaces.
Combined, those figures work out to $8.26 billion in volume, a 2.5% cut of which would be worth $206.5 million.
If we extrapolate that final number to a full-year tally, it would shake out to a yearly run rate of $826 million. That’s pretty close to our first number of a yearly run-rate estimate of $873 million for OpenSea’s gross revenues, provided that the company’s flat-percentage costs execute in-market as we anticipate.
Let’s use a yearly run rate of $850 million for the company because it’s in between our two estimates for the company’s recent revenue pace, extrapolated to a full-year tally. At a $13.3 billion valuation, OpenSea is only worth 15.6x its present-day run rate.
OpenSea blocked users that hail from Iran. US hardlining sanctions are pressing blockchain-based companies to comply with the rules in order to avoid getting under scanner. In November 21, an Ethereum software company, ConsenSys ousted some Iranian students from their coding unit.
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OpenSea, the US-based NFT marketplace, has reportedly blocked users that hail from Iran, as per countless agitated collectors and creators.
The platform has zero-tolerance policy against a myriad of individuals including enterprises and even governments that constitute the US sanctions list.
One such project, Larva Labs’ Meebits, a collection of 20,000 3D voxel characters, has amassed the most wash trading at USD 4.4bn.
Following Meebits, Terraforms by Mathcastles has seen over USD 2.9bn worth of wash trading. Loot, CryptoPhunks, and other smaller NFT collections on LooksRare have seen USD 705m, USD 251m, and USD 62m worth of wash trading, respectively.
Cryptonews.com has reached out to LooksRare for comment.
CryptoSlam noted that they have written an algorithm to detect suspicious transactions, flag them, and even filter them out of certain places on CryptoSlam.
“We think that we are catching ~99% of wash sales as of right now, but we’ve found a few cases where we’ve missed what appear to be wash sales after some manual review.
The world’s largest NFT platform, Opensea, is cutting 20 percent of its workforce. The information comes directly from CEO Devin Finzer, who tweeted a screenshot of a Slack message he’d sent to the entire company staff Thursday. Finzer blamed the economic instability around both crypto specifically and the economy broadly for the layoffs.
The cuts, he wrote, would prepare the company in the event of a prolonged downturn.
“The changes we’re making today put us in a position to maintain multiple years of runway under various crypto winter scenarios (5 years at the current volume), and give us high confidence that we only have to go through this process once.”
Since Opensea doesn’t disclose the number of its employees, it’s unclear exactly how many people are impacted by the cuts. But after this story was published, OpenSea told Engadget that the company now employs 230 people.
One user claimed that his verified collection and account history had been deleted.
Same! My verified collection with 218 ETH volume traded was just disappeared pic.twitter.com/IhJDuJZPuK
— Parin (@ParinHeidari) March 3, 2022
The current sanctions from the US outline that American companies are not allowed to offer their goods or services to users based in sanctioned countries like Iran, Syria, North Korea, and now Russia. OpenSea is a US-based company and its latest wave of restrictions is arguably linked to Russia’s invasion of Ukraine.
Not only @opensea But MetaMask itself is also BANNING every wallet associated with an Iranian IP address.
🚨 THIS IS NOT A DRILL 🚨
Iranian People are losing access to their NON CUSTODIAL Wallets with this update.
Iran, Cuba, Syria and so on) This was not the decentralized system! This was not the deal!— Khashayar sharifaee (@sharifaee) March 3, 2022
Responding to its decision to also block Venezuelan users, MetaMask claimed that users in the region were accidentally blocked from accessing their wallets after blockchain development company Infura broadened the base of its sanctions-based crackdowns.
In the case of MetaMask, users are able to view their balances and transaction histories but are unable to interact with the Ethereum blockchain.
It is safe to say that the decentralized crypto world is not so decentralized after all.
If Metamask/Infura is open and willing to block countries like Venezuela by IP addresses, it’s only a matter of time until they are forced by regulators to censor individual people’s IP addresses.