In less than a year, Magic Eden has become the second largest NFT marketplace in the world. Just last month the company raised $159.5 million from tech titans like Sequoia and Greylock, giving it a $1.6 billion valuation.
A big part of the platform’s success can be attributed to its prescient bet on solana, a blockchain that has quickly gained popularity over the last few years and eaten into ethereum’s lead in the NFT market.
Insider recently spoke with Magic Eden co-founders Zhuojie ‘Rex’ Zhou and Sidney Zhang about their thoughts on solana, and why they are so bullish about its future.
Magic Eden was founded in September of 2021, right in the middle of last year’s NFT boom.
The platform currently only allows for solana NFTs — or NFTs that are minted on the solana blockchain. That is in stark contrast from its biggest competitor Opensea, which only accepted ethereum until April 2022.
But it appears that the choice has worked well for Magic Eden. Since its inception less than a year ago, Magic Eden has scaled up to over 837,000 users, has two million more monthly transactions than OpenSea, and has an exchange volume of over $1.54 billion.
Today, Magic Eden controls virtually the entire solana NFT marketplace. Roughly 97% of all solana NFT transactions and 92.4% of solana gaming NFT trades take place on Magic Eden.
While they’re reaping the rewards today, it wasn’t the easiest choice for Magic Eden’s founders to pick solana over ethereum when the company was founded. Most of the flagship NFT collections, like Cryptopunks and the Bored Ape Yacht Club, use ethereum, and prominent NFT artists like Beeple have only sold their artwork on the ethereum network.
However, solana has been quickly catching up with its crypto competitor.
“At the end of February ethereum represented 91% of all NFT trades and solana was 6% or so. Today ethereum represents 66% of the number of trades and solana NFTs represent 14% of the total adjustable entity market,” Zhang told Insider.
He and Zhou have three specific reasons why they see solana continuing to cut into ethereum’s dominance in the NFT market.
Super fast layer-1 solution
The first reason Zhou and Zhang bet on solana is the speed at which it conducts transactions.
“The language was like a super secure mindset and the proof of history consensus algorithms, it supports 400 milliseconds block time, and 3000 TPS (transactions per second), which is kind of unreal for any other blockchain, especially a L-one blockchain,” Zhou said.
To put that in perspective, ethereum has a block time of 10 to 12 seconds — or 2,400% to 2,900% slower than solana’s — and roughly 10 transactions per second. Cardano, another solana competitor, has a block time of 10 seconds and 250 TPS.
Speed is essential for a blockchain network to scale. To put it in perspective, Visa regularly processes 1,700 transactions per second, and claims to be capable of processing up to 24,000 TPS. The faster solana can conduct transactions, the stronger the network and the more appealing it is to companies looking to adopt a blockchain strategy for their business.
Low transaction fees
Zhou said solana’s low gas fees are another reason to be optimistic about the blockchain’s future. Gas fees refer to the payment required to conduct a transaction on any given blockchain.
One of the biggest criticisms of ethereum is its high gas fees, which is one of the main reasons investors began looking for alternatives like solana.
“I think it’s pretty obvious, people understand, it’s really low cost to interact with the chain. Which means, if you take a look at the stats of Magic Eden versus other marketplaces, then in terms of number of transactions we have way more on-chain interactions than any other blockchain NFT marketplaces,” Zhou said.
Not long ago, when the Bored Ape Yacht Club launched its metaverse, Otherside, over $176 million in gas fees were burnt. Individuals reported that they spent over $14,000 in gas fees to mint four NFTs. For perspective, the gas fee to mint an NFT on Magic Eden is less than a penny.
Polished consumer experience
Finally, Zhou said that the experience of using solana is more “snappy and polished” than ethereum.
Caseem Ward, a solana NFT holder and advisor with Light Node Media, concurred with this assessment.
“It’s always a smooth and frictionless process acquiring solana NFTs during a sale,” Ward said. “Degenerate Ape Academy was the first SOL NFT I minted, and it was such a pleasure. I paid less than a cent to mint and received my Degen Ape instantly, escaping an exorbitant gas fee and long wait time for my transaction to confirm on the blockchain.
Ward continued: “Solana doesn’t have gas wars, a phenomenon where an anticipated NFT project has thousands of buyers trying to secure their spot on the blockchain in order to mint during a public sale resulting in gas fees driven up to sky-high levels. This is in stark contrast to what I’ve experienced minting ethereum NFTs.”
During the Otherside auction, the ethereum blockchain actually experienced an outage due to how much demand there was to purchase a metaverse plot. This resulted in many potential investors missing their chance to invest.
It is worth noting, however, that solana itself has had multiple outages as well.
One of the hindrances preventing solana from taking over the NFT market is the lack of artists who are building on the solana blockchain network right now.
Many creators choose to list their NFTs on the ethereum blockchain simply because there is more money in the ethereum system than solana’s. In 2021, the total NFT market was over $41 billion, while the solana NFT market was less than $1 billion. But Zhang says that the status quo is quickly changing.
“There are a lot of artists, very famous artists that are choosing to drop on solana that probably wouldn’t have chosen to drop on solana in October of last year,” Zhang said.
He also noted that major celebrities like Steve Aoki, Michael Jordan, and Shaquille O’Neil have all recently experimented with solana.
Rising interest among celebrities and artists in utilizing the solana blockchain only validates Magic Eden’s bet on the network, and both Zhang and Zhou are confident that solana’s popularity will continue to grow from here.
“Ethereum is the ecosystem that really took off last year,” Zhang said. But while ethereum may have dominated the NFT market last year, Zhang is focused on the future, not the past.
Zhang succinctly summarized his perspective: “Don’t just look at where the puck is today, look at where the puck is going.” For Magic Eden, the puck is heading in solana’s direction.
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