So many people these days are talking about NFT art and cryptocurrency and blockchain that it’s natural to think “Maybe I can also profit from this?” But for the uninitiated, the technological side of it can sound like something in the area as unicorns, dragons, and fairies.
In our article, we’ll try to break down the terms and explain this business in simple English.
We’ll cover such topics:
- What are NFTs?
- What do you need to create an NFT marketplace?
- What are NFT marketplace features that make it good?
- What technologies are used for the NFT marketplace?
- How can you monetize this NFT marketplace?
What are NFTs?
The abbreviation “NFT” stands for non-fungible tokens it is a unit of data or a digital identifier that:
- Is unique (none like it)
- Is recorded in a blockchain digital ledger
- Is used to certify ownership and/or authenticity
- Cannot be copied
- Cannot be substituted
- Cannot be subdivided
- Can be purchased
- Can be sold
- Can be traded
For example, it can be digital art, music, in-game items, domain names, and other digital collectibles. One of the famous examples is Nyan Cat, an internet meme from 2011. It became an NFT and was sold for $690K.
Examples of famous image NFTs
Here are a few NFTs that you might’ve seen on the world wide web. The pictures below aren’t the NFTs – they are just visual copies since an NFT requires a record in the digital ledger powered by blockchain.
How big is the NFT market?
Right now, things have stabilized a bit but in 2020-2021, the market grew dramatically. In 2020, the market’s trading was at $82 million. In 2021, this number went up by 21,000% to $17 billion. (Yes, from millions to billions.)
What are popular NFT marketplaces?
As of November 2022, the top 5 most popular NFT marketplaces in the world according to Forbes are:
- NBA Top Shot
- Nifty Gateway
OpenSea is the largest NFT marketplace in the world and it offers various integration opportunities for those who would like to develop their own unique NFT marketplace. It was launched over 5 years ago in 2017.
How much does it cost? OpenSea charges a 2.5% fee for every transaction plus gas fees.
Visit the website: opensea.io
Compared to OpenSea, Rarible gives more control to the artists and art creators about how the platform is run. Users can purchase NFTs using credit cards or connecting multiple wallets in the profile. Another additional feature is the partnership with Adobe to make it easier to protect and verify digital content data. Rarible was launched in 2020.
How much does it cost? The Rarible standard fee is 2.5% plus gas fees.
Visit the website: rarible.com
NBA Top Shot
NBA Top Shot, as you can guess, is an NFT marketplace that revolves around basketball memorabilia known as “Moments.” In a way, this is a modern version of trading sports cards that were so popular a few decades ago but are now empowered by technology.
How much does it cost? Each sale involves a 5% fee for the Marketplace and the All-Star VIP Marketplace. The listing and delisting of a Moment don’t involve any fees.
Visit the website: nbatopshot.com
Binance originally was one of the largest cryptocurrency exchanges and in 2021, they have also added an additional NFT marketplace. One of the biggest advantages of Binance is the low fees for trading, selling, and minting NFTs. It is also very user-friendly, which increases its appeal.
How much does it cost? The Binance NFT trading fee is 1%.
Visit the website: www.binance.com/nft
Nifty Gateway is a lot smaller than many of the NFT marketplaces (compared to OpenSea’s 42 million NFTs to Nifty Gateway’s 10 thousand NFTs.) At the same time, it appeals to art creators and collectors because of the partnerships with world-renowned artists.
How much does it cost? The platform takes a 5% fee during the sale of an NFT and an additional $.30 to cover transaction fees.
Visit the website: www.niftygateway.com
NFT marketplace benefits
Okay. There are a lot of NFTs out there, there are a lot of marketplaces… Why should you consider building your own? Well, non-fungible token (NFT) marketplaces have several benefits for creators and collectors of digital art, collectibles, and other unique digital assets. Some of the main benefits include:
- Ownership and provenance: NFTs allow creators to prove ownership of their digital creations and assign unique ownership to each token. This means that buyers can have confidence in the authenticity of their purchases and can also track the history of ownership of an NFT.
- Scarcity: By making each token unique and not interchangeable, NFTs introduce scarcity into the digital world, which can drive up demand for certain assets.
- Monetization: NFT marketplaces enable creators to monetize their work in ways that were previously not possible, such as through the sale of unique, one-of-a-kind pieces or royalties on resales.
- Liquidity: NFTs can be bought, sold, and traded easily, making them more liquid than traditional forms of digital ownership.
- Potential for appreciation: Some NFTs have sold for millions of dollars, and the value of certain NFTs has risen dramatically over time. As a result, NFTs have the potential to be a profitable investment.
- Direct interaction: NFT marketplaces allow creators to connect with their audience and build a community around their work. Creators can also directly promote their work and control the distribution of their creations
- Accessibility: NFTs democratize access to art and collectibles, allowing smaller investors to own a piece of history that would have been difficult to afford otherwise.
- Interoperability: Because NFTs are built on blockchain, they can be easily integrated with other platforms, enabling new use cases and cross-platform experiences. NFTs are great for adding gamification to the business processes for the clients, where they can earn points and use them for various NFT things. To avoid losing your clients in another marketplace, you can create your own using the APIs available on the market (for example, OpenSea’s or Rarible.)
- Sense of community & target audience tool: The platform can unite millions of potential NFT holders that have common interests. This is one of the ways to build and motivate your target audience.
Keep in mind though, this is a new industry and new technology, so it’s also important to understand the potential risks and drawbacks associated with the technology before investing.
What NFT marketplace features should you include?
Based on your overall business goals for the NFT marketplace implementation, you will need to sit down and analyze (on your own or with one of our business analysts, for example), which features you need to include in your marketplace.
Our feature list below is divided into two parts: must-have features and good-to-have features. As you can guess from the names, the first set is pretty much critical and the other – well, that’s where your imagination and business goals are free to choose from existing or invent your own. You can also include the must-have first into the MVP and then focus on adding more personality to your marketplace.
Critical core features:
- Users should be able to buy, sell, or place a bid on NFTs. This feature is the one that defines a marketplace in general (if you can’t buy or sell something, you don’t have a market.) Once purchased, the NFT has to appear in the crypto wallet of the buyer or in the personal account. It’s critical also to define the terms & conditions of the sale process because otherwise, you might run into possible conflicts.
- Users should be able to view the NFT details. It’s important to know what you’re buying before you strike a deal and it’s equally important to look at what you have already in your collection. Therefore, people should be able to view the details of the NFT. This data can include the collectible’s price, the floor price, and the trading volume since this helps to gauge whether this particular NFT is a good investment or not as well as its liquidity and popularity.
- Users should be able to search the platform. Sometimes you know exactly what you need. Sometimes you want to look around for something more or less specific. Sometimes you just have a set amount of money or author or category that you need. For those times, you need to have a way to filter the results to narrow the search down.
- Users should be able to pay for the NFTs. A marketplace requires a way to process payments either in cryptocurrency or fiat and it also requires a way to either pay through the platform itself (via the user account) or through an integration with a crypto wallet (for example, Metamask or Binance, etc.)
To summarize, an NFT marketplace must offer the ability to:
- Buy, sell, and trade NFTs,
- Search for and filter NFTs,
- View NFTs’ information,
- Pay for NFTs.
Okay. Now that we’ve got the core stuff out of the way, let’s talk about the features that can make your NFT marketplace more unique and therefore motivate even more people to use your marketplace instead of others.
- Users may be able to create their own NFTs. This is a cool feature because it invites not just those who are looking to buy something or sell something they have purchased elsewhere, but creators. As a result, you get a unique target audience that is interested in not just consuming but creating art. (This is the way that the SuperRare NFT marketplace went, for example.)
- Users may be able to use templates to launch NFTs. Following up on the previous point, templates for NFT launch simplify the process of creating NFTs because they help to keep all necessary things in mind, for example, the details of the NFT that you should specify. These templates should be user-friendly and intuitive so that even a beginner can understand the process.
- Users may be able to benefit from NFT airdrops. An airdrop is the distribution of NFTs where users can perform simple actions (for example, install an app or browse a website) and get NFTs for that. Basically, in this case, NFTs become a reward. There are many companies that use Amazon or Starbucks gift cards for software reviews, for example, but the same logic can be applied to NFT.
NFT marketplace vs e-commerce site
Can’t you simply use an e-commerce shop builder like Shopify, Woocommerce, or Wix to create your NFT store? While the overall idea is similar – you have goods that you trade or sell – the mechanics are completely different.
As we mentioned at the very beginning of the article, NFTs are unique by nature. It’s not just something that exists in one instance. It’s recorded in the blockchain digital ledger and can be used to identify the owner.
As the result, you need more data protection and security along with blockchain technologies, which standard e-commerce shops don’t offer.
How can you monetize this NFT marketplace?
The best question and the most important one of this article, right? How do you make money with an NFT marketplace? What monetization strategies work and can help you get your investment into the development back?
NFT marketplaces usually bring profit. There are several ways they can bring in money.
- Minting fees are the costs NFT creators pay to create an NFT.
- Listing fees are the price a user pays to add their NFT to the marketplace for sale/trade and for it to show up.
- Commission fees & bidding charges for sales are usually anywhere from 1% to 5%. (Another fee that you have to take into account is the so-called gas fee for the release of an NFT or NFT collection.)
- Transaction charges are any additional charges that are involved in the process of selling or trading NFTs.
- Advertising is another way to profit. You can advertise third-party resources (for example, via Google AdSense or similar platforms.) You can also motivate marketplace users to promote their art or other NFTs. That way, creators gain an audience, while the marketplace gains financially, and everyone benefits.
- Governance tokens are used to reward users for buying or selling NFT collectibles. They are used to give the holders an opportunity to participate in the decision-making processes of the platform.
- Registration fees are also one of the ways, but you have to offer something really enticing to users to want to pay for the sign-up. Usually, this is added later when the platform grows and becomes popular, but in case you have something unique that users would love, that’s also a valid way.
You can invent your own monetization strategies, choose one from the list, or combine several that would make sense to your target audience and your business goals.
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