How to create an NFT marketplace

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How to create an NFT marketplace

The past two years will go down in history not only as the era of covid and lockdowns, but also as times of unprecedented crypto fever. In a matter of months, the growing rate of key cryptocurrencies has given rise to a special generation of millionaires and billionaires - these are miners, traders, investors. Even random lucky ones got rich, who mined a couple of bitcoins 10 years ago and forgot about it (if they didn’t lose their wallet password, of course).

But the NFT phenomenon has taken a separate place in this wave of hype. It turned out that a picture or a meme protected by a cryptographic token turns into a rarity, and the rarity forms around itself a collecting phenomenon and a market. We are talking about a giant market with a turnover of up to 40 billion dollars. The hype around the blockchain and Ethereum capitalization has led to really large investments in NFT trading.

We will not once again dive into the intricacies of the work of non-fungible tokens and reasoning about their future fate. We are interested in a more substantive question - how to break into this unpredictable, but very liquid market in 2022. And do it not as a content author, but as a holder of the NFT trading platform. 

Why NFTs?

Everything indicates that this is a huge uninhabited frontier for investment. In 2021, the market experienced an explosive, frenetic takeoff. So, according to DappRadar, in 2020, the global trading volume of NFTs barely reached the volume of $95 million. But by the end of 2021, this market amounted to 25 billion. There are also estimates of 40 billion. One way or another, we are talking about growth hundreds of times in a matter of months. 

The NFT technology itself did not come out of nowhere, enthusiasts have been experimenting with it since 2014, at the dawn of the crypto industry. In 2017, Ethereum developers presented the ERC-721 token format, which became the main standard for collectors. The NFT industry as the sale of unique digital objects took shape in 2018-2019. Even then, millions of dollars were circulating in this market, and projects like CryptoPunks and CryptoKitties attracted a mass audience and even created difficulties for Ethereum. The industry lacked only a light kick to move into the stage of rapid growth. And at the end of 2020, such a kick “arrived” from crypto exchanges. 

Last spring, the sale of the work of artist Mike Winkelmann (Beeple) - a token-protected collage Everydays: The First 5000 Days - went under the hammer at Christie's auction for $ 69 million. This deal seems to have launched a crazy rally in the sale of digital objects on non-fungible tokens. Let's say another work by Beeple - "NFT-sculpture" Human one was sold for 29 million dollars. 

In April 2021, Anonymous artist Pak sold his NFT work to The Pixel for 1.36 million. The concept of the work is fully reflected in its title - it is really a gray pixel, the most expensive in history. Pixel avatars from the CryptoPunks collectible NFT set are also sold for crazy money. CryptoPunk image #7523 was sold to investor Shalom McKenzie for $11.8 million. 

But it's not just about conceptual art. Memes and real historical digital artifacts go under the hammer. The father of the modern Internet, Tim Berners-Lee, sold an NFT token containing the network's source code for $5.4 million. Twitter founder Jack Dorsey's first tweet went under the hammer for $2.9 million. In the end, the NFT original of the Nyan Cat. Yes, someone really gave 580 thousand for a pixel GIF with a cat. 

Opinion leaders and stars (Eminem, Snoop Dogg, Grimes) hype on the topic of NFT. Brands release unique collections of tokens and dream of “metaverses” (Coca-Cola, Nike and others). The giants of the gaming industry are preparing their own NFT platforms (Ubisoft, Square Enix), metaverse projects trade “land” on the blockchain. In autumn, a virtual site on the Decentraland platform was bought for a record 2.4 million - investors want to hold digital fashion shows there. Finally, Youtube CEO  Susan Wojcicki recently hinted at the introduction of NFT capabilities to the largest video hosting on the planet. And this, no joke, could change the internet forever. 

The first wave of hype in the media is over, but interest in the NFT topic is not going anywhereThis is evidenced by the transaction statistics for the last quarter of 2021, and even Google search trends. 

According to Morgan Stanley, if current trends continue, volume The global NFT market could reach $240 billion by 2030. Experts believe that tokens from luxury brands will be the drivers of such a rise.

It must be admitted that in the new year we have witnessed a large-scale collapse of the crypto market. After the New Year's riots in Kazakhstan, Bitcoin rapidly lost about 20%, and Ethereum - almost a third of its value. But it’s not worth dramatizing, we observed a similar drop last summer, after the ban on mining in China. Contrary to all the forecasts of skeptics, then the crypto market withstood the blow and won back the positions. In fact, the decline in the value of Ethereum may even play into the hands of bold and far-sighted investors. When to invest in “crypto”, if not now?

Why NFT Marketplace?

As you know, the surest way to get rich during the gold rush is to sell shovels to miners. When it comes to NFTs, a “shovel” can be considered an infrastructure for creating non-fungible tokens and operations with them. 

Here we still have to say a few words about the principles of operation of cryptographic tokens. Today, a typical NFT is an ERC-721 entry on the Ethereum blockchain. Such a token is not a “digital chest” in which a meme or GIF with a kitten is waiting for the buyer. The actual contents of the token are metadata and a link to a web-hosted object file. Of course, already today there are NFTs of a different type: tokens, where the conditional “picture” itself and the metadata are stored in the blockchain. But so far, the creation of such artifacts remains too expensive and difficult for the mass market. 

For a full-fledged work with NFT, a regular crypto wallet is not enough for a user today; it will also not be possible to sell tokens on crypto exchanges. We need special platforms where you can create, sell and buy NFTs. And do it as simply, quickly and visually as possible. 

Now the ball in this market is ruled by large and well-known monopoly sites: OpenSea, Rarible, Nifty Gateway and others. They get the most high-profile deals and an impressive market share. According to Dune Analytics, the same OpenSea attracted $300 million in investments already in January 2022 and updated the historical maximum in terms of monthly trading volume, reaching $3.5 billion. This is the highest level since last August - a great signal for the entire industry.

Obviously, the market is ready for a new phase of growth, new investments and new solutions. Right now, new niches are being formed around NFT - platforms for gamers, niche collectors, brands, Metaverse infrastructure. This means that a bold startup has every chance to “shoot” and attract an audience. A strong platform can change the rules of the game and shape the market for itself. 

How the NFT marketplace works

At first glance, everything is simple. If you go to the aforementioned OpenSea, you won't see anything exotic. The site looks like a platform where artists and content makers can freely list their work for sale - there is a collection navigator, there are trends, there are categories of offers. 

But this simplicity is deceptive, the NFT marketplace is significantly different from our usual “buy-sell” sites. At a minimum, for transactions, the user will need a crypto wallet (most often under Ethereum).  

To create NFTs in the marketplace, a blockchain with support for smart contracts is used. Usually it is Ethereum, ERC-721 and ERC-1155 tokens. Tokens generated through a smart contract can be sold and bought.

What is a smart contract? In a nutshell, this is a blockchain program, an automated direct contract between the parties, which “performs itself” under a number of conditions. Such a scheme fits into the “if / then” logic: if the buyer transfers money and receives the goods, the smart contract conducts the transaction - without intermediaries or human intervention. A distributed and open blockchain environment becomes a guarantee of the honesty of the transaction - a record of it will be available to everyone. 

Make a similar picture

In the Ethereum network, the transfer of a token is implemented as the execution of a function prescribed in a smart contract - this allows you to almost completely eliminate manipulations and fraud when changing the owner of an NFT and transferring funds in cryptocurrency. Each NFT on the air contains unique metadata written through a smart contract and is in fact inseparable from it. The token contains its entire path - from owner to owner. It is almost impossible to change this data chain, only add a new block. 

Why do we plunge into these difficulties? To sum it up, a team of blockchain developers is required to implement an NFT marketplace. For such a site, you will need to choose to create a token protocol. As a rule, we are talking about Ethereum, but the huge network of this blockchain is becoming worse for NFT transactions: transactions are slow and require too much cost. A good solution for the future is to think about an alternative blockchain (Solana, Ronin and others), or even develop your own.

Nobody canceled the rules of ecommerce in the crypto industry: users of your marketplace should receive an easy and understandable user flow. For example, create your first crypto wallet in two clicks, and in a couple of minutes create the first NFT on the site by simply placing the desired file in the form on the site. Or, with the same ease, purchase the token you like without thinking about the mechanisms of the blockchain. 

What can be sold on the NFT marketplace?

Short answer: you can sell anything. Digital art, gifs, memes, photos, music, video clips, upgraded characters for MMORPGs, 3D models - any digital objects can be tokenized and placed on any marketplace. 

There are marketplaces that sell everything: such digital analogues of AliExpress in the world of blockchain. There are any tokens there: collectible cards, art, game items, videos, virtual land plots, etc. Such marketplaces are called complex, a typical and most successful example here is the mega-successful OpenSea platform.

But there are specialized marketplaces tailored to a specific niche and uniting communities of interest. For example, the NBA Top Shot collectible marketplace sells tokens based on video clips of the most epic moments of the US Basketball League matches (by the way, the platform has collected 800,000 users). Marketplace Valuables dedicated to NFT-tokens with tweets. There are gamified platforms similar to card games (Waves Ducks) and full-fledged blockchain games (Axie Infinity).

Obviously, there are thousands of such niches, and most of them have not yet been discovered by anyone. Who knows, maybe tomorrow an NFT-exchange for virtual philatelists - collectors of postage stamps from fictional countries will “shoot out”? Or will tokenized Pokemon gain popularity (remember Pokemon Go)? It all depends on the community and the imagination of the developers.

Both types of marketplaces have their advantages and disadvantages. A complex marketplace is conceptually simple and can be developed in any direction. At the same time, a successful niche site can rely on its community, making it easier to promote. 

What you need to develop To

NFT platform, you need an interesting idea, courage and a smart development team. But let's get to the point: let's figure out what kind of specialists are needed in the team, what technologies they will work with. 

In terms of UI / UX, such a marketplace should be similar to sites like eBay and Amazon. Creating or listing an NFT for sale doesn't have to be difficult. It will probably be necessary to implement online auction capabilities, and this mechanism should also be obvious. It is important to provide users with clear usability - the topic of the blockchain is already too complicated to scare away visitors with a complex interface. 

Creating a front-end for an NFT marketplace is almost no different from developing traditional ecommecre platforms. You can use Angular or React frameworks. If the marketplace will be implemented as a mobile application, Kotlin (Android), Swift (IOS) or Flutter (cross-platform) will be used. 

Things are much more interesting with the backend. Under the hood, the site will have the infrastructure to work with the blockchain network, wallets and smart contracts. You can implement its work using Java, PHP or GraphQL. Particular attention will also need to be paid to the reliability of the databases. A good choice would be to use data systems such as MongoDB, MySQL, or PostgreSQL.

One of the key issues in the development of an NFT platform is the choice of blockchain and token standards. Today, the most standard solution is the Ethereum blockchain, ERC-721 and ERC-1155 token formats. But we can also consider alternatives that in the coming years may push the “ether”: Polygon, Solana, Cardano, Binance Smart Chain, Polkadot and others. 

It is important to note that each new blockchain often comes with a new programming language. Let's say Ethereum relies on the Solidity smart contract language. There are also frameworks for working with blockchain: Truffle Suite, Drizzle, Brownie, Hardhat and others.

Today, blockchain developers often use Rust, JS, Python, Golang. At the same time, technology is developing at an insane pace. No one now knows which platform will “shoot” and what will be relevant in a couple of years. 

All this allows us to outline an approximate stack of technologies for the development of an NFT marketplace. If we are talking about a website, then it might look like this: 

Frameworks, libraries: Laravel, Alpine.js, JQuery, livewire

Languages: JavaScript, php, Solidity

Databases: MySQL, MongoDB

Blockchain, token standards: Ethereum, ERC721, ERC1155

Smart contracts: Ethereum Virtual Machine, Hardhat

The cost of creating an NFT marketplace

It all depends on how labor intensive your project will be. You can rely on template semi-finished platforms in which you can implement blockchain work in one way or another. It's cheap, but the result will always be inferior to more expensive and high-quality custom development. 

Another cost factor is functionality. The more complex your idea, the more work will be required to implement it. Each additional feature is an additional cost. 

With or without blockchain, the creation of a large ecommerce project is dozens of hours of painstaking work of specialists. Judging by our experience (which is 22 years on the development market), the implementation of such a turnkey project can take 5-7 months. Taking into account the current realities, it is possible to discuss the cost of developing a blockchain platform with a budget of at least 40-50 thousand dollars. If your contractor is a team from Western Europe or the USA, then this amount can be multiplied by two. 

As practice shows, the development of complex projects rarely goes according to plan and easily goes beyond the framework indicated at the start. This happens not because the team cannot cope, but because in the course of development, the client and specialists have ideas for new features for the platform. Sometimes we are talking about a complete revision of the concept of the project. Conditionally: you wanted to assemble a bike, but during the assembly you realized that you could not carry children on it. Now you need to assemble the pickup truck! So in one of our recent e-commerce projects, the total time for additional tasks exceeded 400 hours.

How to earn here?

If you invest 50-100 thousand dollars in a project, then you are probably doing this not only because of your faith in the blockchain and love for NFT art. The issue of financial success of the trading platform, the prospect of quickly recouping investments and making a profit is important to you.

Modern NFT marketplaces have worked out several forms of monetization. Among them are commissions for transactions, payment for depositing / withdrawing fiat funds, fees for minting tokens, fees for listing and promoting lots to certain positions in the issue on the site. Let's start with the main thing: 

Transaction fees. The easiest and most affordable way to earn money for the marketplace. Each transaction with the purchase / sale of tokens is accompanied by the payment of a small commission to the site. For example, on OpenSea, an NFT buyer pays the site 2.5% of its value. At the same time, the creator of the token pays for the “gas” of the Etherium network (the cost of processing a transaction in the blockchain).

Fee for deposit/withdrawal of fiat currency. We mentioned above that NFT marketplace users need crypto wallets. In fact, trading platforms today are trying to simplify the issue of finance for users and integrate the usual payment tools into the service - bank cards, electronic wallets, PayPal, etc. For example, a user can replenish an account with a bank card directly on the marketplace and immediately replenish a crypto wallet. Such amenities can be made optional and monetized. 

Listing and promotion. A more exotic way to make money for NFT marketplaces is the mechanisms for posting and promoting content on the platform. Some platforms charge additional fees for staking or minting tokens. Others introduce paid opportunities to display lots in the top listing by category, getting to the main page, etc. These are important opportunities for content makers, as the cost of promoting NFTs can be symbolic given the potential benefits.

There are no ready-made recipes and business templates here, you can choose and combine forms of monetization according to the specifics and focus of your site. For example, if your marketplace reaches a monthly trading volume of $400,000, then a 2% commission and paid options for promoting lots will theoretically allow you to recoup an investment of $50,000 in 6-9 months.

The Future of NFT Marketplaces

The Future of NFT Marketplaces

Critics of NFT rightly point out that a token on the blockchain today does not guarantee you legal rights to own a digital object. But they miss the very essence of this fancy market. When it comes to NFT art, here the buyer pays not so much for the “original picture”, but for the story associated with it, which is chronicled in the blockchain. High-quality NFT projects strive to embody an outstanding concept and give rise to interesting storytelling. Sometimes these stories come up spontaneously - like the story of 12-year-old Neela Hayes, who got rich by painting portraits of people with long necks and putting them up for sale in the form of NFTs. This is how the new chronicle of the Internet is being created.

On the other hand, the potential of smart contracts is not limited to art, digital collections, or gaming. For example, the TradeLens blockchain platform (launched by the logistics giant Maersk together with IBM) has changed global logistics, allowing the container shipping industry to be effectively digitized. Today, almost half of all containerized cargo in the world passes through the system. Imagine marketplaces with smart contracts for businesses of all sizes and industries: real estate, investments, cybersecurity, law, retail.

In the field of e-commerce, blockchain could shake the monopoly position of the giants of online retail. The same Amazon today controls about half of the entire e-commerce market in North America. Small shops and manufacturers simply have no chance in open competition with such a business machine. An open and trusted retail blockchain ecosystem could be a game changer: smart contracts would enable stores to reduce costs, speed up transactions, and ensure transactions are secure. In such a system, commissions will be minimal, and frankly unscrupulous sellers and speculators will quickly receive a “black NFT label” and be forced to leave the market.

The potential of platforms for NFTs and smart contracts has no limits, all you need is a good idea and a talented team to bring it to life. If it is better to rely on your instincts, inspiration and business instincts to find an idea, then a reliable partner can help with the “dream team”. Please contact us, for example. We won't let you down.

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