3 Reasons Solana Could Take Over Ethereum in NFTs: Magic Eden
- Magic Eden has grown from 0 to $1.54 billion in platform sales in less than a year.
- Right now, the platform primarily uses solana to create NFTs, for three main reasons.
- The founders believe that solana provides better technical solutions for NFT than ethereum.
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, valuing it at $1.6 billion.
A large part of the platform’s success can be attributed to the forward-looking efforts of solana, a blockchain that has rapidly gained popularity in recent years and eaten into ethereum’s leadership 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’re so positive about the future.
Big bets on solana
Magic Eden was founded in September 2021, in the middle of last year’s NFT boom.
The platform currently only allows solana NFTs – or NFTs minted on the solana blockchain. That’s in stark contrast to its biggest competitor, Opensea, which only accepted ethereum until April 2022.
But the choice seems to have worked out 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. Approximately 97% of all solana NFT transactions and 92.4% of solana gaming NFT trades occur on Magic Eden.
While they are reaping the rewards today, choosing solana over ethereum was not the easiest choice for Magic Eden’s founders when the company was founded. Most of the flagship NFT collections, such as Cryptopunks and Bored Ape Yacht Club, use ethereum, and prominent NFT artists such as Beeple have only sold their artwork on the ethereum network.
However, Solana has quickly caught 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 market for adjustable devices,” Zhang said to Insider.
Han and Zhou have three specific reasons why they see solana continuing to cut into ethereum’s dominance of the NFT market.
3 ways solana is better than ethereum
Super fast layer-1 solution
The first reason Zhou and Zhang are betting on solana is the speed with which they execute transactions.
“The language was like a super secure mindset and the proof of history consensus algorithms, it supports 400 millisecond block time and 3000 TPS (transactions per second), which is a bit unreal for any other blockchain, especially an L-one blockchain,” Zhou said.
To put that in perspective, ethereum has a block time of 10 to 12 seconds – or 2400% to 2900% slower than solan’s – and about 10 transactions per second. Cardano, another solana competitor, has a block time of 10 seconds and 250 TPS.
Speed is critical for a blockchain network to scale. To put that into perspective, Visa regularly processes 1,700 transactions per second, and claims to be able to process up to 24,000 TPS. The faster solana can complete transactions, the stronger the network and the more attractive it is to companies that want to adopt a blockchain strategy for their business.
Low transaction fees
Zhou said that Solana’s low gas fees are another reason to be optimistic about the blockchain’s future. Gas fees refer to the payment required to perform a transaction on a given blockchain.
One of the biggest criticisms of ethereum is its high gas fees, which is one of the main reasons why investors started looking for alternatives like solana.
“I think it’s pretty obvious, people understand, it’s very cheap to interact with the chain. Which means if you look at the statistics of Magic Eden versus other marketplaces, we have a lot more in terms of the number of transactions -chain interactions than any other blockchain NFT marketplace,” Zhou said.
Not long ago, when the Bored Ape Yacht Club launched its metaverse, Otherside, over $176 million in gas tax was burned. Individuals reported spending over $14,000 in gas fees to make 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 the experience of using solana is more “snappy and polished” than ethereum.
Caseem Ward, a Solana NFT holder and advisor at Light Node Media, agreed with this assessment.
“It is always a smooth and frictionless process to acquire solana NFTs during a sale,” said Ward. “Degenerate Ape Academy was the first SOL NFT I minted and it was a great pleasure. I paid less than a cent to make and received my Degen Ape immediately, avoiding an exorbitant gas fee and a long wait for my transaction to be confirmed on blockchain.
Ward continued: “Solana does not have gas wars, a phenomenon where an anticipated NFT project has thousands of buyers trying to secure space on the blockchain to mint during a public sale, resulting in gas fees driven to sky-high levels. This is in stark contrast to what I have experienced characterizing ethereum NFTs.”
During the Otherside auction, the ethereum blockchain actually experienced an outage due to how much demand there was to buy a metaverse plot. This resulted in many potential investors missing the chance to invest.
However, it is worth noting that Solana itself has had several power outages as well.
The future of solana looks bright
One of the obstacles preventing solana from taking over the NFT market is the lack of artists 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 solanas. In 2021, the total NFT market was over $41 billion, while the Solana NFT market was under $1 billion. But Zhang says the status quo is changing rapidly.
“There are a lot of artists, very famous artists who choose to drop on solana who probably wouldn’t have chosen to drop on solana last October,” Zhang said.
He also noted that major celebrities such as Steve Aoki, Michael Jordan and Shaquille O’Neil have all recently experimented with solana.
Growing interest among celebrities and artists to use the solana blockchain only validates Magic Eden’s efforts 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 summed up 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 headed in Solana’s direction.