NFT Marketplaces: A Beginners Guide

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NFT Marketplaces A Beginners Guide

Read on to learn how to get started in your journey to NFT investing 

NFTs are the latest craze in crypto. Since November 2021, the broader cryptocurrency market has been bearish, and most cryptocurrencies are 40-50% off their all-time highs. Interestingly, NFTs have been rocketing in this period. Some top NFTs like the Bored Ape Yacht Club has made investors millionaires and continue to gain exponentially in value.

So how do you take part in the NFT craze and make your money while the market is still hot? Well, you need an NFT marketplace to buy an NFT. NFT marketplaces, as the name suggests, are platforms where you can buy and sell NFTs. Like cryptocurrency exchanges, not all NFT marketplaces are made equal, and as a newbie in crypto, it is easy to use the wrong one.

To help you get it right in NFT investing, here is a simplified beginner’s guide to NFT marketplaces.

How to choose the right NFT marketplace

1. Understand the marketplace’s token standard

While the primary function of an NFT marketplace is the buying and selling of NFTs, the underlying tech standards differ. Different token standards have their pros and cons, and your investment goals should determine the one you go for. Today, most of the NFT marketplaces are Ethereum-based and as such, will make the basis of this discussion.

To help you choose right, here are the different Ethereum marketplace standards available in the market today.

  1. ERC-721

If you want to invest in the rarest of NFTs, then go for a marketplace that uses ERC-721. The ERC-721 standard produces NFTs where each unit is unique and can’t be easily found or replicated.

b) ERC-998

This is an Ethereum token standard that is used for the sale of NFTs in single ownership transfers. The ERC-998 token is best to invest in multiple NFTs that you can hold for the long haul. 

c)ERC-1155 

With ERC 1155, users can hold fungible and non-fungible tokens in their smart contracts. This makes ERC-1155 marketplaces perfect for those interested in NFT game collectibles such as Crypto Kitties – which are often exchangeable assets or currencies used to transact with other players online. 

d) FA2 Token

The FA2 token is the first of its kind. It can be used in any contract that requires Ether and provides developers with more options for their projects since no other blockchain offers this feature yet. FA2 NFT marketplaces are perfect for NFT investors who want to invest in Ethereum-based NFTs that can be traded on non-Ethereum marketplaces. 

2. Check out the Marketplace security features.

As NFTs become more attractive, scammers and hackers are entering the space, too. It’s quite natural since criminals always go where there is money is to be made. One way that criminals are infiltrating the NFT space is by targeting NFT marketplaces. 

Before using a marketplace to buy and sell NFTs, scrutinize its security features. One of the techniques criminals is using to scam investors is impersonating top NFT sellers. Inexperienced buyers fall for such scams and end up losing their money.

To avoid such issues, only trade on NFT marketplaces that have stringent verification processes for both buyers and sellers. Some of the verification procedures to look out for include biometrics and 2-FA. 

3. Look out for price discovery features

This is a feature to look out for when you want to mint and sell NFTs. A price discovery feature allows you to find the perfect price that will help you get buyers for your NFTs. Without this feature in a marketplace, you may price your NFT so high that you may never attract buyers. Similarly, you could price it too low that potential buyers feel that it is senseless as a long-term investment.

Before you start using an NFT market price, check or even ask their support if they have a price discovery feature. If they don’t have it, look elsewhere.

4. Sale of fractionalized tokens

Due to their growing popularity, NFTs have become quite costly. A good example is the Ape NFTs which are now among the priciest NFTs. Unfortunately, this also means that you may find yourself priced out if you don’t have lots of money to invest. You may also be forced to bet so much money on a single NFT, which is a risk if the NFT drops in value. 

To avoid this risk, go for NFT marketplaces that allow you to buy a portion of highly-priced NFTs. This way, you get access to top-quality NFTs without having to break the bank for it. You also have the advantage of spreading the risk across multiple NFTs affordably. 

5. Check for the number of wallets that the marketplace is compatible with

To buy or sell NFTs, you need to load either fiat or crypto to the marketplace. To make buying and selling NFTs easy and fast, go for an NFT marketplace that is connected to multiple wallets. The last thing you want is to trade on a marketplace where you struggle to get your money in or out of the exchange.

6. Overall ease of use 

If you find an NFT marketplace that ticks all the above boxes, the next thing to look for is general ease of use. Some of the features you need to look out for include the exchange layout, commissions for buying and selling NFTs, and even the exchange’s bonuses. While these features may not impact your profitability in purchasing and selling NFTs, they make the process much easier and more pleasant. You want a good trading experience. It’s the least you can ask for since crypto investing in itself is high risk and stressful.

Get started with NFTs

Now that you know what to look for in an NFT marketplace, the next step is to find the best NFTs to buy. Many people only know of the popular ones like the Bored Ape Yacht Club. However, with proper research, you can find some hidden gems that can make you good money in a short time.

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