How Do NFT Marketplaces Work?

With the rise of NFT popularity comes growth in the number of NFT marketplaces. 

These platforms are where non-fungible tokens can be stored, displayed, and traded. On some NFT marketplace platforms, NFTs can even be minted, or created. NFT marketplaces such as OpenSea, Mintable, Rarible, Superrare, and others are already popular and expected to grow exponentially. 

Just like it might be difficult to shop online without Amazon, NFT marketplaces are where investors can purchase and trade in NFTs. To get the most out of non-fungible tokens, investors should understand how NFT marketplaces work. 

The NFT Marketplace Business Model 

NFT marketplaces work like auction houses. Investors can bid on NFTs in these marketplace platforms, and if they place the winning bid, the NFT is theirs. Many times, marketplaces require users to purchase Ether from the Ethereum blockchain for bidding on NFTs since most NFTs are Ethereum-based. 

These NFT trading platforms make money through fees and the sale of T-bonds. Here we’ll detail both. 

Fees 

NFT marketplace platforms such as OpenSea and Mintable offer free use and minting of non-fungible tokens. DraftKings, known as a sports betting platform, is now a marketplace for NFTs related to sports. 

Initializing an account on an NFT marketplace is usually done through a digital wallet such as MetaMask, which carries a service fee of .875 percent. Users will need to purchase digital currency from a blockchain platform and have currency in their crypto wallets. 

These platforms make money on the transaction fees, or gas fees, usually about 2.5 percent to 5 percent of each sale. Digital artists that sell their NFTs, or other NFT sellers, pay these fees as a price of doing business. Since these digital items’ sales can be in the thousands of dollars, the transaction fees can be quite lucrative for NFT marketplaces.

Making the creation of NFTs inexpensive or free can drive up the number of transactions, which will bring in more revenue through transaction fees.

Some online marketplaces offer additional services such as customizations, watchlists, and daily email summaries that are available through paid subscriptions. 

NFT T-Bonds 

Another way NFT marketplaces make money is by selling NFT T-bonds. These NFT T-bonds work similarly to a U.S. Treasury bond or T-bill. 

These bonds, which hold fungible NFTs that have a currency-based value, are sold by issuers at a discounted fixed price. Once the NFT T-bonds reach maturity, the fungible tokens related to the T-bond are released into the T-bond owner’s crypto wallet.

NFT T-bonds can be resold on secondary markets, which gives T-bond holders greater liquidity. 

While T-bills are usually a conservative investment, NFT T-bonds offer plenty of growth potential with greater liquidity than owning an NFT. T-bond holders wait on profits unless they sell the T-bonds.

Starting to Use an NFT Marketplace 

Whether starting to use an NFT marketplace to buy NFT art or to create and sell NFTs, the first step is to create a crypto wallet and buy Ethereum. A loaded crypto wallet can then be linked to an account with an NFT marketplace.

Once an account has been initialized with an NFT marketplace, a platform user can then purchase NFTs or upload their own NFTs to be sold at auction.

NFT Profit Potential 

The NFT market is the latest growth segment of the cryptocurrency market. More than $338 million in NFT transactions were made in 2020, and the market is poised for exponential growth. Minting and trading NFTs can bring in thousands, or even millions, of dollars in profits.

NFT platforms are the marketplaces where these profits are realized. Opening an NFT marketplace account opens a world of trading and wealth creation in this segment of the cryptocurrency market.