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Where to Buy NFTs: The Differences Between Marketplaces
There are dozens of NFT marketplaces, but each can be categorized into one of two types.
The first type is a centralized curation marketplace. These markets require no crypto knowledge and use an interface that should feel familiar to anyone who’s shopped online. The downside is that there’s a limited selection of NFTs and no true ownership guarantees.
The second type is an open marketplace. These markets are where the most popular collections, like Bored Ape Yacht Club, Doodles, and Art Blocks are found. The downside is that there's a steep crypto learning curve and users take on a ton of security responsibility.
Neither marketplace type is good or bad. Which one you use depends on what you want to collect and how serious you plan to take your NFT journey.
To start this post, we’ll go over the advantages and disadvantages of centralized curation marketplaces, then do the same for the open marketplace. We’ll end with what I think the future will look like and which type of marketplace I recommended.
Centralized Curation Marketplaces
Centralized marketplaces require just an email, a password, and a credit or debit card. Buying and selling NFTs will feel as familiar as buying something on Amazon.
Centralized marketplaces will onboard millions of new NFTs collectors because, by design, they abstract all the crypto complexity. They're a great way for beginners to get a taste of what it's like to own an NFT.
While they’re easy to use, they come with a few drawbacks:
These services act as the tastemakers and curators of NFTs. The curation is great because you don't have to worry about scam projects, but you only get access to a small portion of the world’s NFTs.
If you have an account with five services, you'll need to remember login info for five accounts and view your NFTs in five different spots. For example, if you have NFTs on NBA Top Shot and Nifty Gateway, there’s no way to view or trade them using the same account.
The ownership is similar to owning a skin in a video game because these services hide the blockchain and wallet aspects from you. In most cases, you don’t have true ownership of your assets. The services could lock you out of your account at any time if you don’t follow their rules.
Open Marketplaces w/ Self-Custody
Hardcore crypto enthusiasts often say, "not your keys, not your coins," which is a reference to transferring your coins from a crypto exchange account (e.g. Coinbase) to your wallet. Taking self-custody of your assets (cryptocurrencies or NFTs) requires a crypto wallet with a private key.
A digital wallet secured by a private key is the best form of true ownership ever invented. It’s so powerful that if you can remember the 12 words from your seed phrase, you can travel the world without a device and carry billions of dollars worth of assets in your mind. Your assets are completely uncensorable, meaning that the right to hold or transfer your assets can’t be taken from you under any circumstance.
With a crypto wallet (like Metamask or Rainbow), you can log into dozens of decentralized marketplaces (like OpeaSea, LookRare, and Magic Eden), and your NFTs travel with you. Most of the popular NFTs collections like Bored Ape Yacht Club, are found on open marketplaces along with hundreds of thousands of others.
True ownership gets crypto nerds excited, but it’s not for everyone because it comes with a few major drawbacks:
The learning curve is steep. You need to buy crypto (ETH or SOL), then learn how wallets, private keys, public keys, and gas fees work.
You must remain vigilant at all times (even if you're an expert). Signing a single malicious contract can completely wipe your wallet of all your assets. True full ownership over your assets is great, but in exchange, you're given full responsibility. Can't remember your seed phrase? Your assets are gone. Give someone access to your seed phrase? Your assets are gone. Accidentally send an NFT to the wrong address? Your asset is gone. Blockchains don't have customer support and no one will save you.
NFTs are priced in their native currencies, not USD. NFT prices are volatile, but prices are even more chaotic when you add in the volatility of ETH's price. For example, my Doodle has been worth between 8-16 ETH over the last six months, which bad enough as it is, but due to the fluctuation in the price of ETH, my Doodle is down closer to 85% in dollar terms.
Which marketplace is best for you?
The short answer is both!
NFTs will likely utilize a hybrid approach that heavily focuses on centralized services for onboarding new collectors with an off-ramp for those who want true ownership.
I appreciate the responsibility for proper security and love the true ownership aspect of digital assets. And most of my favorite NFTs are found on the open marketplaces.
But there’s a good chance new collectors won’t value true ownership or a universal wallet like crypto nerds do. And that’s okay! Many collectors will be happy to buy on centralized services. Even as a crypto purist, I still use NBA Top Shot daily and there’s no denying that it was my gateway drug to discovering the rest of the NFT world.
While it’s possible to discover hidden gems and make money on centralized marketplaces, they should be seen as a way to have fun collecting rather than something that’ll make you rich. Because crypto believers are the ones most fascinated with NFT and think true ownership is fundamental, I’m confident that most of the prominent NFTs collections will remain on open and decentralized marketplaces. But as we’ve discussed in the first two posts, NFTs are about a lot more than just money.
If you're feeling courageous, next week, I'll show you the step-by-step process for buying an NFT on an open marketplace.