According to NonFungible.com , in the first quarter of 2021, the total market capitalization of large NFT projects increased by 2100% (the market grew by 300% last year ). Most NFTs sell out instantly, with the most famous NFTs selling for nearly $70 million. In addition, celebrities are supporting the NFT hype by tokenizing their music, paintings, memes, short videos, logos, computer code, and the like.
At the same time, the main beneficiaries of the NFT market were sites that provide an opportunity for the simplest possible purchase and sale of NFTs. In this article, we will briefly describe what NFTs are and where they can be used, as well as how to develop your own NFT marketplace and how much it costs .
What is NFT?
A non-fungible token, or NFT, is a digital token that acts as an electronic certificate of ownership for physical or virtual assets such as photos, videos, tweets, computer code, etc. Each NFT is a unique, non-fungible, indivisible digital asset. This means that, unlike bitcoin or ether, NFTs are not identical to each other, therefore, they cannot be traded or exchanged on an equivalent basis and they cannot be used as a means of payment for trading transactions.
For example, NFT Cryptopunk 4250 is a certificate of ownership of a unique character that exists digitally and is described as a pixelated image of a punk woman wearing welding goggles with messy hair and purple lipstick. This item is listed for sale on the Larva Labs marketplace for $116,913.
NFT Cryptopunk 4250 for sale at Larva Labs
Another example of an NFT is a picture of a cute girl smiling in front of a burning house, which became the Disaster Girl meme. 21-year-old American Zoe Roth (she is in the photo) sold this meme for 500 thousand dollars .
Disaster girl. Photo: Dave Roth / Know Your Meme
As you can see, NFTs can make crazy money. Some NFTs are, of course, more attractive and therefore people are willing to pay significant amounts for them, while other NFTs are sold for pennies. The principle of value formation in this market is simple: the more famous (more in demand) the lot, the more expensive it is.
Here are some more examples of famous NFT lots:
- Beeple’s digital collage “Every Day: The First 5,000 Days” sold for an impressive $69 million at Christie’s .
- Twitter CEO’s first tweet sold for $2.9 million .
- The animated film Nyan Cat sold for $590,000 .
- A kitten from CryptoKitties was sold for $172,000 .
How does the NFT marketplace work?
Unlike Bitcoin or Ethereum, you cannot directly trade non-fungible tokens on regular cryptocurrency exchanges. To buy and sell NFTs, you need dedicated trading platforms that allow you to issue, hold, and trade non-fungible tokens. Now this market is dominated by large marketplaces OpenSea, Rarible, Superfarm and Mintable.
They generate NFTs using special smart contracts that add a set of unique information (metadata) to each such token and prescribe its main parameters (name, immutability, inseparability, address/number, etc.). After that, non-fungible tokens can be bought and sold on the site at a fixed price or through auctions.
How smart contracts work in NFT marketplaces. A source
From the client side, NFT marketplaces work like regular online stores . The user needs to register on the platform and create a personal digital wallet to store NFTs and cryptocurrencies. The user can then either use the listing to purchase NFTs or create their own token. Launching an NFT is usually simple and similar to creating an eBay listing. You need to specify the name, price, give a description and an image, photo, video, gif, and the like.
Interface of NFT-marketplace OpenSea
Niches and applications of NFTs
Most NFTs are used to commercialize all kinds of digital art, from digital copies of real paintings to memes. For example, on the OpenSea marketplace, you can buy, sell, and transfer images, videos, gifs, and music. This platform runs on Ethereum and issues NFTs using the ERC721 and ERC1155 protocols.
But fine art is not the only area of application for non-fungible tokens. They can also be used to trade collectible cards (NBA Top Shot), game characters (CryptoKitties), real estate (Mintable), virtual worlds (Metaverses), investment offers (Spencer DINVIDDI contract), and any other area where ownership of anything. The main thing is to create a marketplace that will be able to work with the right of ownership you need.
For example, if you want to develop an NFT marketplace for fine art trading, then you essentially need to create a regular online store , the back end of which should be able to issue, store, sell, and change NFTs. It’s relatively simple. If you need an NFT platform for real estate trading, then you will need to create an analogue of Zillow or Trulia. Such sites should be able to work with MLS databases and databases of state registers, determine the user’s location, etc.
And so it is with every area. Here are some more examples:
- Online learning. Such marketplaces should provide a full range of services for learning via the Internet – from selling a training course to tracking the progress of a buyer’s education and communicating with teachers.
- Investment projects. This kind of NFT marketplace should function like a stock market for trading securities. That is, they must provide the possibility of issuing legal securities with the right to property, dividends or a share in profits.
- Safety. Non-fungible tokens can act as access keys to a content, program, database, operating system , or event. In order to sell such NFTs, the marketplace must be as secure and reliable as possible, as well as support popular buyer-side security tools (Touch ID, Face ID, Eye ID, etc.).
- Video games. The sale and purchase of NFTs, which symbolize unique game items or characters, usually takes place either inside the game (for game money) or on external online platforms that guarantee a safe exchange of real money for a game asset (like on Steam). This implies very close integration with the video game.
Main features of the marketplace
The NFT marketplace combines the functions of an online store , an auction, and a blockchain platform for issuing non-fungible tokens. Users should be able to create their own NFT products and sell them. In addition, these marketplaces usually offer some features to attract and retain customers, as well as improve the quality of their service. When developing your own NFT marketplace, it is better to start by implementing the following things.
Showcase. This feature provides the visitors of the trading platform with all the necessary information about the lot: name, price, description, preview, owner, purchase method, rating, etc. Some NFT marketplaces also provide information about the blockchain and protocol of the token so that users can verify the authenticity of purchased NFTs.
Rarible online marketplace showcase
Search system . Make sure your users can easily find the item they are interested in. It would be nice to split all assets into several categories such as art, photography, videos, domains, memes, and music to make it easier for users to navigate the store listing. Filters also make navigation easier, especially if there are a lot of similar items on the platform.
Registration, login . To be able to buy or sell NFTs on the platform, the user must create an account. Typically, the registration process occurs through email, phone number or social media accounts . In addition, the user is also usually prompted to provide their cryptocurrency address. If it is not there, then the possibility of registration is offered using links to cryptocurrency wallets, such as Coinbase Wallet , Metamask, MyEtherWallet.
Create ad . This process should be simple and not take much time. Ideally, it should be the same as on Ebay. To achieve this, you need to think about the optimal user path and implement something like the OpenSea collection manager. It helps to quickly upload a product to the site and specify the properties of the token, such as name, price, description, tags, external link, and so on.
The process of creating a lot on the OpenSea website
Wallet for NFTs . Users need a wallet to send, receive and store non-fungible tokens and cryptocurrencies. The easiest way to do this is to provide integration with popular crypto wallets. The main thing is that such wallets support the NFT protocol you need. Usually these are wallets such as Metamask, MyEtherWallet, Coinbase Wallet and WalletConnect.
Trading History . Usually, an NFT marketplace should have a section where the user can view their trading history. So you can understand how popular the site is, what they sell on it and at what price. For example, on OpenSea, the trading history includes the following data: event, product name, price, buyer, seller, date.
Trading history on the OpenSea website
Reviews and ratings . Shows how much the lot or the seller/buyer is liked by the visitors. This information helps users evaluate contractors and specific lots. Typically, the rating is implemented in the form of a numerical rating of the product or likes. Reviews can be implemented both in the form of comments that all registered users can post, and in the form of reviews that counterparties leave to each other after the transaction is completed.
Notifications . You can implement a push notification system to inform users about new bids in a selected category or from a selected seller, a status change on a featured item, a new message, a sale of your own lot, or an update to the NFT trading platform.
Support . An important element of any trading platform. With the help of the support service, users will look for answers to their questions, solve problems and conflicts. You can implement a support service as a call center, email support, a separate information portal, or using a help bot.
Non-Fungible Token Standards
In order to run a blockchain-based NFT, certain token standards must be used, which guarantee that the asset will act in a certain way and demonstrate how to interact with the basic functions of the asset. Currently, the most popular standards for running NFTs are:
- ERC721. Used to uniquely identify something or someone based on Ether. It supports smart contracts and offers a permitted way to transfer assets using the transferFrom method.
- ERC1155. According to the standard, identifiers represent not just one unique asset, but a class of assets. Compared to the ERC721 standard, it is much more efficient. So, if you are a video game developer and want to sell 100 sets of armor, then in the case of ERC721 you will need to register 100 smart contacts, and in the case of ERC1155 only one and register its number.
- B.E.P. At the end of the year, the largest cryptocurrency exchange Binance launched a new BSC blockchain with support for smart contracts and compatibility with the Ethereum virtual machine (EVM). And it has analogues of ERC721 and ERC1155 for NFT – BEP-721 and BEP-1155, respectively.
Stages of developing your NFT marketplace
The trading platform for buying and selling NFTs is a complex piece of software that is best left to a development company with relevant experience. Since 2015, we have been helping businesses and individuals implement projects in the field of fintech and blockchain — from wallets to cryptocurrency exchanges. At the same time, our company can help you both create a marketplace from scratch and clone an existing platform.
Step 1: open a project
The first step in creating an NFT marketplace is for you and the development team to review the details of your project in order to assess the technical feasibility of the project and its viability. Here you must answer the questions:
- What niche will you work in?
- How exactly will you sell NFTs?
- Who is your main target audience?
- What token protocol will you be using?
- What technology stack will you use?
- What monetization model will you use?
- What will make your project stand out from the competition?
- What features do you intend to implement?
- Other questions…
The answers to these questions will guide you through the entire development process and help you develop the specifications for building your NFT marketplace. If you find it difficult to answer questions, do not worry, the development team will help with this: they can describe your ideas in text and visual diagrams, prepare technical documentation so that you can start designing.
Once the initial concept and specifications are in place, the development team can create a development plan to provide a rough timeline and budget for the project. Then you can start designing.
Step 2: design and development
When all the technical requirements and the development plan are agreed, the development team can get to work. First, you, the business analyst and/or designers design the user interface of the marketplace (wireframe, mockups and prototypes) describing the user flows and functions of the marketplace. An efficient trading platform architecture is also being created.
UX / UI design . Navigation and the appearance of the user interface are very important when developing an NFT marketplace, since they determine the first impression, usability and user experience in general. So make sure that your site design appeals to your audience and is simple enough for anyone with even the slightest familiarity with Amazon and Ebay to understand.
An example of a possible interface design for an NFT marketplace. A source
Back-end and smart contracts . At this level, the work of the entire internal (server) part of your trading platform is carried out. When developing it, in addition to the usual business logic and marketplace functionality, you must implement work with the blockchain, smart contracts, wallets and provide an auction mechanism (most NFTs are sold using it). Here is an example of a technology stack for the backend of an NFT marketplace:
- Blockchain: Ethereum, Binance Smart Chain.
- Token standard: ERC721, ERC1155, BEP-721, BEP-1155.
- Smart contracts: Ethereum Virtual Machine, BSC Virtual Machine.
- Frameworks: Spring, Symfony, Flask.
- Programming languages: Java, PHP, Python.
- SQL databases: MySQL, PostgreSQL, MariaDB, MS SQL, Oracle.
- NoSQL databases: MongoDB, Cassandra, DynamoDB.
- Search engines: Apache Solr, Elasticsearch.
- DevOps: GitLab CI, TeamCity, GoCD Jenkins, WS CodeBuild, Terraform.
- Caching: Redis, Memcached.
front-end . This is the entire external part of the trading platform, which is responsible for the interaction with the end user. The main goal of front-end development is to provide ease of management, as well as reliability and performance. Here is an example of a technology stack for an NFT marketplace front-end:
- Web languages: Angular.JS, React.JS, Backbone and Ember.
- Mobile languages: Java, Kotlin for Android and Swift for iOS.
- Architecture: MVVM for Android and MVC, MVP, MVVM and VIPER for iOS.
- IDE: Android Studio and Xcode for iOS.
- SDK: Android SDK and iOS SDK.
Step 3: testing the created product
At this stage, several cycles of code testing are performed to ensure that the platform works correctly. The QA team runs several checks to make sure that your project code does not contain critical errors and bugs. In addition, the content, usability, security, reliability and performance are checked for all possible scenarios for using the platform.
Step 4: Deploy and Support
When the platform is tested, it’s time to deploy your NFT marketplace on the server (cloud). Please note that this is not the last step, as you will also need to organize the support service. In addition, it is also necessary to plan the further development of the platform in order to follow the market trends and user expectations.