The number of NFT (non-fungible token) marketplaces is steadily rising, and there is no doubt that they will continue to do so, especially once the Ethereum 2.0 merge is complete (most likely some time in 2022 or towards the end of 2021). NFT marketplaces, such as Nifty Gateway, Rarible, Mintable and OpenSea are obviously already very popular, and some of them are extremely aggressive in the ways that they promote their “live drop” NFT sales.
Different types of NFTs, including everything from trending digital art, trading cards, memes and limited-edition gifs to other types of digital assets, such as domain names, real estate and digital items in virtual worlds and video games, are already available on these online marketplaces. Even huge social media celebrities, such as Jack Dorsey, and famous digital artists, like Beeple, as well as traditional auction houses, including Christies and Sotheby’s, have joined the NFT market by listing digital artwork on the Ethereum blockchain network.
But how do NFT marketplaces make money? In this article, we will be examining the various ways in which NFT marketplaces earn profits through the platforms they provide for digital artists to sell their creations. Read on to find out more!
Main Ways in Which NFT Marketplaces Make Money
There are basically three ways in which NFT marketplaces make money.
- NFT “T-Bonds”
Not all NFT marketplaces implement all the money-making strategies described here, and most of them still focus on transaction fees earned off NFT purchases of digital items. However, as blockchain technology improves, and the number of NFT marketplaces out there continues to increase, we are beginning to see increasingly innovative techniques, such as subscription services and NFT T-Bond sales, being implemented as well.
As you are probably already well aware, NFT marketplaces charge fees for transacting on their platforms. Fees are the most common way by which NFT platforms make money, and they are charged in addition to the “gas” fees that are incurred for verification of every transaction that takes place on the Ethereum network.
The fees are set by the NFT marketplaces themselves and thus vary from platform to platform. They are basically commissions that marketplaces charge you for the convenience of using their platforms to buy, list, store and sell digital items, such as NFT art or digital collectibles, via their “dApp” (decentralized application) ecosystems.
Marketplace fees are usually deducted from the seller’s listed price, however some platforms, such as Rarible, charge fees for both sellers as well as buyers. The percentages that different platforms charge are also different, generally ranging from 2.5% on platforms like OpenSea to 15% on curated marketplaces like SuperRare and Foundation. For a detailed comparison of the Best NFT Marketplaces out there, feel free to read our dedicated article on the topic.
As a seller, you should be able to find out what your NFT marketplace charges quite easily by simply heading over to its FAQ page. As a buyer, you should likewise be able to find out what percentage you stand to pay in terms of fees before you make a purchase, but there should also be an indication of what you will be paying in total before you confirm a purchase or listing on an NFT marketplace.
Note: The gas fees charged by the Ethereum network will be shown in the digital wallet, such as MetaMask, that you are using to interface with the platform to complete your transaction. You can also set these fees on your own to some extent, but gas fees go to the miners on the Ethereum network, and as such have nothing to do with the fees charged or earned by NFT marketplaces.
When you verify your purchase, both the marketplace fees (if your platform charges buyer fees) as well as the gas fees are deducted from the total amount you pay (i.e. the price of the NFT + the transaction fees + the Ethereum gas fees).
Another way in which NFT marketplaces make money is by selling NFT T-Bonds.
An NFT T-Bond is similar to a US Treasury Bond (also known as a “T-Bill”), and owners of these NFT T-Bonds can resell them on supported secondary markets, thereby providing ongoing liquidity to holders.
NFT T-Bonds are sold by issuers to initial buyers for other currencies (often cryptocurrencies such as Bitcoin) and at a discounted price in relation to their face value in order to compensate the issuer for the non-liquid nature of the T-Bond. They hold fungible NFT tokens, which have a fixed currency-based value, until certain conditions have been met at some point in the future once the tokens have reached maturity. Once these conditions have been met, the fungible tokens that are locked into the T-Bond are released to the crypto wallet of the current owner of the T-Bond.
T-bonds have a life cycle comprising three periods:
This type of T-Bond can be issued for any type of crypto project or DAO.
To understand NFT T-Bonds, it may be easier to think of them as smart contracts that “wrap” or “contain” fungible assets, which are locked inside them until certain predetermined conditions have been met (the completion of planned development work, the launch of a platform, a certain date, etc.), at which point their inherent value is made available to their owners.
As NFT marketplaces diversify in the types of ways they make money, NFT T-Bonds will undoubtedly become increasingly common, especially insofar as they can be used as a way to provide insurance for NFT ownership.
Subscription-based features are another way in which NFT marketplaces earn money. Examples of paid subscription features that are offered by some NFT marketplaces are:
- Listings of the most profitable or valuable tokens
- The ability to search multiple wallet addresses at once
- Pool watchlists with historical returns
- Daily summary emails
- The ability to vote for new features
- Special membership status on official Discord channels
- In-dApp Customization features
Frequently Asked Questions
Do I have to pay fees to sell NFTs?
In most cases, creating or “minting” and NFT can cost anything from a few cents to over $1000. However, there are some options out there that let you create NFTs completely free. The most popular of these is OpenSea. For a detailed guide on how to create your very own NFT for free using OpenSea, feel free to head over to our article How to Make an NFT.
Will Ethereum 2.0 lead to reduced NFT marketplace fees?
NFT marketplaces will in all likelihood continue to charge their current rates even after the Ethereum 2.0 merge has been completed. However, the steady increase in NFT marketplaces will probably accelerate once Ethereum 2.0 goes live, and this could eventually result in lower marketplace fees due to the increased competition that will ensue.