This is part of a series of interviews with founders and builders in the Web3 space called the Web3 Growth Handbook. The official handbook will be released in the coming months, but you can read all of the other available interviews here.
"Expectations had to be adjusted down after CryptoKitties. There was the feeling that everyone was just going to start buying NFTs, but we learned that people don’t just buy because an NFT it's on a blockchain. What drives value are utility and provenance."
OpenSea is one of the best known marketplaces for buying and selling Ethereum-based non-fungible tokens (NFTs). Their success directly impacts the blockchain gaming as well as the blockchain art and collectibles market, so growth, retention, and relationship building has been high on CEO Devin Finzer’s mind for quite some time. Devin’s focus now is three-sided. He has to grow the collector user base, the creator user base, and the developer user base.
Founded in December of 2017, OpenSea participated in YCombinator’s Winter 2018 batch before going on to raise over $4 million. They provide a marketplace for creators to sell their NFT-based art, for blockchain gamers to sell their in-game collectibles, and for everyone to buy the unique items they want. OpenSea has also actively been building out developer tools that allow people to create their own marketplaces, run crowd sales, access the OpenSea marketplace via API, and so much more. It’s a play that has worked well for Web 2.0 companies like Shopify, so it’ll be interesting to see how the three-sided market approach works for OpenSea long-term.
Devin took the time to talk with us about growing his business and about the Web3 community as a whole. The conversation ranged from how the success of CrytoKitties impacted them early on to Web3 usability.
What does growth mean to OpenSea?
The two areas where we focus on growth are growth of projects and user growth. For growth of projects, we look at projects building NFT apps and using OpenSea in some capacity. That is the most important area of growth. Most projects are early, with some great projects coming, but there’s a long tail before the best projects arrive.
User growth is the second most important thing. Projects grow and bring their users to OpenSea to purchase NFTs on the secondary market. Can we keep these early adopters around loving the projects and evangelizing the product? That’s the key.
Deciding where to invest time in the product has been the biggest overall challenge. One of the things developers care about is the exposure to a larger audience. We have to manage that tradeoff. Do you build a great SDK or do you build consumer facing features?
Expectations had to be adjusted down after CryptoKitties. There was the feeling that everyone was just going to start buying NFTs, but we learned that people don’t just buy because an NFT it's on a blockchain. What drives value are utility and provenance.
What has been the biggest barrier to growth for you?
There are three sides to the marketplace. Developers, buyers, and sellers. The biggest barrier to growth is usability across all three sides. The ability to interact with a blockchain app, including OpenSea, is really difficult for a variety of reasons. One reason is the quality of the wallets available. Another is the difficulty of building for interoperability.
The quality of the projects on the platform is another barrier. We are bullish on games, and building a quality game experience takes time. It’s an art, not a science. It takes a lot of iterations to get it done right. That iteration cycle is happening now.
What do you think needs to happen to overcome some of the growth barriers you mentioned?
There are multiple areas that need work for the entire market to overcome the growth barriers mentioned.
Wallets need to get a lot better. We’re seeing an explosion of approaches to different wallets. There are custodial wallets, partially hosted wallets, hardware wallets, etc. Those solutions will provide a plethora of solutions, and dapps will need to guide users down those experiences in a certain way.
Part of the maturation process is also fiat onboarding. There needs to be a better experience there, which is happening now.
Fundamentally, the underlying throughput of the chain has to improve. Gas costs affect users using the platform. If developers are paying gas costs, their business models are impacted. The underlying chain infrastructure comes into play because of that in a more subtle way.
What tools do you wish existed to help overcome OpenSea’s growth struggles?
I’m very excited about smart contract wallets. ERC20 has network effects from people using the same standards. If you want to get it on an exchange, there’s no technical barrier. Similarly, the wallet experience needs to have network effects. Smart contract wallets that model the user account as a smart contract and have multiple different interfaces for connecting to that smart contract will lead to a world where we don’t have to worry as much about which wallet a dapp uses. Similar to how we don’t have to worry as much about shifting token standard. I’m also excited about the improvements in the hosted wallet space, like Fortmatic.
What are your predictions for Web3/Blockchain growth in 2020?
I wouldn’t bet on 2020 being a breakout year for Web3. I would bet on the next 2-5 years. Not purely financial applications will have some sort of mainstream presence–we’re talking about millions of people using it. I think in the next 2-5 years, people will be using real things and not speculative apps. I believe this will happen in gaming first. 2020 will still be the infrastructure phase. The basic primitives (tokens) need to feel like file formats that can just be sent around. That creates a network effect. ERC721 has yet to develop the network effect seen in ERC20 but when it does, developers will come to rely on it as a basic primitive that drives the market.
OpenSea is building the future of commerce in the blockchain space. Whether it’s gaming collectibles, art, or something else, they are solving hard problems and contributing to the growth of the entire Web3 community. Check them out here.