Understanding NFT & NFT Marketplace
Imagine you have a dollar, and you decide to exchange that dollar with your friend. Once the exchange is over, you will still have one dollar, in the same value, while your friend too will have one dollar, in the same value.
This is because a dollar and money, in general, are fungible goods, like shares of a company; it doesn’t matter from which stock exchange you buy a share of IBM, the value is the same, determined by the market.
However, in case you have an NFT, and then decide to exchange it with your friend, then things drastically change. Once the exchange is over, the NFT that you will have will be different from the NFT that you gave away.
This is because an NFT is by definition non-fungible entity: It’s unique, distinct, and cannot be replaced or divided. There are algorithms and meta-data behind every NFT, which makes it totally unique and distinct. If you have an NFT, then it’s only you who has that entity, in the entire world.
In this blog, let’s decode NFT, and NFT marketplace, besides understanding the top features and types of NFT marketplaces.
Let’s dive straight into the exciting world of NFTs!
What Is NFT?
NFT or Non-Fungible Tokens are cryptographic assets that are created on blockchain technology, and have unique identification codes and meta-data, which makes them distinguishable, distinct, and completely unique.
In fact, even cryptocurrencies are not distinct, since they are identical to one another. This is the reason that they can be traded at equivalency for commercial usage, but not NFT, which are 100% unique.
What Is NFT Marketplace?
NFTs can be traded with other NFTs or sold/bought via the NFT marketplace, which is a decentralized platform.
This marketplace is like an eCommerce platform, say Amazon or eBay where different products are listed by sellers, and buyers can buy them.
NFT marketplace has numerous different features and types, which makes them quite distinct from eCommerce marketplaces. NFTs or digital assets can be stored, traded, and displayed to a large audience, and a unique business model is evolving.
NFT marketplaces are giving rise to the NFT Business Model, where unique non-fungible tokens related to art, video, audio, and other types are bought and sold.
And this is bringing in NFT development practices, for creating, launching, and maintaining NFT marketplaces and NFTs.
In order to transact at an NFT marketplace, having a crypto wallet is mandatory, because all transactions such as buying, selling, and storing the NFTs will happen via that crypto wallet.
How Big Is The NFT Market?
In one of the biggest events in the NFT world, the right to the first-ever tweet was converted into an NFT, and sold for a record $2.9 million, by Twitter founder Jack Dorsey.
This tweet just said, "just setting up my twttr.", but imagine someone paying $2.9 million, for having the exclusive ownership of this tweet. Since NFTs are unique and distinct, the owner of this 1st tweet NFT is the only person in the entire world who holds the right and ownership of this first-ever tweet.
As of now, $69 million worth: Beeple's Crypto art is the most expensive NFT to be ever sold. Doge, a popular meme in Japan was sold as an NFT for $4 million, which eventually gave birth to Cryptocurrency Dogecoin.
There are around 15,000 to 50,000 NFTs being bought and sold every week, and in the first half of 2021, approximately $2.5 billion worth of NFTs were traded, across the world.
The NFT market and business model are exploding at an amazing pace, and this can create an entirely new world of digital assets, never seen or experienced.
How Does NFT Marketplace Work?
Here are the 10 steps that showcase how NFT marketplace works:
- The user creates a new account
- A Crypto wallet is linked with that account
- Users can create NFT on that marketplace
- NFT is configured for that marketplace
- NFT is listed for selling
- The marketplace and NFT listings are moderated
- NFTs appear for selling in the marketplace
- Bids are placed for that NFT
- NFT is sold to the top bidder
- The marketplace handles the transaction via a crypto wallet
Behind the scenes, the marketplace creates a blockchain-based contract for every listed NFT, the tokens are added to the unique dataform called metadata, from which, the unique parameters are added to the NFT to make it unique and distinct.
A special transaction protocol called smart contracts is used in every NFT that regulates, monitors, and approves the transactions between the buyer and the seller.
Such smart contracts have the unique parameters that are associated with the NFTs, and ensure that the owner of any particular NFT is one and only in this entire Universe!
Different Types Of NFT Marketplaces
Some of the most popular types of NFTs, and their associated marketplaces are:
Digital Collectibles: Examples of NFTs in such a marketplace are game/trade cards, trophies of wins, unique videos of rare gaming moments, which are digitized as a non-fungible token or NFT.
Game Characters: Famous and rare gaming characters can be converted into NFTs, and sold via the marketplace.
Real Estate: Access to high-end, unique, and in-demand properties can be converted into non-fungible tokens.
Music Tokens: Entire music albums or specific songs can be converted into NFTs, and sold directly via special NFT marketplaces.
Investment Projects: In this model, the NFT marketplace can function like a stock market, and allow the users to buy/sell specific NFTs via trading. In some of the advanced and regulated NFT marketplace, such transactions can also have legal validity, like in real estate.
Top Features Of NFT Marketplace
NFT marketplaces have a very specific purpose: Enabling the users to buy, sell and trade their digital collectibles and assets in the most seamless manner.
To ensure this happens, there are some globally accepted and recommended features that NFT marketplace developers incorporate into the NFT marketplace.
Some of these top features are:
As shared earlier, every NFT transaction must happen via crypto wallet, and this is the reason this is an important, mandatory feature of every NFT marketplace. The user should be able to sync and integrate their crypto wallet with the NFT marketplace for seamless transactions. Some of the popular crypto wallets for marketplaces are: Metamask, Coinbase, and WalletConnect.
The NFTs listed on the marketplace should showcase all critical information in the most optimized manner: name, price, description, owner, payment method, and more. NFT marketplaces that have this shop window showcased optimally, will have better chances of triggering sales.
The new users should be able to seamlessly register their new accounts, and then proceed with integrating their existing crypto wallet into the platform. In case the user doesn’t have any existing crypto wallet, then they should be able to create one, right then and there.
The NFT marketplace should have a robust and feature-rich search engine, for enabling the users to quickly search their desired NFTs related to music, videos, photography, art, memes, gaming characters, and more. The search algorithm should be able to detect the desired intent and objective of the user and display the right information, in real-time.
The NFT marketplace should be able to record, store and display the entire user’s history on that platform, which includes their trading data, transactions history, NFTs listed, approved, bought, and sold. Comprehensive user management needs to be incorporated within the platform for enabling this feature.
The NFT marketplace should be able to send notifications and alerts to the users, based on their search and transaction history. In case there is a new NFT being listed, for instance, then the user should be able to get instant notification regarding the same.
A comprehensive and detailed customer support mechanism via live call/chat or Knowledge Center should be incorporated into the marketplace, for ensuring that every query and question by the user is resolved.
If you are looking to launch your NFT marketplace, and looking for expert marketplace developers, then we can help you right away. Get in touch with our expert NFT app developers, and take the first steps towards dominating the ever-expanding NFT market.