Looking at How Solana Grew its NFT Ecosystem Into a Major Player
Though NFTs are still very much in their infancy, they’re well on their way to becoming a household name. For many who are just learning about the technology, NFTs are in many ways synonymous with the Ethereum blockchain, where valuable ‘blue chip’ NFT collections such as Bored Ape Yacht Club and CryptoPunks reside. However, there’s a new major player in the NFT ecosystem, and it’s an entirely different blockchain: Solana.
Emerging blockchains like Solana host rich opportunities to launch and grow new NFT marketplaces, tools, and collections. As web3 investors have begun turning their attention towards Solana, so have popular marketplaces. OpenSea, the most popular NFT marketplace, chose to begin listing SOL collections in April of this year, with Okay Bears bringing in over $80M in secondary sales. Another notable project, Solana Monkey Business, has over $100M in total secondary volume, most of this on a leading marketplace called Magic Eden. Though Magic Eden is relatively newer, the Solana-only marketplace has become an increasingly favored landing spot for those interested in NFTs, quickly taking a prominent spot near the top of the charts of total marketplace volume according to DappRadar.
So how did Solana gain popularity so quickly among NFTs?
1 — Price and Accessibility
For many, Solana has proven to be a more accessible space for investing in NFT collections due to the lower associated costs. Not only is interacting with SOL more affordable than interacting with ETH (due to lower mint-related fees), but in comparison to their ETH equivalents, most NFTs released on SOL are sold at more accessible price points, selling for 1–2 SOL at mint (usually under $100 USD).
2—Environmental Concerns
While ETH is a proof-of-work blockchain, requiring heavy amounts of resources for every interaction, SOL is proof-of-stake, using less energy per transaction. An energy use report from Solana claims that one Ethereum transaction is equivalent to 287,305 Solana transactions.
3—A Small (But Mighty) Stage
Solana is creating its own thriving community of NFT collectors, artists, and investors. Magic Eden, which consistently bests OpenSea as the primary platform for Solana NFTs, has had daily interactions from 30,000 different wallet addresses throughout the year, and reached a record-high daily volume in April 2022 of almost $77 million USD. For project creators, it’s possible to get the attention of these users much more easily than on the Ethereum blockchain, where attention must be fought for on a much bigger scale.
4—Community-First, UX-Focused Startups
The success of Magic Eden and NFTs on Solana did not come without hurdles. A few months into its rapid growth, Magic Eden faced the first major rugpull on its platform from a project that was worth more than $2M at the time (Balloonsville). As opposed to putting the responsibility on their users, Magic Eden took a proactive, community-first approach that is now associated with the company’s culture. The team took to Twitter Spaces, communicated constantly with their community members, refunded minters who lost money, and injected 5,000 SOL into the project which evolved into Balloonsville 2.0. As Variant Fund cofounder Li Jin recaps in her analysis of Magic Eden, “Magic Eden has been able to navigate some of the key tensions that web3 startups face: decentralization vs. being accountable to users, rapid scale vs. prioritizing community input and ownership, and making bold product decisions in an industry where the rules of the game are still being defined.” Magic Eden rose to success, and amplified the entire Solana NFT ecosystem with it, by achieving rapid growth without sacrificing user experience or community sentiment.
As web3 continues to emerge, there is still a lot to be determined. Industry giants like OpenSea face a number of unanswered questions. The OpenSea SOL marketplace’s daily usage has yet to exceed 10,000 SOL unique wallets, which is about one-third of what Magic Eden regularly sees, and the SOL volume fluctuates significantly from day to day, from highs of $7 million USD all the way to lows of about $100,000 USD. Still, the number of active web3 marketplace users pales in comparison to traditional online marketplace giants like eBay, which boasts 138 million active buyers worldwide. Even in this initial phase, VC funding continues to enter the space with Magic Eden raising $27 million in a recent round and gaming marketplace Fractal raising $35 million.
The future of the NFT industry at large will depend upon the sustainability and scalability of new ecosystems. With Ethereum’s upcoming shift from the Proof-of-Work to Proof-of-Stake consensus model that will address many of the congestion and cost concerns that have driven NFT communities from Ethereum to other blockchains, the Solana NFT ecosystem (and others) must continue to differentiate itself with projects that focus on both scale at speed and deliver a community-first user experience. As more investors, developers, and projects begin to view Solana as a viable option for web3 products of all types (including many of SuperLayer’s own projects that have launched on the blockchain), it will be interesting to see how other blockchains begin to execute their own playbooks for NFT ecosystem growth.
