Key considerations and challenges for the development of the NFT market

How to build a successful NFT market platform?

**Written by:**Unique Network

Compilation: PolkaWorld

**The rise of the Web3 ecosystem and decentralized services provides opportunities to create unique digital assets and art that can be owned, verified and traded. NFTs are one such asset that has revolutionized the concept of ownership. **

Due to its advantages such as higher accessibility, increased liquidity for creators, and reduced transaction fees compared to the general art market, the global NFT market has experienced a surge in new NFTs and NFT markets, numerous high-profile sales and The auction attracted the attention of the world. Therefore, the need to achieve a more streamlined transaction process through NFT aggregators and NFT marketplaces has also surged, with different platforms rushing to meet the growing user demands.

However, the needs of NFT users have gone beyond seeking better collections of NFTs. New NFT users and traders are more sophisticated and discriminating when evaluating and analyzing the market. Instead of simply looking at transaction volume before making a decision, they rely on more advanced data such as rankings, historical statistics, wallet tracking, rarity, and more. Therefore, for NFT market developers, it is not just about the number of collections available, but about providing a more streamlined experience through better on-chain and off-chain data integration.

This article explores key considerations and challenges associated with the development of NFT marketplaces. It provides insight into the development process and the fundamental factors creators must consider in order to build a successful NFT marketplace platform. But first, let's dive into the fundamentals.

Define the NFT market

NFT Marketplace is a digital platform that allows users to buy and sell NFTs. Users connect their wallets to the platform, transfer funds, browse available NFTs, and buy or bid on desired assets. After the offer is accepted, the NFT is transferred to their account, completing the transaction. An auction-based marketplace allows bidding on NFTs.

These marketplaces provide creatives with greater control over their assets and important marketing and promotional tools. These tools also facilitate royalty management, incentivizing creators to produce high-value and popular work.

By providing these features, the NFT marketplace creates an environment that nurtures artists, enabling them to thrive and contribute to the ever-expanding ecosystem of digital assets. This process enables creators to monetize their works while enabling collectors to acquire and own unique digital assets.

How does the NFT market work?

Here is a general overview of how a generic NFT marketplace works:

coin

Creators such as artists, musicians or game developers mint their digital content into NFTs. Minting involves turning content into unique tokens on the blockchain network, commonly used standards include ERC-721 or ERC-1155 for Ethereum-based NFTs, SPL-Token for Solana-based NFTs, and BEP for BSC-based NFTs -20 or Polkadot-based NFT using PSP22.

Listing

On NFT marketplaces, creators display their minted NFTs for sale, providing comprehensive information such as title, description, media files, and sometimes additional metadata such as attributes, properties, or provenance. However, certain marketplaces have gone above and beyond by offering additional features that increase the flexibility and future-proofing of NFT collectibles. These features include advanced customization options and the ability to bundle multiple NFTs together. By providing these capabilities, these marketplaces enable creators to develop unique and adaptable collections, ready to respond to changing trends and user preferences. This enables creators to unlock the full potential of their NFTs and cater to a dynamic and evolving market.

Platform Features

NFT marketplaces offer various features to facilitate transactions. Users can create accounts, set up digital wallets, and connect them to the marketplace. They can also browse NFT collections, search for specific items, and access information on creators, rarity, ownership history, and other relevant details.

BUY AND SALE

Buyers interested in NFTs can bid or buy outright if the creator sets a fixed price. Marketplaces facilitate transactions, often using cryptocurrencies as a medium of exchange. Payment is made from the buyer's wallet to the seller's wallet, and ownership of the NFT is transferred to the buyer after the transaction is complete.

Popular marketplaces like OpenSea and Rarible offer a wide range of NFTs and a large user base. In contrast, other marketplaces, namely niches like the Foundation, specialize in specific types of NFTs and thus have a more targeted audience.

Royalty fees and smart contracts

NFTs can be programmed with smart contracts specifying royalty fees. Whenever an NFT is resold on the secondary market, the original creator can receive a certain percentage of the sale price as a royalty. Smart contracts automate the payment of these royalties, ensuring creators are continuously compensated even after the initial sale.

Wallet Integration

The NFT marketplace is integrated with digital wallets that store and manage users' NFT holdings. Wallets provide a secure place to store NFTs, enabling users to interact with the marketplace, initiate transactions, and manage their collections.

NFT wallets have evolved beyond just providing storage functionality. They now incorporate an incentive structure that redefines the concept of a cryptocurrency wallet as a personal gateway. Unique Wallet offers comprehensive features and functionality for NFT creators and collectors. You can mint NFTs, create shards, nest tokens, and destroy entire collections.

Explore the current NFT market landscape

Since the first NFT marketplace in 2017, these platforms have revolutionized the non-fungible technology landscape, providing a direct platform for creators around the world to offer their creations to collectors and traders. Furthermore, these marketplace platforms accelerate a previously slow-growing industry by eliminating intermediaries such as galleries or auction houses.

The vision of the NFT market has expanded beyond traditional artwork and collectibles. It now covers curating new asset classes, including game assets and NFT-based tickets. By embracing these new asset types, NFT marketplaces have managed to onboard a more well-rounded user base. This includes gamers, enthusiasts and individuals looking for unique digital experiences. As a result, the NFT market has flourished into a vibrant and diverse ecosystem, offering many opportunities for creators, buyers, and sellers.

Considering their many benefits, it’s no surprise that the leading general-purpose NFT marketplace has become the destination of choice for NFT enthusiasts. In 2022, DappRadar reports that across different blockchain platforms and markets, the non-homogeneous representation market brings in approximately $24.7 billion in organic transaction volume (note: this figure does not include any manipulation or brushing).

However, the value of the NFT market is influenced by the forces of supply and demand, making it cyclical. When more NFTs are created and enter the market, the supply increases, potentially reducing the price. Likewise, the hype surrounding NFTs can ebb and flow, affecting their demand and, in turn, their value. This and other factors could explain the downturn in the cryptocurrency market in mid-2022. While the market has stabilized since then, the emergence of new markets and better series marks a phase of growth and expansion for the NFT marketplace industry.

As the NFT market landscape continues to evolve and expand, it becomes increasingly critical for developers (and creators) to understand how to design functional and future-proof marketplaces that can keep up with changing trends and user needs .

Designing a sustainable NFT market

Successfully launching an NFT marketplace application requires a comprehensive understanding of all aspects, including the fundamentals of non-fungible cryptographic tokens, the evolving landscape of the NFT marketplace, choosing the right blockchain network, and designing a user-friendly interface. These considerations play a vital role in determining the success or failure of the market.

While challenges and uncertainties are inherent in segmenting the NFT market, those who can skillfully navigate this dynamic and fast-paced environment will reap great rewards. The potential for success in this space is enormous and represents an exciting opportunity for brands that can effectively navigate the changing environment.

Recommendation 1: Create an NFT marketplace with users and creators in mind

In the current NFT environment, there are various marketplaces to choose from. They include general marketplaces that offer a variety of NFTs from different creators, curated marketplaces that focus on a particular theme or genre, and hybrid marketplaces that mix both approaches. However, creating an NFT marketplace from scratch can be expensive, depending on the complexity of the platform and the required functionality.

Alternatively, developers can explore custom solutions or pre-existing white-label NFT marketplace software to reduce costs and simplify development. The Unique SDK provides developers with a ready-made solution to build a fully functional NFT marketplace in just a few hours, saving thousands of dollars in infrastructure and setup costs.

learn more:

Recommendation 2: Define the purpose of the platform

To ensure a smooth and efficient development process for NFT marketplaces, it is key to have a well thought out plan. The plan will serve as a roadmap to guide the various stages of development. For example;

• What is the target audience for my NFT marketplace? Understanding the target audience is crucial as it helps to tailor the functionality and design of the platform to the needs and preferences of the users.
• What type of NFT will the market host? Will it focus on a specific genre or niche, or will it be a general marketplace with a variety of NFTs?
• What functions should the NFT market provide? Consider elements such as minting, buying, selling, bidding and a customizable storefront.
• What will be the revenue model of the NFT market? For example, does it take commissions on sales or charges for certain features or services?
• What is the budget for developing and operating the NFT marketplace? As mentioned earlier, building a thriving NFT marketplace requires a significant investment of time, resources, and money.
• Does the market support advanced capabilities that add utility?

Recommendation 3: Prioritize a seamless user experience

A well-designed NFT marketplace should prioritize a seamless and convenient user experience, offering a smooth flow from initial exploration to final purchase. This may involve incorporating valuable functionality for discovering NFT-related data, creating a user-friendly interface, and providing customization options for NFTs.

Recommendation 4: Emphasize the security of NFT transactions

In the blockchain ecosystem, layer-1 security and protocol security play different roles in ensuring the safety and reliability of decentralized applications. Layer-1 security focuses on the underlying security of the blockchain network itself, while protocol security focuses on the security of specific protocols or applications built on top of the network.

Polkadot parachains are a great example of Layer-1 security, providing a secure and decentralized network infrastructure that supports multiple blockchains running in parallel.

By building on a solid Layer-1 foundation and choosing the right structure, developers can create NFT marketplaces that are safe, secure, and able to support a wide range of use cases.

Addressing potential challenges in NFT market development

Optimize scalability and performance

When designing an NFT marketplace, the ability to scale and maintain high performance levels must be considered. As the number of users and transactions on the platform increases, it is critical to ensure that the system can handle the increased load without performance issues or downtime. This requires a well-designed and optimized infrastructure capable of handling high volumes of traffic and transactions.

Developers must carefully consider the choice of blockchain platform, as different platforms have different scalability, NFT standards, gas fees, and performance capabilities.

Addressing Legal and Regulatory Implications

When developing an NFT market, the ensuing legal implications must be considered. While the regulatory framework for NFTs is still evolving, it is crucial to operate within the law.

First, developers must ensure the legitimacy of NFTs sold on their platforms and have the necessary rights to sell them. Compliance with existing laws and regulations regarding intellectual property, securities and anti-money laundering is also paramount. Additionally, developers must address data privacy laws, terms of service agreements, and potential liability issues.

It is worth noting that regulations in different regions and countries may vary significantly. It is therefore imperative for developers to conduct comprehensive research to understand the legal requirements and obligations when operating in different jurisdictions.

Predict the future trend of the NFT market

As NFTs become more valuable and useful, they may become more mainstream, increasing opportunities and future trends. In addition to digital wallets and payment tokens, the application scope of NFT is expanding, not only artworks, music and other collectibles, but also virtual worlds, real estate, game assets, and even NFT activities, which are gradually gaining popularity. Here are some opportunities and future trends in the NFT market:

Focus on the practicality of NFT

Factors such as rarity, creator popularity and hype determine the value of a digital asset. However, these subjective and unstable factors make accurate valuation of NFTs difficult and may hinder value discovery and liquidity.

Practicality provides a solution, endowing NFT with practical applications. For example, NFTs that grant access to exclusive clubs or events have obvious value because buyers are willing to pay for the privilege of membership. Similarly, NFTs that earn rewards or can participate in games have value because buyers can generate income through them. Utility enhances the appeal and value of NFTs by providing tangible benefits.

By incorporating utility, the NFT market can be seamlessly integrated with the mainstream cryptocurrency market, effectively dispelling the perception that it is a niche market. This integration will yield many benefits, including enhanced liquidity and improved value discovery, as many buyers and sellers will be attracted to the NFT marketplace.

Multi-chain Interoperability

A significant hurdle to the growth of NFTs is the ability to transact on different blockchains, making it difficult for users to dispose of the NFTs they want. This can lead to a decrease in liquidity and value. Fortunately, multi-chain interoperability is emerging as a viable solution, allowing seamless NFT transactions across various blockchains.

Emerging technologies like EVM have the potential to solve the fragmentation problem that is prevalent in the multi-chain NFT market. As this technology continues to improve, we can expect more seamless NFT marketplaces to emerge, enabling frictionless transactions between different blockchains. This development is expected to drive the growth and development of the NFT market, facilitating greater access and use by participants.

Emphasis on identity management and asset protection

NFTs are an ideal solution for digital identity management because they provide a unique identifier that cannot be duplicated. This makes them the perfect tool for ensuring authenticity and preventing fraud in the digital space. In addition, NFTs can verify a wide range of digital assets, including user identities, account information, and transaction history.

By leveraging the secure and transparent nature of blockchain technology, NFTs provide a tamper-proof method of reliable and efficient digital identity management. This makes them increasingly popular in industries that require secure digital identity management, such as loyalty programs, events, and other database-related industries.