NFTs • October 26, 2023, 6:40AM EDT
Non-fungible tokens, more commonly known as NFTs, are unique digital assets that represent ownership of something distinct and scarce. Unlike regular cryptocurrencies or fiat money, these special assets cannot be mutually exchanged for one another because each one carries a unique value based on its distinctive traits and attributes. In essence, NFTs are digital tokens that symbolize ownership of a specific item, whether it is a tangible or intangible asset such as artwork, a soundtrack, a collectible item, an in-game item like an avatar, or even real estate.
When it comes to acquiring these tokens, there are specialized NFT marketplaces where they are listed and traded. These platforms function similarly to e-commerce websites like Amazon or eBay, but instead of physical goods, they deal in NFTs. Using these marketplaces generally requires setting up a crypto wallet that is compatible with the blockchain network that supports your desired NFTs. Users will then need to pre-fund their wallet and create an account on the marketplace of your choice.
It's important to note that listing and creating NFTs on a marketplace platform usually incurs a blockchain network fee, which can vary depending on the blockchain-based system you opt to use. Ethereum, for instance, is a popular system for buying, selling, and creating unique digital items, but it also has the most expensive fees. However, there are other options available, such as Binance Smart Chain, Flow, Tron, and Solana, among others.
NFT marketplaces are not one-size-fits-all. There are both universal platforms suitable for a wide range of NFTs and more niche-like platforms tailored to offering specific types of non-fungible assets. Different marketplaces often tend to cater to certain types of NFT enthusiasts and traders.
Types of NFT Marketplaces
These platforms can generally be categorized into three main types: universal, art-oriented, and niche-specific. Universal platforms, like OpenSea and Rarible, offer a broad spectrum of NFTs, ranging from digital artwork to virtual real estate. They are a great starting point for those new to NFTs, as they offer a wide variety of tokens and cater to a diverse user base.
OpenSea is the most established NFT marketplace and for a long time had the highest trading volumes. It was created in 2017 and lets people buy and sell NFTs of all types.
Blur is another universal NFT marketplaces but one focused on more high activity traders. It enables traders to perform actions such as "sweeping the floor" where they buy multiple NFTs from a collection in one go. Since launch, it has overtaken OpenSea's trading volume, partly due to token incentives.
Art-oriented platforms, such as SuperRare and Nifty Gateway, focus primarily on digital art. These platforms collaborate with a select handful of concept artists and allow for the creation of unique, one-of-a-kind NFTs. They are ideal for artists looking to monetize their digital artwork and for collectors interested in digital art pieces.
Niche marketplaces, on the other hand, cater to specific types of non-fungible assets. For instance, platforms like NBA Top Shot and Axie Infinity cater to sports and gaming enthusiasts, respectively. Other niche platforms focus on virtual real estate or even digitized tweets. These platforms are perfect for those with specific interests and are looking to engage with like-minded individuals within the NFT community.
Factors to consider when choosing a marketplace
Choosing the right NFT marketplace can be a daunting task, especially for beginners in the digital collectibles scene. Several key factors should be considered before making a decision. First, the type of NFT that interests you most significantly influences the marketplace you should opt for. For instance, some platforms cater specifically to digital art, games, or music, while others offer a broader range of categories.
Secondly, the liquidity and market volume of a marketplace are crucial to consider. While some NFTs can be considered as long-term assets waiting for value appreciation, the ease of re-selling these assets back into the market can be a challenge, especially if the underlying asset lacks popularity. Therefore, platforms with higher liquidity and market volumes may offer a more favorable environment for trading NFTs.
Thirdly, understanding the royalty fees associated with a platform is essential. These fees can vary widely across different marketplaces and can significantly affect the overall cost of purchasing or selling an NFT.
Lastly, the overall user experience offered by the platform should be evaluated. Some marketplaces provide more than just a platform for transactions; they offer a comprehensive experience that allows users to interact with each other, trade valuable items, and more. In essence, the choice of an NFT marketplace should align with your interests, financial considerations, and desired user experience.
Disclaimer: This article was produced with the assistance of OpenAI’s ChatGPT 3.5/4 and reviewed and edited by our editorial team.
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