Understanding NFT marketplaces

NFTs were everywhere last year. With cute kitties, pixilated punks and well-dressed monkeys taking the internet by storm, it was almost impossible to avoid them.

But before jumping into the colourful realm of virtual memes and characters, it’s important to understand how and where to buy them. Here’s everything you need to know.

What is an NFT?

In case you’re not familiar with NFTs, we’ll give you a quick breakdown.

NFT stands for “non-fungible token”, aka a digital asset that is unique and cannot be replaced with something else. Put simply, fungible tokens like Bitcoin and Ethereum are interchangeable, meaning that each token has the same value as any other coin of the same type.

On the other hand, if you traded an NFT, you’d get something completely different in return. NFTs were created to give authenticity to assets that can be easily duplicated, such as a piece of digital art or an mp3 file. It does this by providing a certificate of full ownership, certifying it as something that’s original, limited edition and cannot be copied.

What is an NFT marketplace and how does it work?

An NFT marketplace is a platform on which people can buy, sell and create their own unique assets. To access this type of marketplace, a user will need a crypto wallet, enough funds in their wallet and a user account.

Once someone has signed up to a marketplace, there are several things they can do. These include:

  • Buying an NFT – NFTs are usually purchased directly for a fixed price or users can bid on them through auctions.

  • Selling an NFT – a more complicated process than buying an NFT, particularly if the user is trying to sell something they have created themselves. The seller will need to upload the digital asset onto the marketplace and either enter a fixed price or opt to sell via an auction. From there, the platform will verify the asset in order for the NFT to be officially listed. Once the sale or auction is complete, the marketplace conducts the transfer.

  • Minting an NFT – Ethereum is a popular choice for creating NFTs as it’s the largest system for these types of assets. Platforms such as OpenSea, Rarible and Mintable run on the Ethereum blockchain, all of which offer NFT creation options.

What are the different types of NFT marketplaces?

Now that we have a basic understanding of the NFT marketplace and how it can be used, let’s look at some of the most popular platforms out there:

  • OpenSea – one of the oldest and most widely used marketplaces that hosts a variety of NFTs, such as art, music, photography and sports collectibles. It supports over 150 cryptocurrencies and offers gas fee-free trading thanks to its cross-blockchain support.

  • Rariable – community-owned and promotes decentralisation. Users are required to purchase its native RARI token in order to buy and sell digital assets.

  • Mintable – often called the “Etsy of NFT marketplaces”, Mintable is easy to use and supports the minting of all types of NFTs.

  • Nifty Gateway – home to a range of celebrity NFTs and holds the record for selling the most expensive NFT at $91.8 million. A popular choice for many as it allows users to buy NFTs with traditional currencies.

  • Binance NFT – one of the largest marketplaces that’s well known for being beginner friendly and offering low minting fees. Users can place bids on NFTs with Ethereum (ETH), Binance Coin (BNB) and Binance USD (BUSD).

  • Axie Infinity Market – a gaming-orientated marketplace where users can buy or sell fantasy creatures called “Axies”. Users can also buy and sell the game’s native AXS token on other marketplaces and cryptocurrency exchanges.

These are just a handful of marketplaces where you can find some of the best NFTs around.

How do I choose the best marketplace?

When it comes to buying or selling NFTs, it can be tricky finding the right marketplace. This can be especially overwhelming for first-time buyers and sellers, so how do people decide which one to go for?

Typically, this depends on a couple of factors. Most notably, deciding the kind of digital asset they’re most interested in buying, selling or creating. Another consideration is the kind of tokens that are supported on a marketplace. While some support a wide variety of tokens, others are limited and only support a select few.

Finally, there’s the platform’s verification process. Scammers and impersonators can easily trick buyers by selling collections without the original owner’s permission. Therefore, people should ensure that a marketplace offers a substantial verification process, such as two-factor authentication.

NFT marketplaces can be a bit mind-boggling at first, which is why it pays to do your homework before getting started. Who knows, you might even own a famous meme yourself one day!

DISCLAIMER – this article is for educational purposes only and should not be taken as financial advice.