Coinbase's Entry Into The NFT Market Threatens OpenSea's Near Monopoly And Dominance

NFTs, or Non Fungible Tokens, are unique digital assets that provide proof of ownership of scarce items that are traded online, such as rare art pieces. By virtue of being unique digital records, NFTs cannot be exchanged, unlike cryptocurrencies like Bitcoin.

NFTs store the records of ownership of assets in the blockchain and are a niche space within the broader crypto market. The marketplace for these tokens has boomed in recent months, with an estimated $10 billion in transactions in Q3 of 2021.

The biggest marketplace for NFTs is OpenSea, which had a nearly 95% market share of total transactions till date. While it dominated the market earlier this year as well, the volumes traded now represented a chokehold, with the competition left behind. This is the reason why Coinbase's reported entry into the NFT market can be the game changer that industry watchers have long hoped for.

NFTs need to be purchased online and then held in a digital wallet, which is the process followed by OpenSea, which used crypto wallets such as MetaMask.

Coinbase proposed to allow users to buy NFTs with credit cards and hence, this simplified process would make its NFT Marketplace attractive to customers.

Of course, the NFT marketplace is not matured enough, with only about 10,000 active digital wallets. Coinbase, with its estimated 68 million users can bring in the much needed breadth and depth, which is a direct threat to OpenSea. Moreover, this proposed marketplace can be seen as being tied to Coinbase's overall strategy of being a One Stop Shop for everything related to crypto.

Indeed, Coinbase derived its popularity among crypto traders, including the so-called noobs, or newbies to the crypto world, attracted as they were by it being a go-to marketplace for all crypto transactions.

On the other hand, OpenSea had weathered some problems, notably admitted insider trading allegations, and while its position looked assured for the near term, Coinbase can prove to be a formidable challenger. Either way, the NFT market sure looks more interesting and something to keep an eye out for in the coming months.