Flow Journey: TIL I learned about some NFT Marketplace business models

nft ft blockchain flow

Introduction

Next up in my Flow Journey was more a business related question. After going through the Cadence tutorials and starting to understand concretely how I might buy a NFT marketplace, or blockchain based dApp (distributed App) in general, I had a big question in mind.

Let's say you build an NFT marketplace. People purchase your NFTs and then they start trading them. From the examples I saw, it seemed like people could buy and sell between each other and then would just transfer FTs or Fungible tokens between each other. So with that in mind, how do the people who build the platform our marketplace make money.

I was browsing the NBA Top Shot Smart Contracts, and I couldn't find a place during the transaction that would lead to the platform making money. The closest thing I found was a 'beneficiary' cut.

So this led me to my question, how to these NFT marketplaces make money?

Thanks again in huge part to the Flow Community, the Flow Discord server, and the Flow office hours, I learned of 2 common business models for NFT Marketplaces

  • First party sales
  • Transaction based

First Party Sales

I apologize for not remembering the handle of specific person who answered (big thanks to that person!), but what they said was, the first common way for NFT marketplaces to make money is on "First Party Sales".

What this basically means is, the platform has minting permissions. So they are the ones who create the NFTs in the first place and when they are first minted, they belong to the organization. The way they make money is by selling these NFTs for the first time. Afterwards, when people buy and sell them, they don't make any more money.

This is analogous to say trading cards in the real world. When they are first sold, the company that produced them makes money. However, afterwards, when people buy and sell them, it's not like the original company gets a cut. They only make money on the first sale.

Transaction Based

The other way is through transaction fees. So if you build an NFT marketplace, you could take a cut during the purchasing and selling. If you write your Smart Contract to deposit some of the funds into the seller's account, but hold some back and deposit that into your account - then you make money off the transactions. So that's another way to do it.

Not to mention, you could combine the two.

Conclusion

These business models are probably pretty obvious to most people. However, the thing is, when you start learning Blockchain development, seemingly simple questions seem to feel daunting.

Business models was definitely a question of mine, and the Flow team answered it perfectly.

Til the next one.

Casey Li
CEO & Founder, BiteSite

Flow Journey: TIL that you can use established FTs for your NFT Marketplace

nft ft blockchain flow

Flow Journey Introduction

Welcome to the first post in our series called "Flow Journey". While we're confident in our Web and Mobile app development skills, we are brand new to blockchain development and specifically Flow.

For those who don't know, Flow is a new blockchain that was built by DapperLabs. They built it after their experience with building their dApp CrytoKitties on a different blockchain (Ethereum).

Anyway, our team is exploring Flow and learning a lot and as such, we thought we would start blogging about it to share our journey and knowledge that we've learned along the way.

As articles come out, we'll keep a running list here:

Fungible Tokens for your NFT Marketplace

Today, we're talking about FTs or Fungible Tokens.

For those that are new to blockchain development, Fungible Tokens are basically digital assets whose value is equivalent. For example, FUSD is a fungible token and 1 FUSD in 1 person's account is equivalent to 1 FUSD in someone else's account. Think of it as currency.

When you go through the the Cadence tutorials on the Flow website, they show you how to actually build your own Fungible Token to be used in a NFT marketplace. In other words, a way to create your own currency to use in your Marketplace.

Great tutorials, no question. But I had a big question afterwards.

If you're creating your own FT or currency, how would a marketplace work in terms of people buying your NFTs? More specifically, how would people use traditional money (or even established currency like FLOW or FUSD) to pay for your NFTs if you created your own FT?

Well there are 2 things I learned today while on the Flow Discord server. Big thanks to bjartek.find and Dene from Geniace: bjartek.find for answering my questions and to Dene from Geniace for presenting on their project which included a 'native FT' during the Flow Dev Office Hours which clarified my suspicions.

Answer number 1: You don't always create your own 'native FT'.

Thanks to bjartek.find, I learned that it is very common to create an NFT marketplace and use an already established FT (like FLOW or FUSD). The tutorials highlight how you would create your own FT, but that's not necessarily a common thing to do. Instead, you build your NFT marketplace and use FLOW or FUSD as your FT. This way, you don't have to worry about converting traditional currency or any currency for that matter. People will already have some FLOW and FUSD balance that they could use without any conversion.

Answer number 2: Convert to your Native FT

I'm definitely not an expert on this, but hearing Dene from Geniace talk - he talked about their native token and some of the implementation around it. Again, not an expert, but what I got from it, is indeed they would have to do a conversion or exchange to their native token. That I can only assume is way outside my knowledge base.

Long story short, if you're getting started, it looks like you can use a well established FT in your NFT marketplace.

Big thanks to the Flow team and the Flow community. Joining their discord server was one of the best things I've done so far in this journey.

Until the next one.

Casey Li
CEO & Founder, BiteSite