How do NFT Platforms Make Money?

Josiah Nang-Bayi, MD
7 Min Read

The explosive growth of the NFT market has given rise to many platforms providing services around minting, buying, selling, and displaying these digital assets. In 2021 alone, top NFT marketplaces generated over $10 billion in transaction volume. Though the volume has fallen over the years to 2023 and gradually rising again, NFTs have proven a profitable revolution for traders and marketplaces alike.

But how exactly do these platforms make money enabling the emerging NFT economy? This guide will explore the key revenue models and business strategies that fuel NFT platforms.

By understanding how these services monetize, we can better evaluate the ecosystem and opportunities as an investor or creator. Let’s dive in and analyze how NFT platforms capitalize on crypto’s latest gravy train.

Top Ten Ways NFT Platforms Make Money

Transaction Fees

The most straightforward business model for NFT platforms is charging transaction fees on trades.

Leading peer-to-peer marketplaces like OpenSea, Rarible, and LooksRare charge 2-5% on each sale. These platforms operate similarly to eBay or Etsy by facilitating transactions between buyers and sellers for a cut.

Higher-value NFTs can generate lucrative fees – sometimes six or seven figures for platforms from a single sale. If transaction volume grows as projected, these fees alone could provide sizable revenues.

Some platforms like Solanart instead use a tiered fee structure based on transaction size. Others like Magic Eden have tested lowering fees to draw more volume.

Transaction fees provide simple scalable monetization. But as competition increases, services battle to offer the most value at the lowest rates.

Listing and Minting Fees 

In addition to transaction fees, some NFT platforms also charge for listing or minting new NFTs.

For instance, Mintable charges a “gas-less” minting fee when creators first generate their NFTs on the platform. This avoids creators having to hold Ethereum to pay “gas” fees themselves.

SuperRare allows free minting but charges a roughly $60 one-time fee to list artwork for sale after minting. Other platforms can charge variable listing fees depending on factors like item type.

These listing and minting charges provide additional revenue from the constant influx of new NFTs entering ecosystems.

Subscription Plans

A subscription-based model offers recurring SaaS-like monetization for NFT platforms.

For example, OpenSea has an optional seller subscription called OpenSea Pro that charges around $20 per month. This unlocks benefits like custom branding and analytics.

Some platforms charge subscriptions for enhanced use across the board. Cloud-based NFT creator Flow asks users to subscribe monthly for better access to their NFT tools.

Subscriptions can generate predictable revenues scaled by the user base. Premium add-ons cater to power sellers and whales for enhanced monetization.

Creator Earnings Shares

Some NFT platforms share a percentage of creator earnings to incentivize use of their service.

SuperRare, for instance, charges artists a 15% commission on primary sales but then grants them a 10% share of all secondary sales. This gives creators passive income from future NFT trades.

Similar services like Foundation and MakersPlace use variations of creator revenue sharing to stand out. These small cuts of potentially large secondary sales add up across entire creator networks.

Value-Added Services 

Additional value-added services are another monetization strategy employed by NFT platforms.

Marketplaces like Rarible offer custom storefront profiles that creators or collectors can use to showcase their brands or NFT galleries. These provide added customization for a fee.

NFT investing tools provided by platforms for purchase tracking, valuation, and analytics could also come with premium add-on pricing. 

Special events, early access privileges, and other premium perks offered on platforms can potentially be monetized as well.

Data Leverage

While not an immediate revenue stream, some NFT platforms could leverage user data for targeted marketing or insights in the future.

By understanding transaction patterns and trends, they can identify investor behaviors and Creator preferences to improve products or connections.

If platforms can use this data judiciously to enable web3 innovations, it provides indirect long-term monetization potential. However, protecting user privacy remains a priority.

Native Tokens

Native crypto tokens are a buzzy monetization model embraced by NFT platforms like Rarible (RARI) and Audius (AUDIO).

These tokens allow holders to participate in governance or incentives. Platforms distribute tokens as rewards to users for engagement. They can also fundraise by selling tokens directly.

In theory, demand for native tokens tied to successful platforms creates built-in value capture. Speculation by retail investors helps raise the market value, as seen with exchange tokens like Binance Coin.

However, designing sustainable tokenomics is challenging. Many crypto platforms have shifted away from token models to avoid volatility and regulatory issues.

Advertising and Sponsorships

A straightforward web2 approach to generating revenue is through advertising, brand sponsorships and strategic partnerships. 

Platforms like Dapper Labs have partnered with the NBA to turn basketball highlights into NFT collectibles. Brand collaborations can also create sponsored digital wearables.

why buy nfts

Advertising real estate on NFT marketplaces offers another simple monetization stream akin to Google and Facebook. As the ecosystem matures, these traditional digital marketing techniques could propagate more.

Artists and User Bases

Ultimately NFT platforms need to attract and engage creators and collectors to facilitate transactions. This requires building tools and communities of value not easily replicable.

Platforms focused on serving artists and delivering a fantastic user experience tend to fair better long-term – even if they monetize less initially.

Investing in your core constituency rather than extractive monetization provides sustainable competitive advantage and growth.

Conclusion

NFT platforms leverage a range of models from transaction fees to creator revenue sharing, subscriptions, data analytics, advertising and more. Combined these can create solid monetization.

However, focusing too narrowly on revenue risks undermining the core value proposition of supporting artists and collectors. The platforms playing the long-game will win.

The NFT space is still young and changing rapidly. But by understanding the financial drivers, we can better evaluate how protocols balance value creation with capture.

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Josiah Nang-Bayi, MD is a medical doctor by profession, an author, a financial literacy and digital assets enthusiast, an entrepreneur and a growing philanthropist.
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