NFTs (Non-Fungible Tokens) have internet investors in a frenzy, with many cryptographic assets going for exorbitant prices in the crypto art space. However, it isn’t the blue-chip artists who set these eye-popping prices – instead, secondary sales continue to hold and inflate the base price on secondary markets.

But what exactly is a secondary market, and how do these spaces turn primary sales into precious assets? Keep reading to find out.

What Are Secondary Markets For NFTs?

Before we get into secondary markets and how they interact with the active trading community, it’s essential first to establish what an NFT is.

An NFT is a digital asset representing a person’s ownership over something. As the name suggests, it’s “non-fungible”, which means it’s one-of-a-kind. This ownership is backed by a smart contract, which solidifies the agreement between buyer and seller and stores it on blockchain ledgers. This allows the average crypto investor to net a positive return on their NFT investments. 

Now that we’ve laid the groundwork, what is a secondary marketplace? The short answer is that it’s a space for traders to sell existing NFTs to other users once the primary market is closed.

How Do Secondary Marketplaces Work?

According to the traditional investment perspective, secondary markets are when investors or buyers purchase from a secondary entity rather than the distributing body in the primary market. In the NFT arena, this encompasses any transaction made after the “minting phase”, where the crypto artist determines a piece’s price. Think of it as the crypto counterpart to the traditional stock exchange. 

Secondary NFT markets like OpenSea or Rarible act as the mediator between buyer and seller, often providing a user-friendly interface for smart investing. Whether it involves a piece from the Bored Ape Yacht Club or a simple music file, each transaction is then recorded on a digital ledger on the blockchain. This adds to the “history” of a piece, which can be a nice bonus for NFT collectors who want to support the original creator. 

What Kind Of NFT Marketplaces Exist?

Just like stock exchange apps like eToro, secondary marketplaces for NFTs are incredibly diverse. Some are straightforward without all the bells and whistles, while others have a full suite of features to enhance the user experience.

Streamlined Marketplaces

As the name suggests, streamlined marketplaces provide a bare-bones trading experience. That means users can participate in auction house-style bidding wars or buy a piece outright. These platforms also usually have a built-in payment channel, which may be able to accommodate even fiat currencies for transactions.

Augmented Marketplace

Unlike streamlined marketplaces, augmented platforms provide many extra features for niche projects. That can mean everything from marketing campaigns to hosting an NFT gaming project on their servers. 

More sophisticated NFTs and blockchain-based projects can be found on augmented marketplaces. An excellent example of this unique type of marketplace is SuperRare, which is focused on visual art curation. 

Closed Marketplace

A closed marketplace is exactly what it sounds like – it only sells specific kinds of NFTs or caters to certain users. Because they generally have a higher barrier of entry, users on these platforms are usually pretty scarce.

Why Do We Need Them?

You may be thinking, “can’t users just cut out the middleman and trade NFTs between themselves?” But unlike physical goods that can be sold at yard sales or even through online hubs, there is currently no way to sell NFTs without using a marketplace. 

This isn’t necessarily a bad thing. Here are a few ways marketplaces improve users’ experiences.

Supports Digital Artists

Unlike traditional art, every time a crypto asset changes hands on a secondary market, a small royalty is paid out to the original creator. That means collectors can’t get rich on other people’s work without sharing some wealth with the person who made it, making the process more beneficial to artists. So, if there’s a creator out there you want to support, consider purchasing their NFTs.

Community-Driven Trading

Blockchain technology was built to create more democratic and open spaces where anyone can participate and affect how things work. Secondary marketplaces reflect that. 

As people assign value to items by buying and trading assets at prices they determine to be “worth it”, they set the tone for all other users. The result is community-determined prices rather than a central authority calling all the shots.

Secondary Markets vs Minting

As we mentioned earlier, secondary NFT markets are where many people make their crypto fortunes. However, these digital trading platforms wouldn’t exist without the primary market: minting. But how do these two compare?

Buying NFTs at release or minting can be cheaper than trading on the secondary market. However, there are some caveats. 

Namely, minting generative NFTs usually means you’ll receive a random edition that could be worth very little, but it might also end up being the rarest in the collection. On top of this, users can mint several editions at one time, which can make more money than trading on the secondary market. But there is one inherent risk to minting NFTs from new projects: they could be a scam. 

Buying on secondary markets means you can get the exact edition you want while avoiding scam projects. However, highly coveted NFTs can be extremely costly if the market is right.

Final Thoughts On Secondary Marketplaces

Secondary marketplaces are the lifeblood of today’s current NFT trading landscape, with most of the profits made long after the initial minting phase. They provide a platform for users to buy and sell NFTs they deem valuable while benefiting the creator themselves. 

If you want to participate in NFT trading, consider checking out one of the many secondary marketplaces for an easy start.