The OpenSea Debacle: Why NFT Creators and Collectors Must Demand Better
Recent events have left many feeling disillusioned with OpenSea’s dominance. Is it time for an alternative to come to the fore?
KYC is a familiar initialism – Know Your Customer – and it’s employed by many institutions in crypto, from exchanges to marketplaces and more. The thinking is largely that it provides accountability, and in doing so, reduces the risk of illegal activities and the dubious misdoings of the unscrupulous.
Some find KYC to be somewhat at odds with the nature of crypto and its decentralized heart – and it’s a point I wouldn’t quickly dismiss.
Nevertheless, it’s proven itself necessary on several occasions and it’s unlikely to go anywhere any time soon. In fact, absolute decentralization is all but impossible and as the crypto sector expands, major players and organizations will rise.
Their services may be decentralized, but the people of influence – the decision-makers – are at best a modern democracy, and at worst a handful of authority figures calling the shots.
A crypto war is currently unfolding between NFT marketplaces. OpenSea has led the way for some time, but rivals have been carving out chunks of the pie for themselves through various means, including some age-old undercuttery.
But OpenSea’s sales fees are far from the biggest threat to the platform; a recent U-turn caused editors everywhere to sigh collectively as they had to make sizable addendums to articles on the marketplace’s controversial change.
I will unpack what exactly happened next, but the question to keep close by during this article is this: do we need to know more about those behind the marketplaces we choose to use?
OpenSea’s Controversial Decision… and Immediate U-Turn
On the 27th of January 2022, OpenSea rolled out a new restriction for creators and their collections. The @OpenSea_Support Twitter account Tweeted;
“To address feedback we’ve received about our creator tools, we updated our collection storefront contract limits to only support the creation of up to 5 collections and 50 items per collection.”
This was a curious decision, and what exactly the “feedback” was that they had acted on isn’t clear.
What this decision meant is that new NFT creators could mint a maximum of 250 NFTs per account, spread across 5 collections.
What was so baffling about this restriction is that many of the NFT collections that aided in making both NFTs and OpenSea such a staggering success would not have been possible under these rules.
The most notable example is the Bored Ape Yacht Club, of which there are 10,000 Bored Apes. There are also 10,000 CryptoPunks. In fact, of the top 30 all-time Top NFTs by OpenSea’s own stats, no creator would have been able to do what they had done with the proposed and (briefly) implemented limitations.
This, quite expectedly for all but OpenSea it seems, caused an instant backlash. Many creators and artists who were in the midst of creating an extensive collection were outraged at both a rule that would heavily inhibit their potential income, and the lack of notice given for it.
This was bound to send creators to OpenSea’s rivals, and it did. LooksRare put up a fight throughout January, hosting over $105 million in trade volume in just 24 hours at the start of the month.
As quickly as this impending trainwreck appeared, it disappeared, with OpenSea reversing the decision in under 24 hours. So, all is well, right?
Know Your Marketplace: The Perils of Trust
The question I wanted to keep at the heart of this article is whether we need to know more about the marketplaces we choose and the people influencing their direction.
Do we know enough about their intentions and ethos currently?
With OpenSea, this debacle is evidence that perhaps we don’t. So why did OpenSea make this rash decision?
There are a few hypotheses, from the problems with plagiarism through to valuing rarity over quantity. OpenSea has hinted at the former over the latter, with copyright issues, plagiarism, and fake collections running riot on the platform.
Many argue that OpenSea could be doing much more, particularly as they’ve received hundreds of millions in investment and reportedly invested $300 million in “support”. This came off the back of criticism from both overworked support staff and community members.
Some have questioned where these funds have gone. Well, one recent addition is the OpenSea Support Twitter, which is the account that broke the collection limitation news.
They reverted to their main Twitter to deliver an insightful thread post U-turn:
“Every decision we make, we make with our creators in mind. We originally built our shared storefront contract to make it easy for creators to onboard into the space.
However, we’ve recently seen misuse of this feature increase exponentially. Over 80% of the items created with this tool were plagiarized works, fake collections, and spam.
We didn’t make this decision lightly. We made the change to address feedback we were receiving from our entire community. However, we should have previewed this with you before rolling it out.
In addition to reversing the decision, we’re working through a number of solutions to ensure we support our creators while deterring bad actors. We commit to previewing these changes with you in advance of rolling them out. Please give us feedback along the way.” – @opensea
My two takeaways from that statement are that the decision they took was woefully uninformed, but that they may have learned a valuable lesson.
The question that’s left open for many is where OpenSea goes from here.
This article may seem as merely taking the opportunity to bash OpenSea, but it isn’t. Yes, they made a bizarre error, but the platform has been integral to the parabolic growth of NFTs.
There is a bigger question at play here, and it’s one about marketplace ethos, direction, and reliability.
If a platform becomes a single point of failure for a creator, it must be examined to within an inch of its life, otherwise that creator must have other marketplaces in their roster.
A marketplace for NFTs is the facilitator of the current creator economy, and this puts a lot of power in their hands.
If a marketplace’s direction is more geared towards profits and growth than cultivating the success of its artists and creators, that ought to be the reddest of red flags.
The OpenSea situation raised an issue that they themselves highlighted: that highly impactful changes can be made without consulting those who it most affects.
This is inherently anti-crypto in my eyes.
It puts creators in a precarious position, similar to what we have seen with web2 and content creators. It only takes someone tasked with moderating at YouTube to take a disliking to a creator’s work and that person’s livelihood will vanish at the hands of demonetization after years of building a community.
It’s at times like these where I lean on the red flags and troubling markers I use for all projects, namely, accountability.
There’s also a dynamic roadmap with feature requests and bug reports visible. Transparency and accountability will not allay the fears of marketplace missteps, but they go some way to offset them.
Whether you’re a consumer of NFTs, a creator, a developer, or just have an interest in the crypto space, we have all become overly-reliant on marketplaces as our breadwinners.
This is not a problem in and of itself – it is inevitability.
Armed with that knowledge however, we must scrutinize the ethos of these organizations and avoid a single point of failure for artists and games utilizing NFTs, for the good of creators and collectors everywhere.