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How Non-Fungible Tokens (NFT) Marketplaces Are Built

How NFT Marketplaces Are Built

With the rapid development of Web 3.0 projects, we’ve seen a massive spike in the amount of attention of NFTs. According to Dapp Radar, 2021 was the best year for the NFT market. The trading volume reached $23 billion with a floor market cap of $16.7 billion for the top 100 NFT collections.

Non-fungible tokens, or NFTs, are distinct crypto assets. At first glance, they act like regular cryptocurrencies, but they have one crucial difference: each one is unique. Each coin has a specific serial number and owner/creator. NFTs are among the newest, most exciting developments in the blockchain space. Although they may seem complex at first, these digital assets offer a wide range of benefits and various use cases.

So how can entrepreneurs enter this booming space and join the 4th industrial revolution? The best way to get into the NFT craze is to create an NFT marketplace that allows users to buy, sell and trade NFTs. In this article, we will show you how to create NFTs and build your NFT marketplace. 

How is a non-fungible token created?

Let’s first understand why do NFTs have any value at all? Like real-world collectibles, NFTs also have an intrinsic rarity. Each asset is unique, representing one version of that object that exists in the virtual worlds they live in, making NFTs extremely valuable – like a signed collector’s edition of Harry Potter or an authentic Kaws toy.

In simple terms, NFTs are like a digital safety deposit box holding a digital file that nobody can alter. The movement of this file can then be tracked forever, ensuring that everyone can always check whether the item is original. It’s very similar to how most of the valuable art is stored in a vault with security guards watching it all the time. With NFTs, blockchain does all the watching and tracking for your digital artwork. What’s more, when you put your NFT on sale, you can set up a percentage that you will earn when someone re-sells your NFT and earn a commission forever.

Anyone can create digital art and mint it into an NFT in a few simple steps.

If you are into technical details, you’ll be surprised that you can create an NFT with just 14 lines of code. This token is an instance of a smart contract and has a unique token URI with your asset metadata in a JSON file that corresponds with a specific schema. This metadata is the place where you store the data about your NFT, including file name, description, and the image itself.

How do non-fungible tokens work?

Fungible vs non fungible tokens

Unlike crypto, you cannot exchange NFTs with one another directly. The uniqueness of each NFT makes it impossible because there are no two identical NFTs. You can think of them as plane tickets. Each ticket has unique information, including the passenger’s name, the date and time of the flight, and the destination. These characteristics make it impossible for people to trade plane tickets with one another.

Some other key characteristics of NFTs include:

  • Unlike Bitcoin satoshis, NFTs are indivisible, and you can’t split them into smaller denominations.
  • Blockchain stores historical ownership data of the digital asset, so every NFT is verifiable.
  • Each digital asset token is indestructible because smart contracts protect data from removal, replication, or deletions.

What happens when you buy an NFT?

When you buy an NFT from a digital creator on an online marketplace, the NFT becomes your property, meaning that even if you purchase a piece of digital art from game creators, you own this art, not the company that created it. However, the NFT artwork owner has limited rights to the work.

Usually, you can’t make the asset available to the world at large and violate copyright law. The same applies if you purchase a physical painting. Owning it doesn’t automatically grant you the right to display it in public. You also can’t sue someone for reproducing the image without your permission because you are not the work’s copyright owner. A digital artist or a company needs to assign the copyright to you in writing to obtain full rights to the artwork.

Now let’s look at creating an NFT without any technical knowledge.

Step 1 – Choose the type of NFT

NFTs are more than just artwork. You can mint event tickets, music, photos, game items, virtual land, and more. Do you have a real-life object, like a photo with a celebrity autograph or a valuable collectible art? You can create an NFT for this object too.

Currently, there is a lot of emphasis on digital art, and there are tons of collections of classic NFTs like crypto punks, crypto corgis, etc. You can even generate art using GANs or turn your videos into animated GIFs.

Step 2 – Select a marketplace

There is a diverse selection of marketplaces to mint your NFT. Two major types of NFT marketplaces are self-service and curated. If you opt for a self-service NFT marketplace, you will be able to create any kind of NFT using any digital file format. Self-service platforms also allow creators to receive royalties from future sales of their NFTs.

Curated NFT art marketplaces are exclusive to digital creators authorized to mint or create NFTs on the platform. Those platforms usually host the highest quality digital art and are perfect for those looking to discover exclusive digital assets.

Keep in mind that most marketplaces charge “gas” fees and require some downpayment to initialize your account. For example, Opensea charges up to $100 to set up your account on the marketplace.

Do your research before picking a marketplace. Ethereum fees are the highest. You can save on ETH gas fees if you transact on weekends, especially late at night. If you are looking for a bargain, opt for Solana-based NFT marketplaces, like SolSea, with fees starting from as low as $0.001. Once you pick your platform, create a user account and a wallet (if you don’t have one yet).

Step 3 – Create a wallet

You need a crypto wallet to conduct any transactions on the blockchain, store your NFTs, pay listing fees, etc. The wallet also connects to NFT marketplaces and other dapps. Your choice of blockchain will determine the wallet that you will create, depending on the token standard.

For example, the Ethereum token standard is ETH-721, while Binance Smart Chain’s is BEP-721. ETH-721 token is supported by Metamask, Coinbase, and Trust Wallets. If you decide to mint on SolSea using Solana’s standard SPL token, the Phantom wallet is your best choice for this marketplace.

Step 4 – Buy some crypto

To cover transaction fees for minting your NFT, you will have to top up your digital wallet with crypto supported by the platform. You can buy crypto on exchanges like Binance, Coinbase, Kraken, etc. Then you can transfer the funds from the exchange to your wallet.

Step 5- Upload and mint your NFT

Once you’ve created your profile on a marketplace and connected your wallet, you can upload and mint your digital art. Now it’s time to set the price. You can select a fixed price or create a timed action on most platforms and put your NFT on sale. Want to create and sell several NFT assets? Read on to learn more about NFT collectibles.

How to create NFT collectibles?

NFT collectibles are a series of NFTs centered around one specific theme, like Crypto Punks, Crypto Kitties, Bored Apes Yacht Club, etc. Before creating your digital collectibles, you need to develop a clear marketing strategy, understand your audience and what kind of NFTs crypto community wants to see. Here are some questions that will guide you through the process:

  • What theme should I focus on?
  • What shall I design?
  • What traits and rarities will my crypto art have?
  • How many NFTs should I create in one collection?
  • What is my pricing strategy?
  • What is my marketing strategy?

Most collections have 10,000 and more NFTs, but there are digital art projects in the crypto space with less than 1000 pieces. If you are still new to the NFT world, it’s better to create a larger quantity because it will bring you more unique holders, a more extensive community on social media, and a faster growth rate.

To determine rarities for your digital collectibles, you need to use various traits of your characters. To get some inspiration, you can use the rarity checking service rarity.tools and research the number of traits from successful NFT collectibles, for example:

On average, each successful collection has 8-9 traits. To achieve a good rarity ratio, you will need to find a balance between giving users equal chances to buy a rare NFT but without devaluing super rare ones. Remember that you need to find ways to incentivize those who hold your common NFTs and ensure that you don’t create common NFTs for most of your collection (more than 70%) as it won’t stimulate people to buy them.

How do I create an NFT marketplace?

Creating an NFT marketplace from scratch is a challenging and lengthy process. If you don’t have enough technical knowledge, we recommend hiring blockchain developers to help you develop your project.

Here are a few steps that you will need to follow to create your digital art marketplace:

Step 1 – Outline your concept

Before going ahead, ask yourself the following questions:

  • Who is your audience? What is your niche?
  • What blockchain will you use?
  • What tech stack will you implement?
  • How will you monetize your project?
  • How will your project stand out from the competition? Does it offer something unique that other marketplaces don’t?
  • What are the key features of your marketplace?

Once you answer these questions, you will have a clearer direction and can proceed to the development phase.

Step 2 – Design the marketplace

User flow on NFT marketplace

First, you will need a designer to create a user interface concept and the platform’s architecture, including templates, prototypes, and frameworks. Then you can start working on the UI/UX design. NFT marketplaces usually have very straightforward UX design, smooth usability, and straightforward navigation. Anybody should be able to figure out how to use your digital art marketplace. Think of eBay or Amazon, but for NFTs.

Step 3 – Begin developing it

NFT marketplace design

Now you can start working on the back-end and smart contracts. This includes the development of wallets integrations, auction mechanisms, business logic, etc. The tech stack of NFT marketplaces will depend on the choice of the blockchain network and usually includes:

  • Token standard
  • Smart contracts
  • Frameworks
  • Programming languages
  • Search engines
  • DevOps
  • Databases NoSQL
  • Databases SQL

Front-end development will take care of the user interaction, security measures, productivity, and interface.

Step 4 – Test test test

Your newly developed NFT marketplace will have to go through several test cycles to ensure it functions properly. Usually, you will need a Quality Assurance (QA) team to run test cycles and discover bugs and issues. The QA team tests usability, security, productivity, reliability, content, and other features in various scenarios (mobile, desktop, tablet, multiple browsers, devices, etc.).

Step 5 – Release

Once you are done with testing, you can release your NFT marketplace to a cloud server like IPFS. However, it doesn’t stop there. You will have to work on the continuous development of your platform to follow market trends and meet changing user requirements.

Summary

Each NFT is unique and one of a kind. As with any other rare asset, the supply curve is highly volatile. The value of non-fungible tokens (NFT) is driven by supply and demand in the market. There are a finite number of NFTs, and gamers, collectors, and investors are interested in purchasing them for their rarity. People often pay a high price for NFTs because of the limited number and the potential for future growth.

A significant benefit of blockchain technology is the ability to verify each individual item’s inherent values. Consequently, we shouldn’t limit NFTs only to digital art. NFTs can be minted to sell fractional real estate, land, event tickets, physical art, natural resources, and more to record information like their location and ownership history. For example, a physical art-collectible could be verified by original authentication of both the artist and sale date or a piece of land could be identified by signature information. Since we can trace NFT back to the issuer, holders can be confident that their items are authentic.

If you are thinking of building an NFT marketplace, don’t limit yourself only to digital artworks and keep the door open for other opportunities, including NFTs representing assets in the physical world.

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