As almost everyone already knows by now, a non-fungible token (NFT) is a kind of digitized deed that can represent the ownership of unique digital assets like art, music, collectibles, or files, by recording them on a blockchain.
Since as early as 2014, platforms like Ascribe and Counterparty have allowed users to buy and sell these assets, first using the Bitcoin blockchain and later via rivals like Ethereum and Solana, which could host more complex file types.
From 2017, new, shinier marketplaces like OpenSea and Nifty Gateway sprang up, setting the stage for the COVID-19-era boom in NFT trading that saw digital artwork sell for as much as $69 million.
Below is a roundup of the most prominent of these marketplaces—and a look at how they work.
There are a number of general features most NFT marketplaces offer in one way or another.
For instance, all act as intermediaries for the sale of artworks by various creators. They are like eBay for NFTs: You go on a given site, search through genres and different artists, and when you see something you like, you can click on it—and make a bid. Buying an NFT from any platform will invariably incur a trading fee, the proceeds of which will either go to the exchange or a community of token-holders.
That’s another thing: the token. Many major NFT marketplaces have their own native token, which acts as the equivalent of common stock, its price rising or falling depending on the success of the underlying company. These tokens are often awarded to regular users of the platform as a way to encourage participation.
Some of the marketplaces that don’t have tokens have mulled a listing on the stock exchange—but not even OpenSea, one of the biggest, has mustered the courage to do so, as it risks alienating its diehard crypto following.
Most platforms also offer some kind of royalty scheme, compensating creators with some percentage of any secondary sales made of their work—though they do this to wildly differing degrees.
Others allow users to mint their own artwork, while others reserve minting for the administrators of the marketplace. The latter has led to reports of insider trading at marketplaces in which big releases are known in advance.
Types of Marketplaces
NFT marketplaces aren’t all alike, however, and there are, broadly, two kinds: trading shops and auction houses.
Auction houses are more like your classic art dealerships: The platform negotiates a “drop” of a work by an already known, or promising, artist, and corrals a large group of potential buyers to vie for a purchase. The most famous of these platforms—and arguably the platform that sparked the exuberance for NFTs in 2021—is Nifty Gateway.
Nifty was responsible for the notorious $69 million-dollar sale of a piece by digital artist Beeple and, true to form, forged a partnership with legendary IRL art auction house Sotheby’s.
While pretty much every NFT platform permits auctions, others are better suited for more fast-paced, frenetic trading—and considerably less discernment from buyers.
OpenSea is one of the biggest of these. Instead of primarily publicizing one-off, lucrative drops from esteemed artists, platforms like OpenSea behave more like hubs for trading within larger collections.
These collections have featured, most famously, images that can be used as avatars for social networks like Twitter. Among the most successful of these collections are CryptoPunks and Bored Ape Yacht Club, which still account for a vast amount of trading volume—albeit less than at the boom’s height.
The value of any given collection is generally determined by the “floor price”—the cheapest available image of a set.
So this latter kind of platform behaves less like an auction house, and more like a standard exchange, where mostly interchangeable images—rather than fungible tokens or coins—are traded.
Below are a few of the most notable NFT marketplaces.
Prominent NFT Platforms in 2023
Created by Devin Finzer and Alex Atallah in 2017, OpenSea was one of the main drivers behind the madness of 2021. It features a simple user interface, diverse NFT collections, and an active developer and user community. The platform also offered—and continues to offer—some of the most lucrative “avatar” collections, including CryptoPunks and Bored Apes.
The company was valued at $13.3 billion in January 2022. Its growth, however, has been somewhat bumpy with sanctions, phishing attacks, and incidents of insider trading.
OpenSea also became a case study for the curious way in which purchased NFT tokens “reference” associated artwork. While buyers often assume that their NFTs literally “contain” whatever image they’ve bought—by way of, say, the metadata—the platforms hosting them often simply link to a URL of the artwork on a remote, centralized server and don’t store the image in-house. That means that if the URL breaks, the (often pricey) artwork may vanish along with it, as happened with one unlucky OpenSea user.
New York City-based Alex Salnikov and Alexei Falin entered the NFT scene with Rarible in early 2020. Primarily focused on art and digital collectibles, Rarible is both a marketplace and a decentralized network on Ethereum powered by its governance token, $RARI. The platform is backed by CoinFund, a New York-based venture capital firm.
Rarible also offers a royalty program designed to enforce royalty payments, regardless of whether or not the NFT has been shifted to a platform that allows buyers to “opt out.”
Nifty Gateway is designed for serious collectors with relatively deep pockets and is owned by Gemini, the crypto exchange founded by the Winklevoss twins (of “The Social Network” fame).
Unlike OpenSea and Rarible, where anybody can mint their own collections, minting on Nifty Gateway is exclusive to verified creators. As with the old-school art world, success on Nifty relies as much on social connections and artistic ability as it does on luck or trading acumen.
As such, the platform frequently features celebrity artists, as well as musicians like Carl Cox, Grimes, Lil Yachty, and Trevor Jones. It also supports fiat payments in the US and stores owners’ NFTs in a proprietary custodial wallet.
LooksRare is a rare decentralized NFT exchange, and was launched in January 2022 by two anonymous founders called “Guts” and “Zodd,” as a reaction to OpenSea—which had drawn criticism for imposing onerous trading fees and relying on centralized third-party infrastructure.
Billing itself as a “community-first marketplace,” LooksRare redistributes trading fees to its users by way of its native token, $LOOKS, the idea being to “incentivize participation.” The lack of central oversight of the marketplace has nevertheless led to rumors of wash trading, where traders buy and trade with themselves and create the illusion of high volume.
Launched on Oct. 19, 2022, by MIT graduate @PacmanBlur, Blur has quickly become a contender, surpassing OpenSea as the biggest NFT marketplace by trading volume in a matter of months. Taking OpenSea’s ethos to its logical extreme, Blur has made no pretense of being an auction house for quality artwork, instead encouraging pure trading and little else by way of incentives afforded to traders who buy and sell in bulk.
Like LooksRare, Blur is also suspected of harboring a lot of wash trading.
- Magic Eden: a popular Solana-based NFT marketplace
- NBA Top Shot: an NFT marketplace for NBA fans
- Decentraland: one of the earliest vendors of “virtual real estate”
The Future of NFTs
The NFT space generated about $24.7 billion in trading volume in 2022, despite the severe economic tightening the world economy has faced over the last several months. Though the craze around NFTs as a new way to sell art “for art’s sake” has died down, the rise of pure trading hubs like Blur has led to NFTs being increasingly seen as interchangeable assets to be flipped for easy profit.
Perhaps the future of “non-fungible” tokens will be far more, well, fungible, than previously expected.