What Is an NFT Marketplace?
Ending 2021 with a market value at just around $22 billion, non-fungible tokens have become a product type to watch as it grows in the world of modern commerce. Creating an NFT is relatively simple, especially for those already involved in blockchain and crypto exchange. As minting volume exploded in the past few years and sales skyrocketed, companies like OpenSea and Rarible opened up to provide a service platform where collectors and creators could buy, sell and store their digital assets. These are just two examples of marketplaces, both hosted on the Ethereum blockchain, that support NFT exchange. If we think of NFTs like any other product being sold online, we can think of the marketplace as Amazon, Etsy or eBay. The only real difference is that NFT marketplaces are built on a blockchain network and therefore execute sales between users with cryptocurrency or tokens rather than fiat currency. The entire process is mostly automated through smart contracts built into the base code of the specific marketplace, with the end goal being that anyone, however limited in their technical knowledge, can easily click, drag and drop items to build their own digital store and begin selling NFTs.
Why Build One?
Maybe you’ve already gotten in on the action and minted your own NFT project, or maybe you’re still watching from the sidelines wondering when the fad will be over. No matter which side you’re on, the reality is that right now, NFTs are selling like hot cakes and, although the hype cycle is sure to level out in due time, it’s much more likely that the market will find structure and stability in its operations, rather than go away altogether.
In any industry, the products that become most profitable are the ones that facilitate the job that everyone is trying to do — the shovels and the pick axes. Think of what it would have been like back in the peak coal mining days of the 1880’s through the early 1920’s. Before mechanisation entered the scene, with millions of labourers hard at work in the mines every day, the tools that allowed them to work would have been the hottest commodity! With true respect for this history, the philosophy I live by is to sell shovels. At a time when everyone wants to build an NFT store to sell things, trying to be the next Beeple, why not be the one giving them the power and the platform to easily make that happen?
Consider Shopify. When e-commerce started taking off, the existing sales platforms were clunky and not easily scalable. Shopify was created at just the right time by a pair of sellers who were simply trying to create a better experience to build their own online store. Realising how many other people were having the same problem, they quickly shifted to developing a great customer experience in digital store creation that catapulted them into a multi-billion dollar business. Today, Shopify powers over 1 million online stores all around the world on a subscription model that benefits customers with a scaling business while bringing in continuous revenue for Shopify’s owners. Selling shovels.
Markers of a Good Market — What Do Users Want in an NFT Marketplace?
Disclaimer: this is not an ad for Shopify, but their platform is just such an easy reference for this topic. The first menu buttons of their landing page encourage you to ‘Start. Sell. Market and Manage.’ From the jump, a seller is empowered to dive in and execute on any or all of the important aspects of a business in sales. For an online store, these are the base actions a store owner will need to harness in order to get off the ground and engage buyers. Shopify does a great job of walking users through each of these steps and providing solutions in a clear and simplified manner. You have the option of getting straight down to business if you already have your company set up, or if you need help finding a name and claiming the domain, you can start from scratch.
Will these needs be the same for an NFT store? Let’s consider what a Web3 trader may want out of a white label marketplace:
- NFT Design — First-time creators or those looking for an all-in-one experience may want the ability to log in to a single account and build their new store right up from scratch. Simple and intuitive digital art design tools can allow users to experiment and create assets to place on the market.
- Mint an NFT — Once your very first design is complete, it has to be turned into a digital asset and added to the ledger (Ethereum is by far the most popular for NFTs) before you can sell to anyone on the blockchain. A good marketplace provider will give creators the option to complete this process and pay all associated fees via their platform.
- Store Creation & Design — Just as with any other online store, NFT creators will need to create and amplify their brand through their marketplace. Whether the NFT store is a subsidiary of an existing brick and mortar establishment that already has a solid and well-known brand, or it’s a first-time concept, the owner will need a way to create a visually appealing landing page and interface that helps buyers identify and remember their store. As noted in point 1, clean and easy to use design tools (specific, in this case, to web page design) will be crucial to include in a white label marketplace.
For the NFT store owner who already has a library of minted digital assets ready for sale and just needs the platform to sell them, this step might be his entrance point into using our NFT marketplace. We’ll want to provide him with the option of easily importing a group of existing files or pre-minted digital assets into his new store.
- Payment Gateways — For a creator simply looking to monetize her work, sorting out the technical background details is a step she’d definitely want to avoid. A blockchain gateway — or more specifically in this case, a crypto payment gateway — allows sellers to accept payment from customers in the form of cryptocurrency. A gateway can be set up to collect payment in whatever form the trader prefers. You can choose to accept only one form of crypto, such as Bitcoin or Ethereum, or you can opt to allow buyers to purchase with any of the thousands of existing cryptocurrencies they may own. With the latter option, in addition to serving as a wallet to collect and hold these payments, the gateway will also need to have the functionality to provide exchange and conversion services.
It’s good to note here that transfer fees on the blockchain are exponentially lower than your standard debit/credit card swipes and ACH transactions. They’re also much faster (fractions of a second as compared to 3–5 business days) and more secure.
- Marketing — At this point, the NFTs are made, the store is set up, payment collection is ready to go and all our designer needs are buyers so she can start making money. The problem that needs to be addressed? — if no one knows about her great new NFTs, how will they find and buy them?
Our white label platform should include a browser feature where interested buyers can sort, search and find any NFT they’d like. The homepage can introduce top-sellers or popular stores, while sellers can pay an extra fee to boost the advertising of their own assets. Marketing on a whole is a huge aspect that can be built out and developed as we better understand user needs and habits.
- Management & Tracking — Once the store is launched and bids and orders start coming in, our creator will need a new suite of tools to keep track of their work. The marketplace platform can pull out relevant transaction data from the blockchain and list it in an understandable format for the store owner. Information like how many purchases have been made, what is left in his NFT inventory, how many times has each NFT been transferred or resold and what royalties have been collected from these trades is important to track, not only for personal knowledge, but eventually for tax reporting and business audit purposes.
The more we dive into the intricacies of NFT creation and sale, and the more real-time feedback we get from users as this market continues to evolve, there will undoubtedly be a host of new plug and play options that reveal themselves as beneficial in the whole process. What we’ve discussed here is just the tip of the iceberg when it comes to the potential for a platform of this type.
In such a new market, creators and users need clearly defined processes with easy, seamless execution. A great platform will have integrated all the required tools for building a unique, custom NFT store intuitively and from scratch. Of course, anyone with good, working software development skills could build their own shop from the ground up, but to set up the gateways, the marketing and the management frameworks as well as clean design tools for building a page would be a massive undertaking when all you want to do is go from creating a unique digital asset to making money off of it.
With a white label marketplace, each store is truly its own. There is no conspicuous branding that ties you to the platform or makes it seem cookie-cutter. Buyers simply see a clean, functional and intuitive interface where they can interact with a creator and their business. The creators or sellers have direct access to the systems needed at each step. From developing and minting the NFT, to posting it for sale and representing their work at the highest quality, to ultimately accepting cryptocurrency payment, transferring it to a wallet and tracking their NFT sales and transfers. Ability to scale is an absolute requirement.
As the developer of a platform of this capacity, you would be monetizing your skills in a way that brings you revenue for each creator out there who decides to use your system to make their own revenue. Check out this article on building a SaaS application for some direction on the pricing models you can consider when launching an app like this one. You can also read more about financial modeling for blockchain applications to get an overview of how you may need to think about cost output when building on the blockchain.
Often, the best way to get in on an emerging market is to provide the support that allows it and all its users to operate seamlessly. Creating NFTs is great and all, but creating a platform that takes away all the guesswork for users of all capabilities opens you up to the entire market and users at every level of interaction — not just leaving you at the mercy of those who think your pixelated rat collection is cool.
I don’t know about you, but I’m about to go out and make some shovels.