What are NFT Marketplaces
NFT Marketplaces are digital platforms for creating, selling, and buying NFTs, or non-fungible tokens. NFTs are cryptological entities that certify ownership of digital assets and are part of blockchain technology. Marketplaces help connect creators and sellers to buyers by centralizing and streamlining the process of finding and purchasing desired NFTs.
There are two major divisions in NFT marketplaces: generalist vs. niche platforms and individual sellers vs. controlling entities. Generalist marketplaces will support any NFT minted on one of their supported blockchains. As such, these tend to be the larger marketplaces in terms of volume. In contrast, other marketplaces occupy niches such as art, music, trading cards, in-game items for video games, sports clips, etc. The number of niches is vast, and some niches can be very specific.
The second division is in who is minting and selling the NFTs. Some platforms exist to connect individual sellers to buyers. That is not to say that businesses and corporations could not use the platform. However, they would interact with it in pretty much the same way as an individual would. Generalist platforms fall almost exclusively into this category, and many niche platforms do as well. In contrast to these connecting marketplaces are marketplaces where the owner is also the creator and seller of the NFTs. These marketplaces are exclusively niche marketplaces focused on the intellectual property owned by the controlling entity. For example, a video game publisher may sell NFTs related to in-game content or a sports league may sell NFTs for highlight clips.
The use cases of NFTs have not been fully explored. Currently, they mostly function as collectibles, similar in many aspects to artworks. There are many use cases that have been speculated about. Some of these include NFTs for tracking the authenticity of real-world items. In a similar vein, real-estate deeds may be a future use area. Anything where a user or object needs to be uniquely identified provides a potential NFT use case.
Every NFT marketplace will require a cryptocurrency wallet to store NFTs for sale and purchase. Most will also need the wallet to hold cryptocurrency to pay for transactions, although some platforms support the ability to pay with fiat. Many platforms provide some form of assistance to help creators through the more technical aspects of minting and selling NFTs.
Security in the Crypto Space
A very common question for cryptocurrencies, NFTs, and other technologies in the crypto space is if they are secure. The very short answer is that they are all very secure, but that security is subject to human error. Always keep any passwords, seed phrases, etc. secret and secure. If you entrust a third party with these or other property, investigate their digital security protocols.
NFT Marketplaces Features
Most NFT marketplaces have the following features:
- Custom Marketplaces
- Artist Profiles
- Secondary Sale Royalties
- API Interfacing
- NFT Drops
- Set Sale Times
- Package Sales
NFT Marketplaces Comparison
Supported Blockchain: Each NFT is minted on a specific Blockchain. Ethereum is the most used blockchain technology for NFTs, but other blockchains include Solana, Polygon, Klayton, Flow, Tezos, and many more. Some platforms only support a single blockchain, whereas others support several. It is crucial not only to consider the ecosystem associated with any given blockchain but also the gas fees, which are the fees required to execute the transaction on the underlying blockchain. Gas fees can be significant depending on the sale price of your NFTs.
Transaction Fees: Marketplaces typically make money by charging transaction fees on sales. These transaction fees usually fall between 2.5-5% but can be significantly higher on some platforms.
Initial vs. Secondary Sale: Many NFT marketplaces include the ability to mint new NFTs. However, some marketplaces are simply reselling platforms or aggregators of other marketplaces. If you are a buyer interested exclusively in new works or initial sales, ensure the marketplace of your choice has a minting ability.
Niche vs. Generalist: Some NFT platforms have a specific niche, such as art, trading cards, music, etc. Other platforms are generalist in nature. Selecting the right platform as a creator or seller is essential. While generalist platforms typically have significantly more traffic, it may be hard to differentiate yourself. In contrast, you may find a more receptive or interested audience in more niche platforms. As a buyer, it is a matter of choosing a platform where you are most likely to find your desired content.
Secondary Sale Royalties: Many platforms let creators collect a flat or percentage fee when an NFT they minted is sold. Some platforms allow this fee to be set by the creator, whereas others have it fixed by the platform. As a buyer, these fees potentially reduce the profitability of any resells. As a creator, they allow for a continuous stream of revenue from your work.
Most NFT marketplaces require no up-front payment. They instead make money off of transaction fees on the sales that occur on the platform. Many of these fees fall between 2.5-5%, but some platforms have initial sale fees as high as 15%. These fees may vary between an initial sale and a secondary sale. Secondary sales may also have fees that go to the original minter of the NFT.
It is important to note that the fees in the previous paragraph are just the fees that the marketplace collects. They do not include the gas fees necessary to execute the transaction on the underlying blockchain. Generally speaking, these fees will be insignificant relative to the sale price if the sale price is high but may be significant if the price is low. Additionally, gas fees vary significantly by blockchain and current traffic, so always know roughly how much you pay before executing any transactions.