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NFT Marketplace: How to Choose the Right NFT Marketplace for Artists and Collectors

Introduction

In the article NFT Marketplace: Introduction to NFT and NFT Marketplace’s Mechanism, we have given you the primary mechanism of NFT and the specialized NFT marketplaces. NFTs (Non-Fungible Tokens), records on a blockchain that represents pieces of digital media, have become extremely popular this year. NFT marketplaces around the world play a vital role in the trading and liquidity of NFTs. This article introduces what to consider when choosing an NFT marketplace for listing and buying NFTs for your purpose. The currently existing NFT marketplaces worldwide often provide several different features and are built for distinct usage scenarios. Therefore, depending on the position in the NFT marketplace, you need to consider some things when choosing an NFT marketplace.

NFT Marketplaces

NFT marketplaces are online platforms built on the blockchain (Ethereum in most cases) for NFTs to be displayed and traded. Sellers, like digital artists, can sell their NFTs on the NFT marketplaces. Buyers and collectors are able to browse and purchase the desired NFT primarily through bidding on the NFT marketplaces. To use an NFT marketplace, one must have a crypto wallet to complete transactions and store their currency.


Figure 1: NFT Marketplaces

According to data from DappRadar, there are over 30 active NFT marketplaces currently in the world. The number of NFT marketplaces for exchanging digital assets will be expected to rise with the popularity of NFTs. Also, the NFT marketplaces will become increasingly fragmented in the long run, and competition among them will become more intense. Depending on your position in the NFT trading, i.e. whether you are an artist or a digital artwork collector, here are the features you need to consider when choosing the best NFT marketplace that suits your needs.

For Artists:

Types of NFT Marketplaces

The NFT marketplaces can be divided into two categories: the open marketplaces, where anyone can freely join as a creator, and the closed marketplaces, where only invited users, even companies, are allowed to register as creators. Unless you are a very famous digital artist, it is ideal to develop your career as an NFT artist through minting and selling on the open marketplaces and then preparing to be invited into a closed platform.

Some NFT marketplaces (such as OpenSea) are platforms that operate as open markets for all types of NFTs. As an open market NFT artist, you may face issues regarding exposure. In other words, compared with other closed communities, the exposure of NFT will decrease due to too many registered users. In the closed marketplaces, NFT artists can only mint and sell NFTs only if they are invited to enter the market. For example, as the most well-known closed marketplace, Foundation has been running on a mechanism called “Community Upvote”, providing artists with the opportunity to vote among themselves, where the top 50 artists with the highest number of votes can enter the community as creators. In addition, some NFT markets focus on narrower categories. The most famous is NBA Top Shot, which only sells basketball highlights as a virtual trading card.


Figure 2: Community Upvote Mechanism on Foundation

Fees for NFT Minting

The process of the creation of NFTs is essential for artists. Similar to the process of creating coins through minting, adding NFT to the blockchain is called minting. Minting refers to the process of turning digital artwork into a part of the blockchain. Therefore, the NFTs of digital art is immutable. It is worth noting that after minting your NFT, it usually enters your wallet, which means you can cast on one marketplace and sell on another.

Minting Techniques

Using some minting techniques the marketplace might offer NFT creators more choices on the minting fees. For example, the minting technique, lazy minting, can postpone the gas fee for minting NFT until it is sold to its first buyer. In other words, the gas fee for minting is included in the same transaction that assigns the NFT to the buyer, so the NFT creator never has to pay the minting fee.

Lazy minting has been adopted by some marketplaces, such as OpenSea and Rarible, which lowers the barriers to entry for artists and NFT creators. According to data from Rarible Analytics, before Rarible introduced lazy minting, the average gas fee of a single ERC-721 token minted on Rarible was 0.022 ETH, which was approximately equivalent to the US $82.26. The introduction of lazy minting makes it possible for artists to make NFTs at zero cost.


Figure 3: Lazy Minting Feature Introduced by Rarible in October

Blockchain

The blockchain(s) that the NFT marketplaces are operating on also plays a crucial part in the NFT minting. Ethereum is the first decentralized blockchain technology to introduce NFT into the crypto world, on which most current NFT marketplaces are built. However, NFT transactions on Ethereum can be considered relatively expensive in terms of gas fees for smaller transactions. Several adjacent blockchains, such as Binance Smart Chain (BSC), Polygan(Matic), and Tron, compatible with the Ethereum Virtual Machine (EVM), have been developed to optimize NFT transactions.

Let’s take Polygan as an example. Matic, which was later renamed Polygon, was developed to solve the scaling problem of Ethereum. Polygon’s current scaling solution includes the Plasma chain, which allows users to transfer transactions from the main chain to the sub-chains to achieve fast and cheap transactions, and the PoS chain, which has its own proof-of-stake consensus mechanism to protect decentralization. In general, Polygon uses a combination of Plasma and PoS, on the premise of sharing security with Ethereum, to improve efficiency and ensure the security of transactions. In terms of transaction fees, Polygon’s transaction fees are about $0.00004-$0.00012, which is far lower than the gas fee on Ethereum.

As gas fees on Ethereum continue to rise, more NFT creators are turning to Polygan. In late August, the NFT social network Showtime announced that its users could mint NFTs on Polygon for free. This new feature of the platform became welcomed by many crypto artists to use Showtime. The gas fee-free NFT minting on Showtime using Polygan can be sold on OpenSea.


Figure 4: The NFT Social Network Showtime Coming to Polygon Studios

NFT Royalties and Token Standards

NFT transactions, unlike traditional art transactions, allow artists to be paid through their sales and the royalties they may receive from subsequent sales. With blockchain technology, which allows secure traceability, secondary market sales are possible. According to data from NFT tracker NonFungible, more buyers and higher dollar volume are participating in the secondary market for NFTs.


Figure 5: Buyers of NFT is higher in the secondary market than the primary market

NFT royalties give the creator a certain percentage of the sale price each time the NFT is sold on the marketplace. The use of smart contracts will enable authors to obtain a share of the sales price automatically and immediately. Imagine you have created an NFT artwork on an NFT marketplace such as Rarible. A buyer purchased it for 8 ETH. Therefore, you obtained 8 ETH (Ethereum). Suppose you also enter a 10% royalty in the minting of this NFT, that is, whenever a sale occurs, you will get 10% of the revenue. Now, your buyers are auctioning your artwork at a higher price in the market. As your reputation improves, another buyer might buy it for 300 ETH. Since you have pre-coded 10% of the royalties into the NFT, you will receive 30 ETH from this sale.


Figure 6: Setting your royalties on OpenSea

The token standard also influences the creator’s royalty in terms of cross-marketplace transactions. Not all NFT marketplaces utilize the same token standards as we have discussed in the last article. Commonly-used token standards include ERC-721, ERC-1155, and ERC-998. Understanding the token standards that underlie the NFTs will help users understand the different use scenarios of each type of NFT and the various blockchain protocols involved. For instance, Mintable only supports NFTs built with ERC-721 standards, while OpenSea supports ERC-721 and ERC-1155. The ERC-721 standard is now being revised to allow a more efficient method of payment of royalties. It aims to solve the problem of payment of copyright fees when NFT cross-marketplace transactions. The ERC-721 standard will support royalty fees transactions that do not depend on the marketplace on which the NFT is minted.

For Collectors:

Categories of NFTs

The first thing to consider is the categories of NFT. Depending on what category of digital assets you plan to seek, there are NFT marketplaces with different mechanisms for you to search for and buy NFT.

If you are a sports fan, the NBA Top Shot and Sorare are two of the most famous NFT marketplaces. The former is for selling digital trading cards of NBA players. The latter is a football game with collectable NFT cards. For digital artwork, which is the focus of many NFT marketplaces, Choosing the right marketplace often depends on the rarity and style of the artwork you are seeking. For example, the SuperRare marketplace considers the social aspects of the art collection, described as the “Instagram meets Christie’s”. There are other sorts of NFT marketplace for virtual real estate, such as Decentraland, and for video games, such as Axie Infinity.

Blockchain

Choosing the appropriate blockchain that the NFT marketplace is built on is very important in many aspects, including scalability, transaction costs, and the degree of decentralization. Except for the Ethereum blockchain that most NFT marketplaces are built on, some other blockchains have been developed with strategies like energy-efficient blockchain transaction validation mechanisms. For example, Flow was developed by Dapper Labs, who are also the developers of CryptoKitties, to achieve a faster decentralized network, empowering the entire decentralized application ecosystem, especially games and digital collectables. NBA Top Shot is one of the NFT marketplaces built on Flow.


Figure 7: The Flow Blockchain

Payment Methods

Another consideration is the payment methods supported by the NFT marketplace. That is, whether it is the case that users can use fiat currency to purchase NFTs in the marketplace or cryptocurrency is required for sales. Moreover, paying with credit cards and debit cards, and some other online payment methods, such as WeChat Pay in China, might be more convenient ways for new users, who might not be very familiar with cryptocurrency, to buy NFTs on the marketplace.

Several NFT marketplaces such as SoRare have accepted multiple payment methods, including cryptocurrency, credit card, and debit card. However, many NFT marketplaces, such as Decentraland and SuperRare, still merely support cryptocurrency payment.

Popular NFT Marketplaces

OpenSea


Figure 8: OpenSea

As the world’s largest NFT marketplace as well as one of the earliest established NFT marketplaces, OpenSea covers a wide range of NFT categories, including digital art, music, domain names, gaming assets, and cards. OpenSea is built on the Ethereum protocol and offers integrated support for the Klaytn and Polygon networks. The NFTs on the OpenSea include ERC721 and ERC1155 assets. OpenSea shares the gas fee more equally between creators and buyers, allowing people with tight budgets to mint NFTs.

Features

  • Fees: Lazy minting + 2.5% marketplace fee for each sale
  • Blockchains: Ethereum, Polygon, Klaytn
  • Token standards: ERC-721, ERC-1155
  • Supported payment methods: Credit card, Debit card, Cryptocurrency, Bank transfer
  • Creator royalty on the secondary market: Configure up to 10%

Rarible


Figure 9: Rarible

Rarible is another popular NFT marketplace globally, whose prominent category of NFTs available is digital art. What is spatial of Rarible compared to OpenSea is the “RARI standard tokens”, which allows the users to mint singles or multiples, add properties, set commission, and choose fixed-price sales and auctions. Rarible is built on Etheruem and uses token standards ERC-721, ERC-1155.

Features

  • Fees: Lazy minting + 2.5% marketplace fee for each sale
  • Blockchains: Ethereum, Polygon
  • Token standards: ERC-721, ERC-1155
  • Supported payment methods: Cryptocurrency
  • Creator royalty on the secondary market: Open-ended

Nifty Gateway


Figure 10: Nifty Gateway

Nifty Gateway is an NFT auction house and marketplace featuring major artists and creators supported by the Gemini cryptocurrency exchange. Nifty Gateway has sold NFTs by Beeple, Grimes, LOGIK, and other famous NFT artists. Nifty Gateway is designed to allow everyone to collect NFT. However, for minting on this marketplace, you must apply. At Nifty Gateway, fiat currency is the most important means of payment. Therefore, this market is not suitable for people who is extremely passionate about Ethereum/DeFi.

Features

  • Fees: 20% marketplace fee for each sale
  • Blockchains: Ethereum
  • Token standards: ERC-721
  • Supported payment methods: Credit card primarily, with prepaid ETH for some transactions
  • Creator royalty on the secondary market: 5%

Foundation


Figure 11: Foundation

Foundation is an application that facilitates real-time auctions of NFTs. Foundation is exclusive, which means one must be invited by the existing creator of Foundation instead of submitting an application. As we introduced before, Foundation runs on the mechanism of “Community Upvote”. The advantage of participating in Foundation lies in its high level. If you are a Foundation artist, collectors will know that you are at this level where your works are more likely to get high value.

Features

  • Fees: Gas fees + 15% marketplace fee for each sale
  • Blockchains: Ethereum
  • Token standards: ERC-721
  • Supported payment methods: Cryptocurrency
  • Creator royalty on the secondary market: 10% on Foundation or OpenSea only

Conclusion

With the upsurge of NFTs, the number and categories of NFT marketplaces are expected to increase in the long run. Many of the current marketplaces are built for certain targeted users with specific purpose such as buying NFT collectives of highlight reels, while some serve a larger group of NFT creators and collectors. Therefore, this article helps you to choose the best NFT marketplace that suits your needs, depending on what your position is in this boom of NFT. We provide a flowchart to guide your decision in figure 10 and figure 11.


Figure 12: Chart to Guide Artists on Choosing the NFT Marketplace (created by Whimsical)
Figure 13: Chart to Guide Collectors on Choosing the NFT Marketplace (created by Whimsical)

Author: Yufan Zhang & Zichao Chen, Duke Kunshan University

Project Lead: Prof. Luyao Zhang

Acknowledgements:

Design: Austen Li

Executive Editors: Xinyu Tian

Chief Editor: Prof. Luyao Zhang

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