What is NFT marketplace?

What Is NFT And How Does It Work?

NFT is a non-fungible (unique) token. Unfortunately, such a definition does not make it clearer, so the meaning of the concept should be formulated somewhat differently: NFT is a technology for digitizing interaction with any goods, both physical and virtual. It is difficult to overestimate the impact it will have on human life in the future.

What is a token today is known to many, but how to understand "non-fungible"? It is this property that distinguishes NFT from other tokens, eliminating the possibility of their exchange or replacement. Non-interchangeability is a fairly ordinary phenomenon, it is very common in the world around us.

In fact, non-interchangeable can be called anything that has a unique set of characteristics that make it unique, not subject to replacement. For example, the classic fungible asset is money. Any monetary unit can be replaced with a similar one without consequences. A personal car or a house are non-interchangeable entities. If the car is changed in the parking lot, the owner will immediately detect it, even if the make and model are the same.

Each entry in the blockchain is called a token.

Blockchain has opened the widest possibilities of decentralization, which means the abolition of trusted intermediaries included in the functioning of complex systems. For example, to store information about finances, a trusted intermediary is needed – a bank, the storage of personal data is entrusted to government agencies. Naturally, when information is concentrated in one place, this makes it easier for it to be misused and forged. Blockchain, on the other hand, is the placement of information on multiple computers, which eliminates the possibility of its forgery or destruction.

For the first time, the blockchain began to be intensively used to work with cryptocurrencies. The most famous of them is Bitcoin, all information about operations with it is stored on countless machines and is continuously updated. The movement of this currency does not require the services of any bank or financial institution. At the same time, money does not become just symbols on the monitor – the owner can freely dispose of it, store it, transfer it, and destroy it. This is also the reason for a certain disadvantage of cryptocurrencies – it will not be possible to restore access to the funds lost. No one can ever do this, so this kind of activity requires considerable concentration and responsibility.

Ethereum blockchain platform was next. Its creator and ideological inspirer of further development, Vitalik Buterin, raised the use of blockchain to a new level. To control the execution of smart contracts invented by him, you do not have to involve a person. After signing, all control functions and decision making are assigned to machine code. Thanks to Ethereum, the use of technology has expanded significantly, transactions of varying complexity have become possible, with all kinds of digital assets.

If earlier blockchain platform services operated only with fungible tokens (Bitcoin, Ether, Litecoin), then it quickly became clear that not all assets are equal in nature, among them there is a considerable percentage of unique ones. Here is the answer to the question of how NFTs arose. Everyone really wanted to put non-fungible assets on the blockchain and entrust transactions to smart contracts.

It turns out that NFT is a kind of digital certificate, implemented as a kind of unique object.

Uniqueness is ensured through the ERC-721 standard. The innovation is different in that NFT is unrealistic to fake, break into components or replace.

A token is an exclusive right to any digital product, be it audio, video, drawing, and so on, because it contains all the information about the latter, and all actions with the token  (purchase, sale or exchange) are automatically transferred to it.

Finding tokens on a public blockchain makes it easier to track the history of a product. Reliable and up-to-date information about the manufacturer, current owner, recent operations, is always available. 

In principle, with the help of NFT technology, it is possible to transfer to the blockchain (tokenize) almost any product, not excluding physical ones. Of course, in this case, there are still a couple of unsolved problems, but progress does not stand still. Digital assets are simply created for tokenization.

NFT Example

NFT examples are numerous. You can tokenize:

works of digital art;

NFT game artifacts  (weapons, skins);

assets of virtual universes;

NFT music industry pieces; 

anything.

NFT Marketplace Meaning 

NFT tokens are not traded through regular trading terminals. They are unique, so each of them can only be bought as a separate item, for example, as a trading card. Therefore, special NFT marketplaces have been developed for them.

NFT marketplace is a dedicated trading platform designed specifically for non-fungible tokens. On it, users can buy an NFT or sell an NFT, store, and exchange. As a rule, trading is carried out for cryptocurrency. Most often it is Ethereum (ETH), but some marketplaces can accept Bitcoin (BTC), other types of cryptocurrencies and stablecoins for payment.

How Do NFT Markets Work? 

Buying and selling are carried out in much the same way as on Amazon or on any other marketplace. Some NFTs can be bought immediately, just click on the appropriate button and pay for your purchase. In some cases, you will have to fight at the auction.

As a rule, you can also store NFT tokens on the marketplace. Or they can be withdrawn to another cryptocurrency wallet. For example, non-fungible tokens that are designed according to the Ethereum standard (for example, ERC-721) can be stored in the official Ethereum wallet, or with crypto wallets that support ERC standard tokens.

Types of NFT Marketplaces 

There are several types of NFT marketplaces and ways to classify NFT marketplaces.

For example, according to the degree of restrictions on the placement of tokens, two types are distinguished:

Open. Each marketplace user has the right to place their own token on the platform.

Closed. Only certain developers (usually the project team) have the right to allocate tokens. 

Types of NFT marketplaces can also be divided according to other criteria. For example, according to the form of ownership.

In this case, the following types of trading platforms are distinguished:

General. Such marketplaces usually do not have a single owner or organization. They are created by a group of users. Most often, shared marketplaces are completely open.

Private. Created for specialized organizations or for a small group of people who publish their NFT examples. 

Also, platforms of this type are classified according to the types of content that they publish.

According to this criterion, there are three types of marketplaces.

With free publication. Accept NFT with any kind of content. Platforms include a large number of categories and NFT drops. 

Thematic marketplaces. Publish content with a single topic.

Curated. The administration of such marketplaces independently decides which types of tokens are of great value. Therefore, users initially offer their NFT examples, but the project managers approve the publication.

On all these marketplaces, the purchase of non-fungible tokens is free. Therefore, if you want to invest in NFTs, there will be no problem.

Why Are NFTs So Expensive?

Every time people hear about the benefits of NFT, they have the same question: “Why would I want this, can I just save the picture?”

Indeed, in the past, anyone could find a digital work on the Internet and save it. At the same time, the copy did not even have the slightest difference from the original, complete identity. This was a big problem for the creators.

With the advent of NFT, the situation has changed – there is a difference, and it is huge. Yes, you can save now, but these will be exact copies, not originals. It is even more profitable for the author if the work is downloaded and posted on social networks.

When an NFT1/1 (copy number/number of copies) is created based on a virtual painting, for example, it secures ownership of it. As the number of copies increases and more people become aware of a computer-generated work, its cultural value only increases.

It is something similar to classical art. No one doubts the value of Leonardo's paintings. An endless stream of tourists visit the Louver just to look at them, reproductions adorn the walls, T-shirts, desktops. The Mona Lisa craziness has been going on for years. All this only leads to an increase in the price of the canvas.

It's the same with digital art. Visitors to the art gallery are sure to enjoy the authentic works of the masters. Blockchain is an art gallery. The value of the work is due to the interest in it, its cultural context. NFT captures this value, certifies authenticity and ownership. Any digital product after tokenization has additional useful characteristics, which significantly increases its value.

How to Get in NFT Market And How to Create an NFT?

The first step is to determine for yourself which area is of greatest interest. If the craving for beauty prevails, then an inexpensive purchase on the marketplace or the release of your own NFT will be a good option to start with.

Regardless of the direction, an Ethereum NFT wallet is required. It is with its help that authorization is carried out on sites. Usually, this does not require the provision of additional data (password, e-mail, etc.). Thanks to the keys, public and private, the Ethereum wallet acts as a universal means of identification, which is very convenient. The Ethereum platform provides convenient and quick access to work on a variety of sites without unnecessary confirmations and boring questionnaires.

The best option would be to connect the MetaMask wallet.

There are thousands of installation instructions on the network, so we will not dwell on this in detail. It is only worth noting that the installation takes place in the form of a browser extension. Everything is clear and simple.

Cryptocurrency is not needed to familiarize yourself with the operation of the system in advance. But if there is a desire to buy a non-fungible token (or minting an NFT), you will need to have some Ether.

You can buy it on the crypto exchange. Immediately after the purchase, the currency will be stored in an exchange wallet. In order to find it in your MetaMask and get it in full, you need to make a withdrawal.

The next step is to copy your wallet number to MetaMask and activate the withdrawal in the exchange menu. A modest fee is charged for each Ethereum transaction, which is necessary to fund the computing power on which the blockchain operates.

In order not to think about commissions, you need to learn one simple thing. Every action in EHT requires gas, a special entity, the fuel of Ethereum. For the purchase of NFT and their minting gas is also needed. And gas is expensive, but Ethereum is working to solve this problem. Of course, in addition to paying for NFT, you will need to pay for gas. The price may vary, depending on the load on the network. Purchases are divided into instant and auctions.

Should I Buy NFT?

There are many reasons for buying NFTs. The main value of these tokens is their exclusivity. For collectors, owning a unique digital work is like buying an original painting, antique furniture, or a rare piece of jewelry.

Fans of a particular artist may be driven to buy NFT by the desire to financially support their favorite author. There are also investors, speculators and resellers on the NFT market. They buy a work for a relatively small price, and then sell it for a higher price, taking advantage of the high volatility of cryptocurrencies or waiting for the work they buy to become more popular.

However, it should be borne in mind that the buyer is forced to rely on the one who issues the NFT token. The NFT market is built on trust, there are almost no guarantees, but in more cases, people keep their promises. It is beneficial for the authors to support the issued tokens, because they will receive a commission from their resale on the secondary market, after they have been sold to their first owners.

The theft of non-fungible tokens is not excluded. There are already cases of hacker attacks and theft of tokens from accounts. NFT is a young phenomenon and therefore the market, despite the rapid development, remains volatile and unstable.

 

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