The idea of paying $28.9 million dollars for an image that can be downloaded in one click may seem absurd. However, that’s what NFT trading looks like from first sight. Originally NFTs, or non-fungible tokens, emerged as a part of the Ethereum blockchain. One of its first applications was the CryptoKitties game. Breeding and selling digital cats inside the cryptocurrency system became a prototype for numerous NFT games.
So, What Exactly Is an NFT?
NFT stands for “non-fungible token,” and it is created to verify ownership of a unit of data recorded on a blockchain. If we compare NFT with any other cryptocurrency, the main difference is that, as an art object, each token is non-replaceable. For example, any cryptocurrency has a certain market value at a certain period of time. Just as how one dollar equals another and can be replaced by any other one-dollar bill, it’s fungible.
NFTs, on the other hand, have different market values depending on their unique features and attributes — even those from the same collection and creator. They cannot be replaced with any other NFT and do not hold the same value as any other token, so it’s non-fungible. The potential value of a unit of data increases when it has more emotional value and significance.
What Can Be a Non-Fungible Token?
Lots of music, art, domain names, in-game items, and even NBA Top Shot moments were minted into tokens, adding value to those through sentimental attachment. An NFT contains a unique fingerprint of a file, a token name, a symbol, and (optionally) a link to a file. These attributes are later on stored on the blockchain. Anyone can track previous owners and the selling prices for any given item. It’s fraud-proof because all creations and transactions are monitored and confirmed by a network of computers.
Copying and distributing digital items takes just a few clicks; however, the blockchain records each transaction, which helps track the original owner — and no one can tamper with it. So, the creator can sell his artwork as an NFT, but he gets to keep the copyright and reproduction rights, which means he can still sell prints. NFTs can also be programmed to give royalties to the creator for every transaction.
The price of an NFT is determined by people. The most expensive NFT artwork so far — “The First 5000 Days” by Michael Winkelmann, professionally known as Beeple — was sold at Christie’s auction for $69 million. Be it $2.9 million for a Tweet or $600,000 for a cat GIF, they are worth exactly as much as someone is willing to pay for them.
Prices depend on a number of factors:
- Who made the NFT
- The story behind an item
- Context and circumstances of an NFT’s life span
- When it was made
- What people think about it
- Who the previous owners are
The text below will explain what makes NFTs so unique and how to create your own NFT marketplace.
The size of the NFT market is growing at a fast pace, with its market value hitting $23 billion in 2021. The NFT marketplaces are organized as P2P platforms, which allow users to tokenize and trade almost anything.
Examples of the top successful marketplaces include the following:
- OpenSea. It’s the world’s best known and largest NFT marketplace, built on Ethereum. OpenSea’s choice of NFT varies from works of visual art and music to digital land ownership rights and domain names. Creators can make their own collections of items.
- Rarible. This NFT marketplace is focused on digital art (photos, memes, games, etc.). While it’s built on Ethereum, the platform supports several cryptocurrencies. It also has launched its native token, RARI.
- Nifty Gateway. This marketplace is famous for selling digital artwork of popular artists, including Beeple (the author of the abovementioned $69 mln picture). It holds partnerships with famous creators and brands. The platform is powered by the crypto exchange Gemini.
- Mintable. Built on Ethereum, it deals with NFTs of art, music, games, and collectibles. The distinguishing feature of this platform is the option to create NFTs without transaction fees.
- Foundation. The platform is tailored for digital art creators, including beginners. It supports high royalties (10%, including secondary sales) and allows users to create and curate digital art collections.
How Are NFTs Created?
The process of creating NFTs from digital files is referred to as minting. During the process, an item receives a unique address stored on a blockchain. The metadata created during minting is unchangeable, and that’s what creates a unique, valuable asset from the replicable object. For minting, one usually needs a crypto wallet with the currency of the chain they are going to use.
The currency is used to pay the gas fees, which are required by the blockchain system to compensate for the energy spent on a transaction. It may be burdensome for amateur creators who later fail to sell their works. That’s why some marketplaces provide options for gasless minting. In this case, the transaction on a blockchain doesn’t happen until the item is sold.
How Does an NFT Marketplace Work?
An NFT marketplace’s basic task is to allow users to create, sell, and buy assets of non-fungible tokens. Transactions are accompanied by a fee that usually varies from 2.5-5% of the transaction volume.
NFT creators earn by receiving a certain percentage of the initial sale profit and royalties. Royalties for the NFT artwork usually emerge each time a transaction is executed.
From the NFT seller’s viewpoint, interaction with the marketplace normally includes the following elements:
- Creating an account with a linked digital wallet for NFT storage
- Creating assets by uploading digital goods and tokenizing them
- Waiting for assets to go through moderation
- Listing assets for sale
- Making transactions
- Receiving payments
Most of the marketplaces have options for auction: listing assets for sale includes bidding. There is also a difference in payment methods, as some marketplaces support fiat currencies.
Technology Stack for Building an NFT marketplace
A key element to creating your own NFT marketplace is choosing the technical implementation.
First, you need to choose a blockchain platform. Most NFT marketplace platforms are based on the Ethereum blockchain. The Ethereum standards for NFTs include the following:
- ERC712: The first and the most widely used standard, which is used for NFTs only. Tokens are unique, and a piece of digital art can be stored as a single token. It’s possible to price each token independently.
- ERC 998: The standard allows you to create composable tokens using both NFT and fungible tokens.
- ERC 1155: This standard, initially developed for games, allows you to register fungible tokens and NFTs using an identical smart contract.
However, there are alternative systems, the main features of which are summarized below.
|Binance Smart Chain||An ecosystem designed especially for NFT and DeFi apps. Compatible with Ethereum Virtual Machine|
|Flow||An ecosystem developed especially for NFT games and collectibles after the launch of CryptoKitties|
|EOS||dGoods standard, especially for NFTs. Allows using one smart contract for NFT and fungible tokens|
|Tron||TRC-21 standard for NFTs. Aimed at social media/entertainment applications|
|Solana||System with high transaction speeds and low transaction fees|
|Cosmos||Ecosystem that allows exchanging assets across different blockchains|
|WAX||Carbon-neutral blockchain ecosystem. Provides a vIRL NFT standard that is suitable for V-Commerce and allows game integration|
|Polkadot||Decentralized platform, which enables cross-chain transfers|
|Cardano||Platform based on the results of peer-reviewed research. Provides CIP25 standard for native NFT tokens|
If you are going to use several systems, consider their interoperability.
Another consideration: choosing storage options for artworks created by users. There is the option to store them on the same blockchain as NFT tokens. However, when it comes to large files, this may become way too costly. Storage alternatives are listed below:
- Decentralized storage
- Storage on a centralized server
- Storage on a private server
Options for NFT Marketplace Development
There are two basic ways you can approach NFT marketplace website development:
- White label development
- Custom development
Let’s dive into the pros and cons of each.
White Label NFT Marketplace Development
White label NFT marketplace development means that the developer makes a product for sale and does not identify it with their brand. Customers are buying a ready-made product that they can rebrand as their own. This form of product development does not imply an individual approach. Also, it sometimes involves a third-party agency that rebrands and resells the white label product.
- Time- and effort-saving
- Lack of uniqueness and special features
- Lack of control over product quality
Custom NFT Marketplace Development
Custom development refers to the creation of a unique product on demand, which is tailored for a specific purpose. It implies close communication and collaboration with the service provider. You will have to create a detailed plan of features you need and explain your vision to the developer.
- Possibility to interfere with the development process
- Unique product covering all your needs
- May be time- and effort-consuming
- Costly compared to white label
Must-Have Features for an NFT Marketplace
When you are developing an NFT marketplace, one of the key attention points will be making it distinct and unique. However, the following features are the basics to start with:
- Account registration. Users need to be able to create protected personal accounts to manage their assets.
- Creating non-fungible tokens. Give the user the possibility to upload their digital items and turn them into tokens.
- Creating and managing asset listings. Sellers can list their items for sale, assign and change values, check the listing approval status, and edit or delete lists.
- Token search. Buyers can easily find and purchase NFTs that match their interests, searching by category and applying filters.
- Buying and selling items. Offer an easy interface for interaction between sellers and buyers. This may or may not include options for bidding.
- Digital wallet. This may include options for creating a new crypto wallet or linking an existing one to an account. More advanced variants may allow adding several wallets or supporting fiat currencies.
- Storefront. This will give the potential users an overview of items they can buy. It’s essential to organize the interface in a simple and intuitive way.
How to Develop a Custom NFT Marketplace
Developing a one-of-a-kind NFT marketplace requires a unique idea. As a guideline to finding and embodying it, consider the following steps:
1. Find your niche
Before starting your own marketplace, analyzing the tendencies of the current market is a must. The following fields are already being widely implemented in creating NFTs:
- Visual art
- Property ownership rights
Since almost anything can be turned into a non-fungible token, there is still a lot of space left to display creativity. Whether inside or outside the scope of those options covered by major marketplaces, you can specify a unique field. To give you an idea about possible variants, there are NFT marketplaces that specialize in tokenizing and selling:
- Comedy collections
- User-created ASMR
- NFTs related to Asian pop-culture
- Cricket highlights
- Luxury items
- Programmable art
Analyze the existing propositions of competitors to find inspiration. Think of your target audience and the items they would like to tokenize. Would it be digital files or something physical? Or maybe both? What is the main topic unifying them? Specifying the field will help you outline the idea of your future marketplace.
2. Find developers
Once you have a clear vision of what your marketplace should be like, find people to embody the idea. Having an in-house team to implement the idea is great. However, involving specialists who have experience with similar types of projects can significantly simplify the task. You may find a dedicated software development team provider and hire the whole team at once. Creating a team of freelancers is also an option but would require much more organizational effort.
Regardless of which way you choose, filling your team with people experienced in creating decentralized finance apps would be a great plus. If not, your developers should have a background at least in dealing with:
- P2P networks
- Decentralized applications
Of course, the basic rules for checking the reliability of the service provider apply as well.
3. Prototypes and design
Prototypes are the first stage of implementing the idea. Start with a low-fidelity prototype. This kind of software prototype includes only basic functionality and very schematic outlines. As this stage does not imply interactivity, it can be done on paper. Starting with lo-fi prototypes reduces the cost of possible mistakes.
After outlying the basics, turn to the high-fidelity prototype. These prototypes are close to the real product: they’re usually computer-based and interactive. High-fidelity prototypes are used to outline the UI and actual design of the product.
4. Build an MVP
This stage turns the prototype of your future marketplace into a real software product. Developing a version with a minimal set of basic features will test the project’s viability and show its weak areas.
Starting from MVP will reduce the cost of mistakes and allow you to make radical changes if necessary. At this stage, you can also start promoting the product; this will help you gain an audience and keep them waiting for the actual launch.
5. Release and improve
When the NTF marketplace MVP version is ready and working, it’s time for release. You can start with either a website or an app — or try both at the same time. Another option is to release a demo version first.
Launch the product and see the results. Collect user engagement metrics from the first users. Analyze them and use the results for making necessary changes: improve usability and add new features. Use promotion to attract new audiences. Keep your marketplace updated on a regular basis.
How Much Does It Cost to Create an NFT Marketplace?
There are several factors that influence the cost of creating an NFT marketplace. They can be divided into two groups. The first group refers to the features of the marketplace itself, including:
- Design. How detailed and sophisticated should it be? A custom design will increase the price compared to templates.
- Functionality. What kind of features do you want to be included? Are those just basics, or are some special add-ons included? How difficult are they to implement technically?
- Third-party integration. Do you want users to add several wallets from different platforms? Should they be able to connect their accounts with social network services?
The same goes for the mobile app, with an additional question of target platforms.
The second group is related to the size of the team and the level of wages of specialists you are going to hire. To develop an NFT website, the minimum necessary software development team would consist of:
- Frontend developer
- Backend developer
- UI/UX Designer
- QA engineer
- Project manager/Product manager
- DevOps specialist
Given these factors, the cost of developing an MVP for a marketplace starts from $54,000.
It usually takes 3 to 5 months to develop an NFT marketplace website, as the process will need to go through the following stages:
- Idea evaluation
How To Start an NFT Marketplace: Summary
Given the striking popularity of the NFT market, building your own NFT marketplace is a promising challenge. It requires finding a unique niche combined with technical implementation. Now that you are familiar with the outlines of NFT marketplace development, it’s time for action. The Attract Group team can help you implement your idea, as we have already helped other clients. Feel free to contact us to consult on any questions you have left.