The trade of Non-Fungible Token’s (NFT) has grown exponentially in the last few years. From their creation back in 2014 the NFT laid dormant in the digital landscape for many years. But in 2020 the online community, riding the cryptocurrency wave, re-discovered the NFT and set it on a trajectory to large scale adoption.
An NFT provides a way to define and store ownership of a digital item on a distributed ledger – a cryptographic blockchain. This then allows that ownership to be traded in a more secure and reliable way.
In order to buy and sell NFT’s we need a marketplace. An NFT marketplace is more complex than a traditional online marketplace as it involves integration with a blockchain, wallet addresses and the web3 protocol. Today, we’re going to delve into setting up an NFT marketplace.
Note: NFT’s can be built on blockchains other than Ethereum for simplicity we will be focusing on the Ethereum platform today.
What is an NFT
A non-fungible item is one that has unique properties which prevent it being copied or replicated. A “token” in the context of cryptocurrency is a representation of ownership of an asset.
Brining the two together, an NFT is a crypto token embedded on a blockchain which is implemented according to a standard that allows them to persist cryptographically secured information. This information describes the verifiable ownership of a digital item – such as digital art, game items, music characters, social media posts and practically any other digital item.
Proof of ownership such as this has previously only been possible with traditional paper or digital contracts. The downside of these contracts is that there is no dedicated ledger available to reliably store and verify these contracts. Put simply, traditional contracts are susceptible to forgery and falsification whereas NFT’s are not.
Characteristics of an NFT marketplace
The primary function of a digital marketplace is to facilitate trading. Sellers need to list items for sale, and buyers need to purchase items. In addition to this, assets must be exchanged, and settlement must occur.
An NFT marketplace offers exactly these functions, but the critical implementations differ from traditional digital marketplaces.
In an NFT marketplace, a buyer and seller must both have digital wallets and associated wallet addresses for a trade to occur. An NFT marketplace must be web3 enabled, this is a requirement to allow it to operate as a Distributed App (dApp) and interact with the blockchain. Lastly, an NFT marketplace must allow for the creation of NFT assets in accordance with Ethereum’s ERC721 token standard – the standard for NFT’s.
Currently, modern browsers are not web3 enabled. This means that as a prerequisite to a user interacting with an NFT marketplace, they user must install a web3 “bridge” in the form of a browser extension. The most popular one today is Metamask. This extension enables the secure interaction between the user’s crypto wallet and the dApp underlying the marketplace.
Building an NFT marketplace
Like most application development projects, there are two primary approaches one can take to developing an NFT marketplace:
- Option #1 – leverage an off-the-shelf product.
- Option #2 – build a bespoke solution from the ground up.
The usual pros and cons apply to each approach. The former is quicker and cheaper to establish initially, but less customisable and extensible, and it comes with ongoing platform fees. The latter is more time consuming and costly to set up but is fully customisable and vendor independent.
#1 Off-the-shelf NFT marketplace
In off-the-shelf approach, one can leverage a platform such as OpenSea, Rarible or Mintable. These platforms offer a Platform-as-a-Service (PaaS) for non-technical users to get up and running with an NFT marketplace quickly.
The typical process of getting your NFT marketplace up and running is;
- Create an ERC721 compliant token contract, in the case of OpenSea, this is representative of a “Store Front”.
- Generate a set of “Genesis” tokens using the token contract.
- Offer the tokens up for sale.
For a full walkthrough on setting up an NFT marketplace of OpenSea, you can check out this quality walkthrough: How to Create your own NFT Marketplace on OpenSea in Three Minutes or Less.
#2 Bespoke NFT marketplace solution
A bespoke NFT marketplace, built from the ground up, offers a completely customisable platform for NFT trading. However, the complexity is far greater than that of leveraging an off-the-shelf product.
The typical Ethereum-based technology stack is as follows.
- The Ethereum blockchain
- Token standard (such as ERC721 or ECR1155)
- Ethereum Virtual Machine (EVM)
- Application code
- DevOps and hosting
Developers must do all the work of building the application code, database structure and the DevOps deployment pipeline. The application must be integrated with the Ethereum blockchain via the EVM to create and interact with Smart Contracts.
NFT’s make up a key component of what is known as “Web3” – the next evolution of the internet. Web3 is a way of describing an internet that promotes:
- Privacy, security and non-discriminatory
The rise of “Content Creators” has seen a need to drastically improve on how digital assets are owned and traded. NFT marketplace’s moves the power back from the centralised platform to the individual.
So far, NFT marketplaces cater for the trading of digital products such as;
- Game assets
- Social media / internet posts
- Real estate
- And more…
Also, entrepreneurs are finding new uses for NFT’s all the time.
NFT’s are a fantastic technological advancement that are changing the way that digital asset ownership works. An NFT marketplace is a more reliable, secure and future-proofed way to trade digital items compared to traditional platforms.
The two options for setting up a marketplace cater for most scenarios. Off-the-shelf platforms are quick, easy and cost-effective for smaller budgets, whereas bespoke solutions offer the customisation and extensibility that many larger businesses need.
With the onset of Web3, the internet is changing rapidly. It’s important to embrace the latest technological achievements in order to ensure your ventures thrive online well into the future.