OpenSea CEO: FTX Fallout is ‘opportunity’ to refocus on trust

The recent collapse of cryptocurrency exchange FTX has created an infection which spreads throughout the industry. Beyond individual users, many companies have disclosed their exposure to FTX – including crypto lending firm BlockFi, which filed for Chapter 11 bankruptcy protection Monday after stopping customer withdrawals.

Devin Finzer, CEO and co-founder of leading NFT marketplace OpenSea, described the FTX downfall as a “tragic event” in a recent interview with Decrypt. “We’re still feeling the damage across the room,” he said. “There is no doubt that it is a setback for crypto.”

OpenSea had no exposure to FTX or related Alameda Research trading company, confirmed a spokesperson for the company Decrypt. Amid the compounding wreckage, Finzer described what he sees as an “opportunity” for the industry to rebuild with a focus on trust while further embracing decentralization.

“I think for the broader crypto ecosystem, and for NFTs in particular,” Finzer said, “this is really an opportunity to invest in strong, ongoing user trust.”

Finzer’s comments came in the middle debate on OpenSea’s announcement that it will continue to impose creator royalties on NFT sales, following moves by some competing marketplaces to reject royalty fees. Royalty fees are typically set at 5% to 10% of the secondary sale price, and are automatically paid to NFT project creators by participating marketplaces.

OpenSea has long paid out royalties, but said earlier this month that it was considering various options in the middle of the industry shift. Ultimately, after overwhelming feedback from NFT creators, OpenSea promised to continue paying royalties. Finzer described the move as crucial to maintaining trust in creators, as Decrypt covered last week.

Decentralization also plays a role in that, he explained. OpenSea does not hold users’ assets when listing and trading NFTs, but some NFT marketplaces do.

Magic Eden, the top Solana NFT platform, has been criticized by rival platforms and other Web3 developers to hold listed NFTs in an escrow wallet, which some have considered risky. FTX’s NFT marketplace also took care of assets, and now these NFTs cannot be withdrawn by their rightful owners as the FTX empire undergoes bankruptcy proceedings.

“We actually operate through a decentralized system smart contracts. We do not hold users’ funds or users’ NFTs,” explained Finzer. “And so there are a lot of advantages to that kind of system, over a central authority where things are much more opaque.”

Part of OpenSea’s move to encourage enforcement of royalties across the wider NFT ecosystem is the launch of a blocking tool, which allows creators of new Ethereum NFT projects to block platforms that do not respect royalties. Rival marketplace X2Y2 has since changed course and adopted royaltiesand has been removed from the block list as a result.

Over in the Solana NFT ecosystem, the vast majority of trades now take place on marketplaces that do not require traders to pay creator royalties, although the largest of them – Magic Eden, with nearly 90% market share on Solana –making them optional for buyers to pay.

Open sea started supporting Solana NFTs in April, but has not done much out of that market against the entrenched leader. According to data from TiexoHandled OpenSea just over 0.1% of all Solana NFT trading volume in the last month.

Regarding the Solana NFT community’s view on enforcing royalties, Finzer said, “We haven’t necessarily seen that many positive signals yet [in Solana] as we have seen on Ethereum.”

OpenSea is looking at a similar blocklist enforcement tool for Solana, he said, but that it is “a little more complicated” given its unique blockchain infrastructure. Alternatively, he pointed to Metaplex’s development of a new Solana NFT asset class standard which could enforce royalties to creators on the chain, potentially obviating the need for such a tool altogether.

Meanwhile, the FTX contagion effect is claiming victims across the crypto industry, and Finzer suggested that rebuilding from such a widespread disaster could take a couple of years. Still, though he called it the “biggest thing that’s happened” in crypto since Mt. Gox Bitcoin hack in 2014is he sure that the industry will come back.

“I have extreme confidence in the overall resilience of the community and the ecosystem,” asserted Finzer, “and the desire to move forward and build.”