NFT marketplaces earn money primarily through fees, with popular methods including charging listing fees or taking a percentage of each sale as a transaction fee. Marketplaces like OpenSea charge a 2.5% fee on sales, while others like Rarible impose both seller’s and buyer’s fees totaling 5%.
SuperRare operates differently by not charging seller fees but adding a 3% buyer’s surcharge and a 15% artist commission on initial sales. NFTs have become trendy due to high-profile sales and celebrity involvement, with people buying them for various reasons including personal value or as an investment.
If you’re considering entering the NFT space, you can start your own marketplace on platforms like OpenSea, provided you have some ETH for transaction fees. Whether buying or selling NFTs is worth it depends on individual valuation and market interest.
Have you ever wondered how NFT marketplaces make money?
Whether you have been considering setting up your own NFT marketplace yourself or are simply curious about how other platforms earn a profit, you’ve come to the right place. But as for a short answer on how does NFT marketplace make money, NFT marketplaces earn money from fees.
In this article, you will learn how NFT marketplaces function and more about how popular NFT platforms make money.
How Do NFT Marketplaces Work
An NFT marketplace is an online marketplace where people can buy and sell digital collectibles or NFTs. Sometimes, people will sell NFT art for a fixed price; at other times, they might sell it auction-style at an online auction house.
These marketplaces allow digital artists to sell their digital artwork to buyers.
An NFT, or non-fungible token, is a special kind of digital item that you can not interchange with other tokens. Unlike Ethereum, Bitcoin, and other digital assets, which are interchangeable and not unique, each NFT art has a digital certificate confirming it is the original, unique work.
Nobody can forge or copy that digital certificate, as it is verified on the blockchain. Many NFTs use the Ethereum blockchain. Using blockchain technology, the digital certificate is verified on multiple nodes and available to the public.
How do NFT Platforms Make Money
There are two main ways NFT marketplaces make money. We’ll go over some specific marketplaces later on.
By Charging a Listing Fee
You might have to pay a listing fee to sell an NFT on an online NFT market. Such an NFT platform is not free for sellers.
By Charging Gas Fees
In cryptocurrency, gas fees are fees that power transactions. Think of them as gas powering your car or truck. An NFT platform might charge a fee on all NFT sales. In that case, it will usually be free for sellers to list their future NFTs, but they won’t get 100 percent of the sale.
However, it is important to distinguish between gas fees charged by the network and those charged by the platform.
For example, every transaction on the Ethereum network comes with a fee that goes to miners who help power the network and keep it running. Even when sending Ethereum from your Coinbase wallet to your friend’s digital wallet, you will have to pay such a fee.
However, the fees that the marketplace charges are separate. Those fees go directly to the marketplace; it is how they make money.
Also, a marketplace might charge either a seller’s fee or a buyer’s fee. A seller’s fee is deducted from the total price, while a buyer’s fee is in addition to the total cost.
For example, if you sell something for $100 with a 5 percent seller’s fee, you will receive $95. If it is a buyer’s fee, the buyer will pay $105, and you will receive $100. A marketplace might charge both.
Examples of How NFT Marketplaces Make Money
Let’s review some popular NFT marketplaces and see how they make money. In this section, I will be talking only about transaction fees the marketplace charges. When first setting up your account and listing/minting NFTs, you usually have to pay network fees, but that goes to miners, not the marketplace.
That means listing your first NFT won’t be free. You’ll have to withdraw from your crypto wallet. However, you may not have to pay for minting until you sell the NFT; that is known as lazy minting and makes sure you don’t pay network fees for no reason.
OpenSea is one of the most well-known and popular NFT marketplaces. Social media, startups, and video game companies have helped contribute to its renown. It is entirely free to list your own NFT on OpenSea and sell it via smart contracts. OpenSea is primarily for ERC721 and ERC1155 assets.
OpenSea charges 2.5 percent of each sale, paid by the seller.
It is important to note that OpenSea also made its ecosystem available to the public for NFT marketplace development. In that case, you get to choose the fees you charge. However, OpenSea will still get 2.5 percent of each sale in exchange for providing its infrastructure to you.
Rarible charges both a seller’s fee and a buyer’s fee of 2.5 percent each. In total, it takes a 5 percent commission. However, the seller of the digital art can choose to take on the buyer’s fee and pay the whole 5 percent.
SuperRare, unlike many other marketplaces, does not charge seller fees. Instead, it adds a 3 percent buyer’s surcharge. That means if you sell a product for 1 ETH, the buyer will pay 1.03 ETH.
However, there is also a 15 percent artist gallery commission fee for initial sales, so you won’t get 100 percent of the sale. So, if you sell something for 1 ETH, you will only get 0.85 ETH.
Why Are NFTs Trending?
NFTs are trending because many entrepreneurs, such as Jack Dorsey and Elon Musk, have either sold NFTs or talked about it. Artists have turned many memes into NFTs. For example, the girl in the “girl and burning house” or “disaster girl” meme turned the original picture into an NFT and sold it for $500,000.
How to Start an NFT Marketplace
You can use OpenSea to create an NFT storefront and sell NFTs. You’ll need some ETH to power your gas fees. For a full guide on how to do so, click here.
Is It Worth Buying or Selling NFTs?
People buy NFTs for many reasons. They might simply like the artwork, or they might want the NFT because it is sold by a meme creator or by a famous artist. It’s up to you to decide how much an NFT is worth to you. If you have an NFT worth selling, consider listing it on a marketplace; you may find an interested buyer.
Frequently Asked Questions
How to make money with NFT?
You can earn money from NFTs through several different ways, such as NFT trading, selling them at an auction house, buying them from other users, mining them for profit, using them as collateral to borrow money, etc.
How much do NFT marketplaces make?
The average revenue per user for an NFT marketplace ranges from $0.20 to $2.00.
Is NFT marketplace profitable?
NFT marketplaces are profitable when they reach a certain size and volume of transactions. The profitability depends on several factors, such as the number of users, the average transaction price per user, and the total amount of tokens sold.
Best wallet to store new NFTs?
The best way to store digital assets such as non-fungible tokens is through an exchange like Binance. Binance also has a great NFT marketplace you can check out. You can also use hardware wallets such as Ledger Nano S to store your NFTs.
NFTs are gathering a lot of attention in the mainstream media. There are many types of NFTs, including trading cards, memes, and GIFs. Some NFTs are selling for millions of dollars, while others are selling for just a few dollars.
Hopefully, you now understand how NFT marketplaces operate and why they were built. NFT marketplace owners charge small commissions to profit off the NFT hype.