Will $SOS and the OpenDAO Challenge OpenSea’s Leadership?

Christmas came early for many active OpenSea NFT traders. The OpenDAO is a decentralized autonomous organization (DAO) began issuing a new cryptocurrency named $SOS on December 23rd. The new organization took a snapshot of Ethernet wallets and tallied up all of the NFT transactions for each address on OpenSea. The $SOS token began with an airdrop of 50% of the total supply based on OpenSea activity.

The new DAO is setting aside 10% for limited partners, 20% for staking incentives and another 20% which will be set aside to support NFT communities, compensate victims (presumably of NFT-related fraud or theft), and issue developer grants. After just five days, the $SOS token has established a fully diluted market cap of $600 million. It also has over 200,000 token holders and was listed as an ERC-20 on CoinMarketCap within 24 hours of launch. This is unusual, to say the least.

A Budding OpenSea Competitor

Not much is known about the founders. The primary contributor appears to be @9x9x9eth on Twitter. The expectation is that The OpenDAO will use its proceeds to compete directly with OpenSea in the NFT marketplace space. And, they already have a pitch in mind saying that new NFT projects minting on the site will have a lot of investors swimming in their newly gifted $SOS ready to spend.

The Real Challenge to OpenSea

The OpenDAO’s token launch tied to OpenSea activity is a brilliant strategy. It was a fast way to get engagement from existing NFT collectors and to bias the rewards to the most active traders. These are precisely the people that any new NFT marketplace would like to attract. OpenSea has a big advantage as the first to scale in the NFT marketplace space.

Marketplaces in any segment are difficult to make work precisely because you need liquidity (think of it as scale) from both the supply and demand sides. It is hard to achieve liquidity on one side of this equation and doing it on both sides is a Herculean task. This is why successful marketplaces are often so enduring even if competitors arise with better features or economics. It is hard to replicate large-scale activity on both sides of a market.

The OpenDAO has created instant liquidity on the demand side of NFT collecting both in terms of users and cryptocurrency. It now must create scale on the supply side by bringing in artists. That is one reason why there are tokens held in reserve for grants. Some of these will go to artists to encourage participation. But, this might take some time to develop.

This provides a very real threat to OpenSea’s dominance. However, the bigger near-term threat is Coinbase’s forthcoming marketplace. This also will bring instant liquidity on the demand side making it easy for millions of Coinbase account holders to participate in NFT collecting. And, there are many NFT projects interested in partnering with Coinbase which should provide some initial content for the site. With that said, Coinbase also will have the same challenge of building liquidity on the supply side of NFT art beyond the day-to-day trading.

The OpenDAO might have the better strategy in the end. Coinbase is likely to onboard consumers new to NFTs. The OpenDAO is only existing NFT collectors. That seems like a better place to start with to drive active trading of NFT releases.

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