Analysis of OpenSea's acquisition of NFT aggregator GEM: an action by a monopoly to "eliminate threats"

OpenSea's acquisition of Gem is a very centralized method. When a competing product emerges, even though it is not yet a threat, the monopoly leader will still quickly acquire/merge through strong capital strength to kill the threat. Chinese gamers should be very familiar with it, and the operation of OpenSea can be said to be comparable to that of Tencent.

It is still worthy of praise to Gem.xyz, the shopping cart, rarity, flashbot, whales purchase notification and other functions are very easy to use, not only can save handling fees, but also keep an eye on market dynamics, and can grab rare NFT at critical times. And many of these functions are also what the community has always hoped to add to OpenSea, but the dragon can never hear the voice of the community, and the emergence of Gem makes up for the gap in NFT market functions. So we also jokingly call Gem the Dragon Slayer of OpenSea.

In fact, as an aggregator, Gem's related data is excellent. Since its launch in mid-December last year, Gem has accumulated a transaction volume of over 246,000 ETH, which is twice the transaction volume of the earlier Genie (Genie launched in early October last year). The main reason why Gem can achieve corner overtaking in such a short period of time is market depth. Gem has aggregated more mainstream NFT markets earlier than Genie, such as OpenSea, LooksRare, X2Y2, etc., while Genie has been the main NFT market for a long time. It is OpenSea and some other small markets that have lost market share due to long-term inaction, and it was not until early April this year that LooksRare was integrated. In addition, Gem also aggregates the analysis data dial of Dune Analytics and its own anti-pinch robot, which is also ahead of Genie. Gem overtakes Genie in a corner. Although the data is excellent, NFT aggregators do not charge platform fees and other fees, and the profit model that is still being explored has planted the seeds for acquisition.

(Data source: Dune Analytics)

Thanks to the convenience of functions and as an aggregator, Gem naturally absorbs the users of its aggregation platform and occupies a certain market share, especially the big players. From this point of view, Gem may have caused a greater impact on OpenSea than LooksRare threat. At present, the ratio of buying NFT through the aggregator Gem and directly through the NFT market has reached 10:90. Although a considerable amount of it is still contributed to OpenSea, for OpenSea, which has long occupied more than 95% of the NFT market transaction volume, users are paid by Gem. Separate traffic is more like OpenSea of Web2 company, private domain traffic is still a key link, and it is not expected that more and more users will share it with other platforms.

(Data source: Dune Analytics)

OpenSea also faces a choice between Crypto and traditional. Especially after some inappropriate remarks by OpenSea, the voice that OpenSea will issue airdrops is getting smaller and smaller. In addition, OpenSea has always paid no attention to the suggestions of the community, and there have been long-standing public grievances in the world. More community-based platforms such as LooksRare and X2Y2 have also begun to challenge it. Compared with OpenSea, it is obvious that the community has a great say in Gem's products and functions. Gem has a popular feedback system and great interaction on community platforms like Discord. Gradually, the possibility and calls for Gem airdrops are getting higher and higher, which is undoubtedly more detrimental to the swaying OpenSea.

Just as monopolies often do, to stifle threats at the first sign, OpenSea acquired Gem. Although Gem operates as an independent department, it hopes to pursue OpenSea with regulatory compliance. There is a high probability that there will be no Token plan in the short term , and now that Gem has become a part of OpenSea, the possibility of its airdrop has also become very small in this acquisition.

In the Web2 world, we have seen too many cases of small and beautiful companies gradually falling after being acquired by giants. This acquisition is likely to be that Gem, as an NFT aggregator, has not yet found a profit point to support the development of the platform without charging any platform fees, and has not announced financing before. Perhaps the team is indeed facing operating capital constraints. Difficulties, although understandable, are disappointing for Crypto Native. This is more like a compromise with capital and lack of confidence in tokenomics. Although Gem emphasized that the acquisition of OpenSea did not kill the possibility of Token, similar words were said by OpenSea last year. To this day, there is still no possibility of OpenSea regarding Token.

Gem currently enjoys a considerable market share in aggregators, but I believe that more community-based and decentralized challengers are on the way, which may also bring a new profit growth model for NFT aggregators.