FTX US Aims to Take On OpenSea—First With Solana NFTs, Ethereum Only ‘Weeks Away’

The U.S. division of cryptocurrency exchange FTX today launched its new NFT marketplace. Initially offering NFTs minted on the Solana network, FTX NFTs will soon add support for Ethereum—the leading blockchain for NFTs—as it attempts to steal some of OpenSea’s thunder.

Unlike OpenSea and decentralized Solana marketplaces like Solanart and DigitalEyes, FTX NFTs lets users buy and sell collectibles in U.S. dollars using credit cards or funds brought in from an ACH bank transfer or wire transfer. Users can buy and sell with cryptocurrency as well.

Like the centralized FTX US exchange itself, the NFT marketplace is regulated in the United States, which means users—from the U.S. or elsewhere—must undergo know-your-customer (KYC) identity checks. That’s a key difference from those aforementioned exchanges, but the ability to buy NFTs with USD and credit cards could help boost mainstream adoption.

“NFTs right now is a very niche market specifically because it has grown up as a DeFi product,” FTX US president Brett Harrison told Decrypt.

“We hope by providing a centralized marketplace for NFTs where we let people fund their account with a credit card or with a wire transfer,” he added, “it will bring a lot more liquidity in general to the marketplace, and result in better price discovery and fair markets.”

An NFT acts like a deed of ownership to a rare digital item. The NFT market exploded in 2021, with $2.5 billion in transaction volume in the first half of the year, per DappRadar—an enormous leap from $200 million across all of 2020. After a summer lull, the market surged to new heights, with $10.67 billion worth of trading volume in the third quarter of 2021 alone.

“The crypto community right now is very interested in NFTs, and so are we,” said Harrison. “We think it’s a natural fit for us, given that we’re so plugged into blockchain technology and all the requirements of being able to support an exchange with hundreds of thousands, if not millions of users and simultaneous auctions.”

How it works

Initially, FTX NFTs will support the Solana blockchain, which has seen rising NFT trading volume from top collections like Degenerate Ape Academy and Solana Monkey Business. Both collections have seen single-NFT sales in excess of $1 million, along with millions of dollars’ worth of total respective activity each week.

Users can transfer their existing Metaplex-compatible Solana NFTs onto the FTX NFTs platform to sell them, and owners can transfer them away as well. Furthermore, users can mint and create their own NFTs on the platform, which are subject to approval before listing.

Unlike Solanart, FTX NFTs will not take a strictly curated approach to listing collections, however, there are stipulations that come with being a centralized, regulated exchange. For example, Harrison said that they will not list projects in which the NFTs act like a security rather than purely artwork or a collectible—such as projects that provide royalties from secondary NFT sales as a reward back to other holders.

Solana Monkey Business, one of the projects that FTX teased in the lead up to today’s launch, offers royalties from sales to holders of its Gen 1 NFT collectibles. However, royalties are not paid to holders of the larger collection of 5,000 Gen 2 collectibles. FTX NFTs will allow the sale of the Gen 2 Solana Monkey Business NFTs, Harrison clarified, but will not list the older set.

FTX US is working with the creators of projects to verify collectibles coming onto the platform and stamp out fraud. Harrison said that information within Solana’s Metaplex contracts—or with Ethereum’s ERC-721 standard—will let them verify details for NFTs coming onto the marketplace. FTX can also authenticate NFT minting addresses on Solana, Harrison said.

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FTX NFTs charges a 2% fee on sales, which is lower than OpenSea’s fixed 2.5% rate and Solanart’s 3% rate, and Harrison said that the exchange will “respect the royalty decisions from the contract” for NFTs transferred into the marketplace. Unlike other Solana NFT marketplaces, FTX NFTs will allow users to sell via auctions in addition to fixed price listings.

Solana NFTs are on the rise, but Ethereum remains the top platform in the space, by far. Major collections like CryptoPunks, Art Blocks, and Bored Ape Yacht Club all live on Ethereum, while leading crypto game Axie Infinity has its NFTs on an Ethereum-based sidechain, Ronin. Ethereum made up the lion’s share of the NFT market’s massive Q3 trading volume tally.

Ethereum support for FTX NFTs won’t be far off, however: Harrison said that it’s “probably on the order of weeks away,” as the team hustles to expand the focus of the platform.

Eyeing the competition

Solana’s rapid rise in recent weeks has generated millions of dollars’ worth of fees for NFT marketplaces like Solanart and DigitalEyes—platforms with small teams and rapidly rising activity. Over the last week alone, Solana NFT collections have generated more than $139 million worth of total trading volume, per data from Solanalysis.

With a sizable user base and reach, plus lower fees, auction capabilities, and the addition of USD payments, FTX US is muscling into the nascent Solana NFT space with an eye to suck up a big chunk of the market share.

“We think that those aspects of the marketplace will make it in many ways more attractive than its competitors,” Harrison told Decrypt. “We’re hoping and sort of expecting that we’ll be able to buy into that market share a decent amount.”

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Ultimately, OpenSea is a much bigger target. The leading NFT marketplace generated nearly $6.9 billion worth of trading volume in Q3 alone, per Dune Analytics, between Ethereum and Polygon sales. OpenSea doesn’t currently support fiat currency payments, but they’re coming.

Meanwhile, rival upstart platforms like Infinity—which incidentally calls itself the “FTX of NFTs”—and Artion hope to take a chunk of its business. Harrison believes that FTX US is well positioned to take the wind out of OpenSea’s sails.

“OpenSea has the advantage of a three-year head start. They certainly have a lot of features, and their marketplace is excellent in a lot of ways,” he said. “But we are a very fast-moving and nimble company. We think we can approach a lot of the technological capabilities of OpenSea, hopefully in a pretty short time period.”

11 October 2021 17:00

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