The NFT space has grossed massive popularity in recent years owing to its immense potential and increased technical knowledge among people. Although NFTs staunchly advocate decentralization, most existing infrastructure works on top of Web2 solutions and business tactics. What could that mean for users? Well, that means users embracing decentralization are still within the waters of centralized Web2 technology even without knowing. We will compare and contrast centralized and decentralized NFT marketplace models and look at different Whitelabel NFT marketplace solutions based on both of them. Gear up as we are set to witness more about one of the intriguing and heated topics in the current NFT space.
“Web 3.0 is about creating a more secure and private web, where users can trust that their data will be kept safe and confidential.”
Keep these words from the popular entrepreneur and cybersecurity expert John McAfee in mind, as you will find them relatable further down the article.
Centralized NFT Marketplaces: A Primer
A centralized NFT marketplace is what it sounds like – A platform allowing users to create and trade NFT assets while remaining under a centralized umbrella. Such platforms are reminiscent of conventional e-commerce stores looked after by individual enterprises. Their working nature has both benefits and drawbacks, which we will discuss in the following sections.
If you think of NFT marketplaces functioning based on a centralized model, the names of all prominent marketplaces will pop up. OpenSea, Coinbase NFT, SuperRare, Foundation, and Nifty Gateway – all are centralized NFT marketplaces. And all of them have a significant contribution to the global NFT market.
Benefits of Centralized NFT Marketplaces
- Centralized NFT marketplaces usually offer highly user-friendly experiences as they rely on Web technology at various levels. From storage solutions to platform administration and customer support, these apps reflect Web2 versions of NFT trading platforms.
- These applications have a massive user base as most of them have an established presence in the Web3 space in some way. While some persisted with NFT business, others delved into NFTs from exchanges and wallets.
- Such platforms with an established ownership structure can easily secure partnership deals across industries. These collaborations can allow brands and creators to access the massive user bases of these apps.
Problems with Centralized NFT Marketplaces
- Centralized NFT marketplaces are centralized, meaning there will be an intermediary watching every transaction. Sometimes, content from creators is even censored, stating that it interferes with conventional regulations, which is alarming, especially for NFTs.
- This type of NFT marketplace imposes restrictions on the secondary selling of NFT assets bought from them. Most platforms enable users only to list assets inside the application if they were purchased inside the app.
- While centralized NFT ventures strive to offer maximum security, unprecedented outages can bring huge losses. Many popular NFT marketplaces have experienced criticism from users due to the failure of external API integrations.
Decentralized NFT Marketplace: A Recap
Now that we have seen the ins and outs of centralized NFT marketplaces, you can relate to John McAfee’s statement we touched upon earlier. But wait, we will see more about decentralized NFT marketplaces to validate the correctness of the statement.
A decentralized NFT marketplace, as its name suggests, is decentralized to the core. The platform typically does not need an intermediary; even if one is present, their role will be minimal. The power of these platforms lies in the fact they are driven by the community that uses them.
Rarible, Blur, Element Market, and Magic Eden are well-known NFT marketplaces that adopt a decentralized working model. These platforms often label themselves as community-driven to appeal more to the target market and keep things less technical. The community decides on most things here, including fee changes, technical upgrade proposals, and rewarding schemes.
Benefits of Decentralized NFT Marketplaces
- Decentralized NFT marketplace development doesn’t rely on central teams for administrative purposes, freeing up restrictions related to content censorship to an extent. Still, community members can collectively decide if an NFT promotes unsavory principles or practices.
- The community is everything in decentralized NFT marketplaces, as collective decision-making plays a vital role here. Platform upgrades, changes to the business model, and more are handled through a voting process using native crypto tokens.
- These applications also enhance liquidity for NFT assets, as users can sell NFTs across marketplaces without concerns. Such provisions allow NFTs to be traded more quickly, making the market more liquid.
Problems with Decentralized NFT Marketplaces
- While decentralized NFT marketplaces promise a lot for enthusiastic users, most applications remain difficult to access, hence receiving an underwhelming reception. Even prominent apps like Rarible and Element Market do not have trade volumes anywhere near those of OpenSea.
- Such applications also encounter the problem of decisions being influenced by people holding too many tokens or influential figures who can drive other users to support or reject a decision.
- This type of NFT marketplace has not seen a huge user base, making us wonder how well can community consensus and smart contracts handle a platform. Provisions for customer support are also low, making it difficult for new users.
Which is the Best NFT Marketplace Model – Centralized or Decentralized?
We have seen comprehensively both centralized and decentralized NFT marketplaces. It’s now time to determine which model could be ideal for business in the coming future. While centralized NFT marketplaces score heavily in terms of achieving user friendliness and empowering the transition to Web3, the factor of centralized authority becomes a challenge.
On the other hand, although decentralized NFT marketplaces do not have a massive user base, their potential hasn’t disappeared, and they can evolve to make Web3 truly centralized. According to DappRadar rankings, Rarible and Element Market are among the current top NFT marketplaces in terms of Unique Active Wallets (UAW). This shows how users have begun embracing decentralization.
How Can White Label NFT Marketplace Solutions Be Helpful in this Case?
If you are planning to maximize the current trend of building a decentralized NFT marketplace, it will be better if you utilize white-label NFT marketplace solutions. These applications are usually available with a decentralized NFT marketplace development company that can customize the software to fit your individual needs.
Utilizing pre-made NFT marketplace software can benefit you in terms of finances and time taken. The NFT market is subject to evolution, and trends often change unprecedentedly, making it tough for ventures to put huge efforts into bringing an NFT marketplace from scratch. These solutions also make it possible for you to launch an NFT marketplace similar to an existing decentralized marketplace, making it easy to gain recognition.
The NFT marketplace business model has even more potential. We say this despite the market being full of hundreds of different marketplaces. Adding decentralization into the mix betters the prospects for businesses aiming to launch their applications. With the current market trends strongly in favor of community-driven NFT marketplaces, entrepreneurs aspiring to step into NFTs can courageously take up the decentralized NFT marketplace model. An experienced decentralized NFT marketplace company can help realize such platforms both from scratch and Whitelabel NFT marketplace software, supporting business-savvy individuals with varied resources. With 2024 just around the corner, we expect NFT marketplaces based on community consensus to evolve and become mainstream, preserving the core elements of Web3 technology.
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