How Does an NFT Marketplace Work

10 Nov 2023 by Harry Newman 4 min read

The rise of NFTs has been enormous, this is helped by NFT marketplaces, a website or app that allows digital collectors to buy, sell and create their digital tokens that represent unique, tangible or intangible items.

NFTs are different cryptocurrencies like Bitcoin or Ethereum, where they are traded on exchanges. NFT marketplaces are where NFTs are listed and traded, due to their unique traits and attributes.

What is an NFT Marketplace

NFT marketplaces allow NFTs to be stored, displayed, traded and minted.

Much like Amazon sells goods listed by users, an NFT marketplace sells NFTs that users list.

NFT marketplaces exist on a wide range of blockchains, Ethereum being the most popular blockchain for NFTs.

NFTs have revolutionized the digital art and collectible landscape, and at the heart of this, lies NFT marketplaces.

The primary functions of an NFT marketplace include:

The creation of NFTs by artists and creators, by uploading their digital content, defining ownership details and assigning royalties.

Users list their NFTs for sale or auction, auctioning allows users to compete for ownership.

NFT marketplaces provide great features for users to discover new NFT projects or NFTs of interest, this includes, a search functionality, curated collections and trending categories.

Connecting a crypto wallet is required to facilitate transactions, depending on which blockchain you are using will depend on what wallet is compatible with that NFT marketplace, this could be MetaMask for example.

NFT marketplaces record ownership and transaction history on the blockchain, ensuring transparent and immutable ownership.

What Are Some NFT Marketplaces

There are many different NFT marketplaces available, an extensive list of other NFT marketplaces is linked below:

OpenSea

Opensea is the largest and one of the most popular NFT marketplaces, the NFT marketplace is mainly on Ethereum, but it also supports Polygon, Klatyn, and Solana blockchains.

Rarible

Rarible is an NFT marketplace that allows users to create and trade NFTs with ease. Rarible supports Ethereum and Tezos.

Magic Eden

Magic Eden is a marketplace which originated on Solana, the NFT marketplace is now compatible with Ethereum, Polygon and Bitcoin.

A list of the many other NFT marketplaces can be found here.

How Does an NFT Marketplace Work

To use an NFT marketplace you need a crypto wallet, the type of blockchain you are on will depend on the wallet you connect to the NFT marketplace.

Users or anyone interested in minting NFTs can begin the process by uploading their digital content to the marketplace, this could come in the shape of digital art, videos or anything else the NFT marketplace will support.

Creators define the metadata and attributes associated with the NFT, this includes the name, description, amount created and assigns royalties to the NFT; so every time the NFT is resold the owner receives a percentage of the sale price.

This ensures the creators will receive compensation for their work.

Creators can choose to list their NFTs at a fixed price, alternatively, you can opt in for an auction-style listing, where the highest bidder wins. This can help to drive the price of the NFT up.

NFTs once purchased by users can be resold or traded on secondary marketplaces, this still maintains a transparency thanks to the blockchain.

NFT marketplaces rely on smart contracts to execute the buying and selling process automatically.

Minting, listing and transferring NFTs requires a transaction fee to cover blockchain network costs, this is usually a small amount.

NFT marketplaces will provide easy instructions to follow with the set-up of creating an NFT. Most have a user-friendly interface making it easy to use for anyone.