How Magic Eden became the OpenSea of Solana

It was August 2021 and Solana had just had its most hyped NFT mint to date, a collection called The Degen Ape Academy. And it had been a disaster.  

The mint was so hotly anticipated that the project’s team couldn’t handle the pressure of tens of thousands of buyers trying to mint NFTs in the collection of 10,000. It had to delay the drop multiple times, and the fiasco even spawned an offshoot of exiled apes that were sold during one of the failed mints and later rejected from the official collection.

The big problem was a dearth of infrastructure for projects launching NFTs on Solana. There were no launchpads for NFT mints, barely any working marketplaces and projects had to build everything themselves. The Degen Ape Academy’s botched mint was just one of many. 

“We thought to ourselves jokingly, maybe we could build something better. This would be a fun side project,” says Magic Eden co-founder Zhuoxun Yin.

By then it was clear there was strong demand for NFTs on Solana — a faster and cheaper blockchain than Ethereum that is hence more suitable to smaller purchases — but there was no infrastructure to match it. 

Yin and his colleagues could smell opportunity. So they knocked together a basic version of an NFT marketplace and created a Discord server where they gleaned feedback from a few of their friends.

Six months later, Magic Eden is as dominant in Solana’s NFT market as OpenSea is in Ethereum’s. But while Magic Eden may have become the OpenSea of Solana, it doesn’t intend to follow in the footsteps of Ethereum’s top marketplace.

From side project to Solana dominance

The original team was comprised Zhuoxun Yin (Zedd), a senior product manager at Coinbase at the time; Jack Lu, who organized partnerships at FTX; Sidney Zhang, an engineering manager at Meta and Rex, a senior engineer who worked as Zhang’s right hand.

Yin says that the team wanted to create a marketplace that made it easy to discover different NFT collections — a more Netflix-style approach — with lots of categories and tags to help users navigate the site. For example, tags would be used to show which collections are derivatives of other projects. Plus, he wanted a focus on NFTs used for gaming, including a part of the marketplace that showcased such NFT-based games.

The marketplace shortly went live on September 14 and started gaining traction right away. Over the next few months, the team grew from four people to around 50. Magic Eden’s traffic grew even faster, increasing by two or three times each month. This was driven by the site’s smooth user interface and its performance — particularly in terms of its speed and pace at which it added new features — relative to other marketplaces.

In total, Magic Eden has seen 5 million SOL in transaction volume, a sum worth $555 million (and that’s despite the price of SOL having halved in recent weeks). The marketplace now accounts for 90% of the NFT market on Solana — equivalent to OpenSea’s dominance on Ethereum — in terms of both transaction count and volume.

Yin says half of that volume came in January alone, putting pressure on the site’s infrastructure and forcing it to change providers. “We haven’t been able to keep up with the kind of traffic we’ve been getting. Last few weeks have been really crazy,” he says.

While Magic Eden didn’t need much funding — it was making plenty of money from transaction fees — it took some on as a way to get the backing of big crypto players and expand more quickly. First, it raised $2.5 million in a seed round in October. Now the project is about to close a Series A round, which it aims to do within a few weeks.

Magic Eden gets three-quarters of its revenue from the 2% fee it charges on all NFT purchases. But it has also built out a launchpad for NFT mints, allowing projects to sell their NFTs without needing to build their own infrastructure (which was a frequent occurrence in the early days of Solana NFTs).

Magic Eden hosts two or three mints per day, according to Yin, and this part of its business has grown so quickly that it now accounts for the remaining 25% of the marketplace’s revenue.

What’s the future for Magic Eden?

With Magic Eden dominating the Solana NFT market and OpenSea on Ethereum, the question is whether each will stick to their own plate or if either will try and eat the other’s lunch.

Yin says the team’s general philosophy is to go where the users go. “The sheer speed at which NFTs have taken off on solana has been pretty outstanding. On every metric,” he says. He adds that the team is positive that many new types of NFTs will emerge on Solana because it allows for more experimentation as a cheaper blockchain — and so it could come to dominate the NFT market more broadly.

But Yin acknowledges that if 80% of NFTs are still on Ethereum in two years' time, then Magic Eden would definitely be there, too. 

On Ethereum, there has been a recent battle between OpenSea, which appears to be leaning toward a traditional route of becoming a publicly listed company, and a new competitor, LooksRare, which issued a token in a more of a Web3 approach.

Which route will Magic Eden take? “We want to lean into all of the weird, wacky Web3 crypto stuff. Because that’s our DNA,” says Yin. 

He says that Magic Eden is interested in eventually having some kind of token but it’s not rushing to it. “Because you’ve got to think pretty deeply about how it’s going to work and what it’s going to do. But that’s more along the path that we’ll take versus being a super centralized company.”

Magic Eden is also working on a mobile app. It has a beta out on Android right now and plans to ship a version on iOS soon. The app will come with its own built-in wallet (specifically aimed at newcomers to the Solana NFT space) while it will also support popular Solana wallets, such as Phantom. 

Yin says 30% of the site’s web traffic is mobile, yet mobile users can’t actually do anything beyond browsing. “I think NFTs will be pretty mobile native,” he says.

Using NFTs in gaming

Beyond that, the marketplace is looking to expand into the gaming space. 

Yin says that community and social elements are what have driven NFTs to become popular in the last year. “What types of things today outside of crypto have this dynamic? Gaming is absolutely one of them. It already has massive communities. Very social. People spending time and money in these immersive worlds. It’s ready-made for NFTs.”

While he acknowledges the large AAA gaming studios will take time to come in — particularly with the anti-NFT vibes from the gaming community — there are many Web3 native developers who are building NFT-ready games.

Yin says Magic Eden can support game makers in three ways. First, by helping them launch their NFTs as a launch partner, using its pre-existing NFT launchpad. Second, by building a software development kit that gaming platforms can use to build their own in-game marketplaces that use Magic Eden under the hood. Third, it can build products that are adjacent to this market, such as applications that support NFT rentals (where in-game NFTs are loaned to other players for a short period of time). 

To this end, Magic Eden has partnered with blockchain gaming studio Faraday, the makers of Mini Royale: Nations, and has been the launchpad for its NFT sales.

Yin uses Mini Royale as an example of the potential of NFT-based gaming. He says that the game has half a million monthly active users. He considered what would happen if they started doing a regular NFT drop, like giving out a loot box every day to each user. “If a user does that every day you start getting to millions of NFTs really quickly.”