Buying and selling NFTs: fees, royalties and fake volume

Buying an NFT takes a minute. Selling one can take months, or never happen. This lesson explains how the marketplaces work, what a sale costs and why the trading figures you see deserve suspicion.

Two ways to get one

Minting means creating a new token by paying the project's contract. You are the first owner. The price is set by the project.

Buying on a marketplace means paying an existing owner. A marketplace is a website plus a set of smart contracts that swap a token for payment in one step.

What listing involves

To list an NFT for sale, you sign two things.

An approval. You give the marketplace's contract permission to move your NFTs from that collection, so it can hand one over when a buyer pays. The function is called setApprovalForAll, and as the name says, it covers every token you hold in that collection.
The listing itself. A signed message stating the price and how long the offer stands.

The approval stays in place after the sale. Lesson 54 explains why that matters and how scammers imitate this step.

What comes out of a sale

Marketplace fee. A percentage of the sale price.
Creator fee, or royalty. A percentage meant for the creator on each resale.
Gas. The network fee for the transaction. Lesson 32 explains it.

Royalties are less certain than they sound. A smart contract cannot force a marketplace to pay one. For a time the marketplace OpenSea enforced them with a tool that blocked sales on marketplaces that did not. Competitors got around it. On 31 August 2023 OpenSea retired the tool and made creator fees optional for new collections.

So when a project promises that royalties will fund its future, check whether anyone is still required to pay them.

Why selling is hard

A bitcoin can be sold in seconds because every bitcoin is the same and there are always buyers. Each NFT needs its own buyer.

Floor price is the lowest asking price in a collection. It is an asking price, not an offer. Nobody has agreed to pay it.
Thin markets. A collection may see a few sales a week, or none. To sell quickly you may have to accept far less than the floor.
Rarity. Tokens with unusual traits are priced higher, and are harder still to value.

Lesson 51 gave the wider picture: trading fell from $57.2 billion in 2022 to $13.7 billion in 2024.

Fake volume

A wash trade is a sale where the buyer and the seller are the same person, using two wallets. It makes an NFT look in demand and sets a high "last sale" price to show the next buyer.

It is easy to do because wallets are free and anonymous. In 2022 Chainalysis, a blockchain analysis firm, studied sales to wallets that the seller had funded. It found 262 users who had done this more than 25 times each. Most of them lost money once fees were counted. The 110 who profited made about $8.9 million between them from buyers who believed the prices.

A high sales figure or a striking last sale price proves nothing by itself.

Before you buy

Check the collection's contract address against the project's official site.
Look at sales, not listings. How many real sales in the past month, and between how many different wallets?
Add up the costs. Marketplace fee, royalty and gas on the way in, and again on the way out.
Assume you cannot sell. Buy only what you would be content to keep.
Keep records. Buying an NFT with crypto is a taxable event in many countries. Lesson 60 explains.