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A non-fungible token, known as an NFT, is a digital asset that can be bought and sold online. NFTs are most commonly purchased using cryptocurrencies, and are generally encoded with the same underlying software as many cryptocurrencies.
NFTs have been around for almost a decade, but their popularity only exploded in the past few years. The first known NFT, called Quantum, was created by Kevin McCoy and Anil Dash in May 2014, yet it wasn’t until 2021 that NFTs broke into the mainstream investing market–largely due to COVID-19 seeing an uptick in the digitalisation of our daily lives.
In 2022, there are now a few ways to buy NFTs, such as through peer-to-peer sales, cryptocurrency websites and even social media sites like Instagram. Yet the most common way to purchase NFTs remains purpose-built NFT marketplaces by far.
Here’s what an NFT marketplace is, and a guide to using an NFT marketplace in Australia.
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An NFT marketplace exists to facilitate the purchase and sale of non-fungible tokens. Individuals can also list their NFTs for potential auctions or bidders, and in some cases, users can also mint (create) NFTs using a marketplace.
Ultimately, an NFT marketplace is to digital assets what eBay, Amazon or Facebook Marketplace are to consumer goods.
Every NFT marketplace has to operate on a blockchain technology to verify asset ownership, and some marketplaces support numerous blockchains. The majority of NFTs exist on the Ethereum cryptocurrency blockchain, with Binance Smart Chain, Polygon, Cardano and Solana blockchains also growing in popularity for NFT marketplaces.
The most popular kinds of NFT marketplaces are universal, art-oriented platforms; however, smaller, unique NFT marketplaces also exist for niche asset types. These include marketplaces for sports cards, music, video games and many other niche markets, which position themselves as places not just to trade digital assets but also join a community of like-minded individuals.
Jordan Fogarty, CEO and co-founder of Web3 ecosystem business Be Media by Animoca Brands, explains that alongside these purpose-built NFT marketplaces, social media sites are also increasingly being used to advertise NFTs to attract buyers.
“A search for NFTs on eBay or Facebook Marketplace shows a number of NFTs,” Fogarty says as an example. “However, the transaction cannot be completed on these traditional e-commerce platforms.”
That’s why social media sites are now pivoting to offer their own purpose-built NFT marketplaces, too.
In early November, Instagram announced it will soon launch an “end-to-end toolkit” for NFTs that will allow users to create and launch their own NFTs for sale through Instagram.
“A small group of creators will soon be able to create digital collectibles (NFTs) and sell them right on Instagram,” Meta’s Head of Commerce and Fintech Stephane Kasriel said in a statement.
Kasriel added that the move to the NFT marketplace space for Instagram comes because of a need to make digital collectible creation and commodity a “much simpler user experience”.
The popular social media app also won’t charge fees to create or sell NFTs until 2024, Kastriel noted in his statement; however, in-app transactions are still subject to app store fees.
When the news was announced, users on Twitter took to the now-Elon Musk owned platform to say it’s a “big move” that shows the “journey to mass adoption”.
“Anything that encourages users to set up a digital wallet is great for the evolution of the industry,” Fogarty tells Forbes Advisor.
Regardless of which NFT marketplace you’re using, you will need an NFT wallet to store, trade and purchase your NFT tokens. You will then also need to create an account for a specific NFT marketplace, and ensure the cryptocurrency it uses for trading is compatible with your NFT wallet.
Some NFT marketplaces require an invite in order to be able to make an account. This is known as a ‘closed market’ NFT marketplace. An ‘open market’ NFT marketplace, on the other hand, is accessible to the public.
Once you have an account on the NFT marketplace of your choice and a compatible wallet, you will be able to submit NFTs for listing; place bids on listed artworks; or pay for the digital token at its asking price.
Your NFT marketplace will typically handle the transfer of an NFT from one individual to another–with fees varying between marketplaces.
Just as there are many different kinds of cryptocurrencies that can be used to purchase NFTs, there are also many different NFT marketplaces that facilitate these sales. They’re also not location dependent, either, meaning Australians aren’t locked in to using an Australian-based platform.
“NFT marketplaces are global in nature,” Fogarty says. “That is one of the attractions of Web3–the blockchain knows no borders.”
Fogarty says that when choosing an NFT marketplace–as with any marketplace, regardless of product–it comes down to what you are buying or selling, and the audience that is at that marketplace.
Depending on which NFT marketplace you use will determine the types of NFTs available, the transaction fees, payment options, and other rules or member regulations. When comparing NFT marketplaces, you should consider the following:
Fogarty says it’s important to consider both the visitor-base size and the type of audience who are attracted to the NFT marketplace you may be considering. More users means more people to buy from and sell to, after all–but are they interested in buying the type of products you’re offering?
When comparing NFT marketplaces, it’s important to consider the size of the collections–that is, the amount of ‘stock’ a marketplace has.
“Stock brings the visitors as it gives them something to buy. But will your product be lost in the marketplace and rarely get seen?” Fogarty asks of those looking to sell their own minted NFTs.
For those looking to purchase, a broader collection size may be more attractive due to increased choice.
As CoinSpot business development and partnerships executive Tim Wilks explains, some marketplaces are fairly limited in their purchase options.
“Ensure you can purchase NFTs with the cryptocurrencies that you hold or have the ability to purchase,” Wilks advises. Some marketplaces may only be compatible with one or two cryptocurrencies, while others offer hundreds.
To bring purchase and trading into the mainstream, some NFT marketplaces are now even offering users the option to pay with a debit or credit card at checkout.
When doing so, the payment server will convert the fiat currency into the NFT marketplace’s default cryptocurrency in order to complete the sale. A credit card processing fee will incur, and conversion fees may also apply depending on your banking institution and the marketplace.
If using ETH, gas fees may also incur–which is a fee paid to transact on the Ethereum blockchain. Gas prices rise and fall depending on how busy the network is.
Regardless of which payment method you choose, you will still be required to have a crypto wallet, as this is where your NFT purchases will be stored. If you already have a crypto wallet, it’s worthwhile finding an NFT marketplace that is compatible with your pre-existing wallet.
In addition to the potential gas fees explained earlier, many NFT marketplaces also incur other costs to the user–such as service and transaction fees, subscription prices or royalties paid to the original artist.
These costs vary depending on the NFT marketplace, with transaction fees commonly being around the 2.5% mark.
Wilks says it’s important to note there are huge variations in NFT marketplace usability and complexity, and individuals–regardless of where they are in their NFT trading journey–should consider finding a platform that can assist with the most streamlined trading experience.
But for people venturing into the world of cryptocurrencies and NFTs for the first time, it can be an overwhelming experience, he says.
“This is only made more complicated by having to undergo the registration process and learning how to use multiple platforms – one for your wallet, one for trading, one for browsing NFTs and so on.
Therefore, Wilks suggests that beginners should look for platforms that offer all of these NFT marketplace services under one roof.
“For beginners, a unified platform means greater convenience, less room for user error and the ability to access customer support if necessary.
Most international marketplaces are available for Australians to buy and sell NFTs, too. According to MarketResearch, the global NFT market was worth an approximate US$1.59 billion in 2021.
The NFT market is now expected to grow at a CAGR rate of 22.05% during 2022-2028, reaching a global value of US$7.63 by 2028. Meanwhile, OpenSea–the world’s first and largest NFT marketplace, founded in 2017–reported a $13.3 billion valuation in 2022.
Comparatively, Australian-owned CoinSpot only launched its own in-platform NFT marketplace in March 2022.
The company was founded in 2013, making it one of the longest running crypto exchanges in the world, and the most prominent in Australia. At the time of writing, CoinSpot has more than 30 different collections with more than 400,000 individual NFTs on its marketplace, Wilks says.
During the recent NFT boom, other Australian tech minds launched their own NFT marketplaces. Magic Eden was founded by three Australians in 2021, scoring a US$1.6 billion valuation in only nine months; according to its website, it already has more than 8000 collections and a secondary trading volume of $US1.9 billion.
However, as Fogarty explains, the key factor to finding the ‘best NFT marketplace’ for you is not dependent on location or size. Instead, it depends on the individual’s own needs and preference when it comes to trading, buying, selling and/or minting non-fungible tokens.
One NFT marketplace may be perfect for artists looking to mint and sell their artwork, while other platforms that don’t allow for minting may be better suited for beginners entering the market for the first time.
“If there is a dedicated Australian marketplace for the NFT you are looking to purchase or sell, then absolutely start there,” Fogarty says.
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Yes. While initially NFTs were only able to be purchased directly with cryptocurrencies, many NFT marketplaces are now allowing users to make purchases with debit or credit cards. However, additional fees will incur.
Yes, cryptocurrency exchange Coinbase does have an NFT marketplace. At the time of writing, the Coinbase NFT marketplace is still in the Beta stage, however, anyone can use it. Coinbase has said its marketplace has a “community aspect of it”, with the end-result aiming to be a cross between a social media platform and traditional NFT marketplaces like OpenSea.
Solana is one of the most popular blockchains that announced support for NFTs in May 2021. A year later at the 2022 NFT NYC event, Solona co-founder Anatoly Yakovenko announced that there were more than 14.8 million NFTs minted at that time and US$3.1 billion in primary and secondary sales.
Facilitating all of these sales are a variety of NFT marketplaces. These include Magic Eden, Solanart, Metaplex, DigitalEyes, SupaDrop, SolSea and many more.
Sophie Venz is an experienced editor and features reporter, and has previously worked in the small business and start-up reporting space. Previously the Associate Editor of SmartCompany site, Sophie has worked closely with finance experts and columnists around Australia and internationally. Sophie grew up on the Gold Coast and now lives in Melbourne.
