Have you ever wondered how NFT marketplaces make money? Whether you have been considering setting up an NFT platform yourself or you are simply curious about how other marketplaces earn a profit, continue reading. In this article, you will learn how NFT marketplaces work and how their owners make money.
What Is an NFT Marketplace?
An NFT marketplace is an online marketplace where people can buy and sell digital collectibles or NFTs. Sometimes, people will sell NFT art for a fixed price; at other times, they might sell it auction-style at an online auction house. These marketplaces allow digital artists to sell their digital artwork to buyers.
An NFT, or non-fungible token, is a special kind of digital item that you can not interchange with other tokens. Unlike Ethereum, Bitcoin, and other digital assets, which are interchangeable and not unique, each NFT art has a digital certificate confirming it is the original, unique work.
Nobody can forge or copy that digital certificate, as it is verified on the blockchain. Many NFTs use the Ethereum blockchain. Using blockchain technology, the digital certificate is verified on multiple nodes and available to the public.
Ways NFT Marketplaces Make Money
There are two main ways NFT marketplaces make money. We’ll go over some specific marketplaces later on.
By Charging a Listing Fee
You might have to pay a listing fee to sell an NFT on an online NFT market. Such an NFT platform is not free for sellers.
By Charging Gas Fees
In cryptocurrency, gas fees are fees that power transactions. Think of them as gas powering your car or truck. An NFT platform might charge a fee on all NFT sales. In that case, it will usually be free for sellers to list their future NFTs, but they won’t get 100 percent of the sale.
However, it is important to distinguish between gas fees charged by the network and those charged by the platform. For example, every transaction on the Ethereum network comes with a fee that goes to miners who help power the network and keep it running. Even when sending Ethereum from your Coinbase wallet to your friend’s wallet, you will have to pay such a fee.
However, the fees that the marketplace charges are separate. Those fees go directly to the marketplace; it is how they make money.
Also, a marketplace might charge either a seller’s fee or a buyer’s fee. A seller’s fee is deducted from the total price, while a buyer’s fee is in addition to the total cost.
For example, if you sell something for $100 with a 5 percent seller’s fee, you will receive $95. If it is a buyer’s fee, the buyer will pay $105, and you will receive $100. A marketplace might charge both.
Examples of How Different NFT Marketplaces Make Money
Let’s review some popular NFT marketplaces and see how they make money. In this section, I will be talking only about transaction fees the marketplace charges. When first setting up your account and listing/minting NFTs, you usually have to pay network fees, but that goes to miners, not the marketplace.
That means listing your first NFT won’t be free. You’ll have to withdraw from your crypto wallet. However, you may not have to pay for minting until you sell the NFT; that is known as lazy minting and makes sure you don’t pay network fees for no reason.
OpenSea is one of the most well-known and popular NFT marketplaces. Social media, startups, and video game companies have helped contribute to its renown. It is entirely free to list your own NFT on OpenSea and sell it via smart contracts. OpenSea is primarily for ERC721 and ERC1155 assets.
OpenSea charges 2.5 percent of each sale, paid by the seller.
It is important to note that OpenSea also made its ecosystem available to the public for NFT marketplace development. In that case, you get to choose the fees you charge. However, OpenSea will still get 2.5 percent of each sale in exchange for providing its infrastructure to you.
Rarible charges both a seller’s fee and a buyer’s fee, of 2.5 percent each. In total, it takes a 5 percent commission. However, the seller of the digital art can choose to take on the buyer’s fee and pay the whole 5 percent.
SuperRare, unlike many other marketplaces, does not charge seller fees. Instead, it adds a 3 percent buyer’s surcharge. That means if you sell a product for 1 ETH, the buyer will pay 1.03 ETH.
However, there is also a 15 percent artist gallery commission fee for initial sales, so you won’t get 100 percent of the sale. So, if you sell something for 1 ETH, you will only get 0.85 ETH.
Why Are NFTs Trending?
NFTs are trending because many entrepreneurs, such as Jack Dorsey and Elon Musk, have either sold NFTs or talked about it. Artists have turned many memes into NFTs. For example, the girl in the “girl and burning house” or “disaster girl” meme turned the original picture into an NFT and sold it for $500,000.
How to Start an NFT Marketplace
You can use OpenSea to create an NFT storefront and sell NFTs. You’ll need some ETH to power your gas fees. For a full guide on how to do so, click here.
Is It Worth Buying or Selling NFTs?
People buy NFTs for many reasons. They might simply like the artwork, or they might want the NFT because it is sold by a meme creator or by a famous artist. It’s up to you to decide how much an NFT is worth to you. If you have an NFT worth selling, consider listing it on a marketplace; you may find an interested buyer.
NFTs are gathering a lot of attention in the mainstream media. There are many types of NFTs, including memes and GIFs. Some NFTs are selling for millions of dollars, while others are selling for just a few dollars.
Hopefully, you now understand how NFT marketplaces operate and why they were built. NFT marketplace owners charge small commissions to profit off the NFT hype.