How does an NFT marketplace work?

Now valued in the tens of billions, the NFT space is one of the hottest industries right now. It is also one of the most misunderstood. For those unfamiliar with NFTs, talking about Bored Apes, drops, rock bottoms, and Axies might sound a little daunting. But with greater celebrity involvement and more and more users getting involved, the learning curve doesn’t seem to put people off.

One of the first hurdles to getting involved with NFTs is learning to buy and sell tokens. Answering how an NFT marketplace works will not only allow you to buy non-fungibles so you can collect these valuable scarce assets, but also flip them for profit if you wish. You may even want to use these marketplaces to create your own NFT made from your own artwork.

Whatever your reasons, getting to grips with NFT marketplaces like OpenSea opens up a world of possibilities. Below we’ll explore how they work and how you can get involved.

What is an NFT Marketplace?

While NFTs are part of the crypto space, you usually cannot buy them on centralized or even decentralized crypto exchanges like Coinbase or Kraken.

Instead, you should visit dedicated NFT marketplaces that specialize in trading non-replaceable tokens. These websites facilitate the entire process and have made trading NFTs almost as easy as regular online shopping.

You still need one crypto wallet, which, however, will contain your money and NFTs. There are many different crypto wallets on offer, but since Ethereum is the most popular network for NFTs, MetaMask (https://metamask.io/) is a great place to start. For other networks, such as Solana, there are other wallets such as Phantom (https://phantom.app/).

Not surprisingly, you should also: sign up for an account with your marketplace of choice. With a funded crypto wallet linked to an account, you can treat NFT marketplaces like any other ecommerce site. Just browse what’s for sale, make deals, buy direct, or even sell what you own.

What is an NFT blockchain?

Concept of NFT, non-fungible tokens, digital items for crypto art, gaming, collectible with blockchain technology on dark background, vector illustration

Blockchains are distributed networks of computers that execute code. In the case of networks such as Bitcoin, the code establishes a cryptocurrency that can be used as a medium of exchange or store of value. For other networks, such as Ethereum, Solana, Cardano and Binance Smart Chainis the blockchain capable of executing smart contracts?

Smart contracts make it possible to create NFTs as the data inside keeps track of who owns what.

An important concept to understand is interoperability. Blockchains like Ethereum have different types of tokens on the network. These are called ERC-20 tokens and contain stablecoins such as USDC and USDT. While some networks, such as Dapper Labs’ Flow network, are not interoperable, many are, meaning you can use currencies other than ETH to buy NFTs.

How does an NFT Marketplace work?

The marketplaces are relatively easy to master:

The application process

Each NFT marketplace has its own signup process which will be slightly different. Nevertheless, the main process includes the following:

  • Found the login button: this can be worded differently and even just say “Connect wallet”. In these cases, your crypto wallet is used as your account, streamlining the process.
  • Link your wallet: this means that you give the website permission to access your wallet. Do not worry. This is completely safe, but remember to keep your wallet seed phrase and password private at all times.
  • Finance your wallet: Whether buying, selling or trading, you need money in your wallet. This is because using a blockchain network involves computing power and energy consumption. Fees, or “gas,” act as a way of compensating those who operate the network.

Buy NFTs

Buying NFTs is a relatively simple affair. If you know exactly which NFT you are looking for, search the collection and find your NFT. You can then do one of two things, should the NFT be for sale:

  • “To buy”: just like websites like Amazon, you can just buy the item for the set price.
  • “Make an offer”: if an NFT mentions it, like eBay, it means the owner is open to offers. This can either mean that the seller is willing to negotiate, or they don’t really want to sell, but are willing to consider it if the bid price is high enough.

Sell ​​NFTs

Selling is a bit more involved. If you have an NFT in your crypto wallet, do the following (these instructions are for OpenSea, but the process is similar for all NFT marketplaces):

  1. Locate “Profile” in the menu bar
  2. Find the NFT in your collection that you want to sell.
  3. Select “To sell” on the list page.
  4. Choose your price and sales format† This can be a fixed price or an auction form.
  5. Select how long what you want your NFT to be on offer
  6. If you specify the NFT for a specific buyer to buy, enter their wallet address in the “Reserve for a specific buyer” box.

Selling an NFT involves costs. For example, OpenSea has a service fee of 2.5% and royalties of 10%. This means that on most sales, 12.5% ​​is deducted from the final sale value.

Create an NFT

Creating an NFT from scratch is currently easiest on Ethereum. While the blockchain has the highest gas cost because it has been around the longest, it has the largest ecosystem. This means the process has been streamlined and there are many more potential buyers.

When you create an NFT on a blockchain, it is referred to as ‘minting’. Most newbies will mint their first NFT as an ERC-721 token, which is considered the gold standard of non-fungibles. Large collections now also use a method called lazy-minting, which interacts with the blockchain only when someone buys your token. This saves gas costs and is better for the environment.

Full steps in minting can be found on your platform of choice and will guide you through the process. Just look for the “Create” button. OpenSea’s instructions can be found here (https://support.opensea.io/hc/en-us/articles/360063498313-How-do-I-create-an-NFT-).

Keep in mind that you will still need a compatible wallet like MetaMask and some cash to cover the cost for when someone buys your token.

The Most Popular NFT Marketplaces

There are now many websites that you can use to buy, sell and create NFTs. However, these are some of the most important things to know:

  • open seathe largest and most established NFT marketplace. OpeanSea’s catalog includes generative profile photo collections, sports cards, virtual plots, trading cards, and even website addresses.
  • rare A community-owned marketplace that uses the RARI token for governance. Most of the NFTs here are art-based, but there are many more.
  • NBA top shot Dapper Labs’ marketplace for NBA NFTs, built on their blockchain, Flow.
  • SolSeaSolana’s version of OpenSea with many new and upcoming collections listed.
  • CNFT.io Cardano’s largest NFT marketplace. Not quite as established as other platforms yet, but attracting creators with fast transactions and low fees.

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