Would you buy a digital image for $69,000,000?
Well, someone definitely would. In 2021, a now-famous digital artist Beeple whose actual name is Mike Winkelmann sold his artwork on the Christies auction for this price. It was a collage that united 5,000 pictures that Beeple was creating every day from 2007 to the day of sale.
Here it is by the way:
What makes this piece of digital art so precious? It is unique. You can copy this picture and paste it into an article or save it to your hard drive. But you won’t own it. That’s because the original digital picture has a “certificate of authenticity”, which is an NFT.
In this article, you’ll learn what an NFT is, how it works, how and why people use them, and how you can benefit from this technology.
In 2021, NFT art sales reached 1.5 million per month counting 11 million for the whole 2021. 2022 can be even hotter.
What’s an NFT token?
NFT is an abbreviation for Non-Fungible Token. Basically, a token is a piece of information that is associated with some digital content. It’s a digital signature for a real-world object. It could be digital art, music, texts, sport cards, digital collectables, and even tweets. Yeah, people sell their tweets.
An NFT item is unique and you can’t replace it with another item. It’s just like physical art: there’s only one original Mona Lisa painting and thousands of copies.
In the physical world, everyone knows that the original painting is in the Louvre Museum. But in the digital world, you can’t tell if the piece of art you’re looking at is original. An NFT associated with this piece of digital art makes it the “original Mona Lisa”.
NFT works on the Ethereum blockchain. They are created by the ERC-721 and ERC-1155 standards. The standardization of the NFT issuance allows for higher interoperability—non-fungible tokens can be transferred between multiple decentralized systems.
What are the beneficial properties of NFTs?
NFTs are unique and irreplaceable. You can’t exchange one token to another. You can’t copy and fake it. Let’s see why NFTs have become so popular among digital content creators.
- It’s authentic—the information about a token and its owner is open and available to the public in the blockchain.
- It’s tradable—you can sell NFTs on crypto marketplaces, and they are always in demand.
- It’s transferable—thanks to the ERC-721 and ERC-1155 standards used for NFTs creation, you can transfer NFTs between different decentralized applications to trade digital art and collectibles.
- It’s not interoperable—each NFT is unique and you can’t exchange it to another token like you do with cryptocurrency or fiat money.
- It’s programmable—NFTs are fully programmable, which means they can be programmed to be associated with different fields like design, crafting, forging, music production, etc.
- It’s scarce—coders can limit the supply of NFTs. It greatly increases the cost of an item because it’s limited.
What do people use NFTs for?
Mainly, creators sell their digital content as NFTs on NFT marketplaces and online and offline auctions. Not only digital objects can be NFTs. Physical objects can be transferred to NFT as well.
For example, an artist Misha Libertee created a glass painting and then destroyed it with a crowbar. Now, his glass painting only exists as an NFT. The crowbar Misha used was digitized as well and sold as an NFT too.
|Digital art:: artists create digital paintings, pictures, photos, and other virtual objects of art. See the example in the beginning—a digital painting EVERYDAYS.||Sport collectibles: collecting sport cards has gone to the next level. The NBA goes even further—they sell NFT videos of the best NBA moments.||Video game objects: game developers create unique content for their games like characters, weapon skins, furniture for Minecraft, and other unique objects that can be traded.|
|Events and tickets: electronic tickets can be converted to an NFT. It can have unique design and become concert memorabilia and can be sold in the future as a rare collectible.||Music: NFTs open new possibilities of monetizing music for songwriters and performers. For example, Kings of Leon released their first NFT album, which became available for purchase on blockchain. And one of the songs from the album will be played in space. An NFT song played in space. Strange and great times, ladies and gentlemen.||Tweets: Twitter CEO Jack Dorsey sold his first tweet as an NFT for $2,915,835.47. You know what to do :-)|
Finally, NFTs can be used for digitalization of everything physical. And this future is very near. You probably will be able to buy a car and get an NFT version of it to use in metaverse or as in-game content. Who knows.
Smart contracts: how NFT transferred between parties
In the physical world, when you sell your car to someone, you both make a legal agreement documented on a paper. This paper guarantees that you get the money and the buyer gets the car, which becomes his or her property.
In the digital world of NFTs, smart contracts play the role of a paper agreement. A smart contract is a program, a piece of code stored in the blockchain. In this program, a coder inputs all the terms of agreement between the parties: who pays and how much, who receives the NFT and at what conditions. Every aspect of the trade is defined in the smart contract.
Smart contracts are self-executed. Here’s a simple example of how smart contracts work. Suddenly, Hulk Hogan and Dwayne “The Rock” Johnson are coming back to WWE and having a fight. You make a deal with your friend: if Hulk Hogan wins, you get one bitcoin, if The Rock wins, your friend gets that bitcoin. So, you make a bet using a smart contract and program it according to the terms you both agreed on. Once the fight is over, the smart contract receives a signal from WWE and sends one bitcoin to you or your friend depending on the fight result.
Another cool example is an NFT ticket to a rock band show. When you buy an NFT ticket, a smart contract assigned to this NFT immediately executes the money transfer to the parties: let’s say 50% to the band, 30% to the event organizer, 10% to the technical team, and 10% to a charity fund. No middlemen and delays.
What’s NFT marketplace?
NFT marketplaces are basically eCommerce marketplaces for digital products. The major differences between them are that an NFT marketplace processes payments in crypto currencies only and integrates with the smart contracts functionality.
On an NFT marketplace, a customer can buy a digital asset for a fixed price or at an auction. Customers need crypto currency wallets to be able to buy NFTs on a marketplace.
There are two major types of an NFT marketplace (just like any other marketplace):
- All-in-one NFT marketplaces where digital content producers sell any kind of digital assets: digital art, photographs, music, 3D models. The largest and most known NFT marketplace of this type is OpenSea.
- Niche NFT marketplace selling specific NFTs such as tweets, digital holograms, and other non-typical digital objects. For example, on Valuables, you can buy a tweet with an autograph of its original creator.
How to develop an NFT marketplace
You basically have three options for building an NFT marketplace:
1. Use ready solutions such as OpenSea’s SDK to build your own NFT marketplace on the OpenSea infrastructure.Create an NFT marketplace from scratch.
2. Create an NFT marketplace from scratch.
3. Launch an NFT marketplace on a ready marketplace software with customizations.
As you can see from the comparison table above, developing an NFT marketplace on a ready multi-vendor software can be more beneficial than coding it from scratch or using limited solutions such as OpenSea’s SDK.
With a ready platform, you can enter the market fast enough, customize and scale your NFT platform hassle-free, and save money on unnecessary development.
So, as a base for your NFT marketplace, you will need a ready marketplace platform that:
- Supports digital products
- Has vendor panel
- Has product moderation features
- Has the auction feature
- Integrates with crypto wallets
- Customizable enough to integrate it with a token protocol and smart contracts functionality
There’s currently no ready marketplace software that supports NFT functionality out of the box. Any platform will need customizations to work with crypto wallets, smart contracts, and Ethereum blockchain.
The best way to launch an NFT marketplace is to build it on a ready-made marketplace platform that partially supports necessary features and has open code so that you can customize it to make a fully functional NFT platform.
We develop CS-Cart Multi-Vendor as the most flexible low-code marketplace software with open source code and thousands of ready add-ons, among which you can find crypto payments and auction features. Leave the customizations on us.
What to start the NFT marketplace development with?
To build an NFT marketplace, you first need to understand the workflow of your future NFT platform: how vendors will upload and sell their digital assets and how the marketplace will regulate all the transactions.
First, let’s find out the workflow for vendors. It doesn’t really differ much from the vendor workflow on any other non-tokenized marketplace like Amazon:
Most of the modern marketplace platforms have these features by default except for NFT transactions regulation functionality and crypto wallets. For example, the standard edition of CS-Cart Multi-Vendor has all of this out of the box, plus ready integrations with crypto payments and the auctions feature.
The interesting part comes next. To work with NFTs, your marketplace needs a token protocol integration. These protocols are created on the Ethereum blockchain—a particular group of smart contracts. You need this integration to regulate transactions between buyers and sellers on your NFT marketplace.
You can integrate your marketplace with blockchain and the token protocol by custom development and API. It means that the marketplace software must have open code and API.
We’re ready to help you with all the customizations to build your NFT marketplace on CS-Cart Multi-Vendor. Hit the button below and try CS-Cart Multi-Vendor for free and consult with our team about customizations.
Psss. In 2022, we’re releasing CS-Cart 5. It’s based on Laravel, which is a very well-known and flexible development framework. It means that custom development of an NFT marketplace will be even easier on CS-Cart.
NFT stands for Non-Fungible Token. This is a piece of digital asset—image, video, audio, 3D model, gif—that has a unique digital signature stored in the Ethereum blockchain, which makes it a unique object.
What’s smart contracts?
A smart contract is a piece of programming code, which serves for inputting terms of agreement between parties for a transaction in the blockchain. People use smart contracts to define terms of an NFT purchase.
How do NFTs work?
Here’s an example of an NFT sale. A digital artist uploads their art work to an NFT marketplace. A buyer pays for it with crypto currency and a smart contract is executed to confirm the transfer of money to the artist and the art ownership rights to the buyer.
Are NFTs legal?
NFTs are legal. But there could be local regulations that you should follow when buying or selling NFTs. Also, buying and selling digital assets that represent illegal content can be prosecuted.
Why are NFTs so popular?
NFTs allow you to own a digital object. When you buy a digital art work as an NFT, the record of this transaction stays in the blockchain forever unless you resell it to someone else. And when you own an NFT, it’s not just a copy that you can get on the Internet, it’s the very original object that is in your ownership. And the fact that all the transactions are carried out in the blockchain, reduces the probability of fraud. Also, scarcity is what NFTs are so valued for.
What’s an NFT marketplace?
An NFT marketplace is a multi-vendor eCommerce website of digital objects represented as NFTs. OpenSea.io is a well-known NFT marketplace.
What’s the best way to develop an NFT marketplace?
The most efficient way to build an NFT marketplace is to get a ready multi-vendor software platform that has basic NFT marketplace features such as digital products, auctions, and crypto wallets, and integrate it with the Ethereum blockchain, token protocols, and smart contracts functionality.
The header image credit: Brian D’Cruz Hypno Plus