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What are NFT Marketplaces?

The global NFT market cap sits at around $40B at the time of writing. Let us explore what NFT tokens are, how they differ from traditional assets, and what the NFT space has in store for us. 

NTF – Nonfungible Tokens – What Are They?

Traditional assets such as money, stock shares and options contracts are all fungible, meaning they can be interchanged with other goods or assets of the same type. Money is a prime example of fungibility. If I borrow a $100 USD bill from my uncle, I can repay him with any $100 USD bill in circulation because all $100 USD bills are worth the same. Similarly, I could also repay him with five $20 USD bills. 

Non-fungibility refers to unique qualities of an asset that differentiate the value of that asset. For example, unique or rare sports and gaming collectibles allow the owners to trade their items while connecting with the community. 

In brief, NFTs are unique digital assets residing on a blockchain along with a transparent record of all previous ownership. Just as a person can own the deed to a property, NFT ownership is codified into the blockchain. NFTs range from a single digital image or avatar to more significant digital assets like real estate in the metaverse. To learn more about NFTs: check out this article

NFT Marketplaces

As crypto art rapidly gains popularity, digital artists and creators have connected with fans and collectors around the world via NFT marketplaces.

NFT marketplaces are like digital art galleries where collectors can view and compare projects, art works and other digital assets. Much like each art gallery may have a unique style, cost structure and/or list of benefits; NFT marketplaces differ significantly from one another. The defining characteristics of most NFT marketplaces are: 

  1. the blockchain/network they endorse (i.e. Open Sea sells ETH NFTs), 
  2. the royalties they offer and,
  3. the fees associated with buying or selling on their platform. 

Along with Open Sea, Rarible and NiftyGateway are a few other examples of platforms where users can buy and sell their NFTs. These platforms are often built on the supported blockchain using smart contracts. 

Preferences For NFT Marketplaces

The qualities of smart contracts make NFT transactions transparent, traceable, and irreversible. Once an NFT is sold – this information is codified and distributed across the entire blockchain, significantly reducing risks for art creators and collectors. It is important to find a marketplace you like and become comfortable with. Some marketplaces have such high volumes that the user experience becomes decayed. For instance, Open Sea was the first NFT marketplace and because it was adopted so highly, quality control has become an issue.

Many scammers try to replicate NFTs on Open Sea because it is not possible for them to vet every project. The NFTs can not actually be duplicated, but imposters will download the pictures and upload them with a similar name and then try to direct traffic to their fake Open Sea page. The metadata will never match because an NFT can not be duplicated, but the scammers make it look similar. That is why it is important to look and then look again before purchasing an NFT to make sure you are on the true verified page. It is also important to find a marketplace where you agree with the fees and accessibility of the wallet. For instance, Solana utilises the phantom wallet. While the fees are low from Solana, the wallet is not mobile compatible which could be an issue for some buyers.

Jack Dunam
Jack Dunam