How Magic Eden’s Founders Built a NFT Marketplace Rival to OpenSea

Please fol­low and like us:
Pin Share

  • In less than a year, Mag­ic Eden has become one of the biggest NFT mar­ket­places, rival­ing OpenSea.
  • Its cofounders made a big bet on Solana, a blockchain that promis­es quick­er, cheap­er transactions.
  • Mag­ic Eden has gained pop­u­lar­i­ty by embrac­ing alter­na­tive uses for NFTs such as gaming.

Like many cryp­to-curi­ous mar­ket observers, Jack Lu found him­self aston­ished by the rapid rise in pop­u­lar­i­ty of non­fun­gi­ble tokens last year.

But Lu, who at the time worked at the cryp­tocur­ren­cy exchange FTX, felt that the NFT buy­ing expe­ri­ence could be bet­ter. In his view, the process of dis­cov­er­ing new col­lectible tokens left a lot to be desired, and pur­chas­es often involved steep trans­ac­tion fees. What NFT mar­ket­places need­ed was more atten­tion to prod­uct design, he thought.

Lu, an Aus­tralian immi­grant who land­ed in Sil­i­con Val­ley, had pre­vi­ous­ly been a prod­uct man­ag­er at Google, and he knew of a few oth­ers with expe­ri­ences build­ing prod­ucts at com­pa­nies like Coin­base and Uber. By the end of last sum­mer, he had cor­ralled three of his friends — two of them fel­low Aus­tralian expats — to launch their own mar­ket­place, Mag­ic Eden. 

Less than a year lat­er, Mag­ic Eden has become one of the most pop­u­lar venues for buy­ing and sell­ing NFTs. The com­pa­ny processed $319 mil­lion in NFT sales last month, it told Insider.

Among NFT mar­ket­places, it’s now a grow­ing com­peti­tor to OpenSea — the mam­moth NFT mar­ket­place that has raised $425 mil­lion in fund­ing from investors like Andreessen Horowitz and Coat­ue Man­age­ment, valu­ing it at $13.3 bil­lion. Mag­ic Eden has its own share of top-tier back­ers, includ­ing Sequoia and Grey­lock, with a fundrais­ing haul of $29.5 mil­lion. Coin­base Ven­tures and cryp­to-focused VC firm Par­a­digm have invest­ed in both marketplaces.

Lu, Mag­ic Eden’s CEO, and his cofounders — CTO Sid­ney Zhang; COO Zhuox­un Yin; and chief engi­neer Zhou­jie Zhou — sought to set their com­pa­ny apart by show­ing off a greater vari­ety of uses for NFTs

The vast major­i­ty of them func­tion as pro­file pic­tures, or PFPs, that their own­ers buy for hun­dreds and some­times thou­sands of dol­lars and dis­play online on their social media profiles.

But Mag­ic Eden’s founders were drawn to oth­er appli­ca­tions for NFTs, such as video games. That drew them to Solana, a blockchain designed to process trans­ac­tions quick­ly at low costs, which lend­ed itself well to alter­na­tive uses for NFTs — such as allow­ing cus­tomers to play pre­view ver­sions of NFT video games inside Mag­ic Eden’s app before mak­ing a deci­sion to buy the full version.

“We love exper­i­ment­ing,” Yin said. “Our fun­da­men­tal belief is there will be many new types of assets using NFTs as technology.”

Sidney Zhang, cofounder and CTO of Magic Eden, wearing black jacket and cap, standing outside with trees in the background.

Sid­ney Zhang, cofounder and CTO of Mag­ic Eden.

Mag­ic Eden


Mag­ic Eden’s cofounders also pur­sued an alter­na­tive strat­e­gy to gain mar­ket share: Instead of mak­ing their mar­ket­place a des­ti­na­tion site, they would seek to part­ner with oth­er com­pa­nies to embed their mar­ket­place on oth­er Web3 plat­forms. For instance, users of the cryp­to wal­let Exo­dus can access Mag­ic Eden’s app inside their wallets.

The com­pa­ny has sought to strike oth­er part­ner­ships, too. For the NCAA US col­lege bas­ket­ball tour­na­ment March Mad­ness, it devel­oped an NFT with Over­time, a Gen Z‑focused sports media com­pa­ny, that allowed buy­ers exclu­sive access to games and events host­ed by Overtime.

Those strate­gies have helped Mag­ic Eden to grow quick­ly and com­mand the mar­ket­place for Solana-based NFTs. By last Novem­ber, just a few months after its launch, it com­mand­ed 30% of the vol­ume in Solana-based NFTs, the com­pa­ny said. Today, it con­trols more than 95% of the mar­ket, accord­ing to data from Dune Ana­lyt­ics, a cryp­to ana­lyt­ics plat­form wide­ly used in the Web3 industry.

“We’ve had a lot of expo­sure to dif­fer­ent mar­ket­places,” said Mike Duboe, a part­ner at Grey­lock, who made the fir­m’s invest­ment in Mag­ic Eden. “Then we start­ed using their prod­uct, and frankly, this is the best team on Solana.”

Mag­ic Eden has ben­e­fit­ed from anoth­er tail­wind: Solana has gained favor among some Web3 devel­op­ers for cer­tain use cas­es, includ­ing NFTs. For years, Ethereum, home of the sec­ond-most valu­able cryp­tocur­ren­cy, has been the lead­ing blockchain for app devel­op­ment. Many of the most pop­u­lar NFT col­lec­tions, includ­ing Bored Ape Yacht Club, Cryp­toP­unks, and Moon­birds, use Ethereum as their base, and OpenSea got its start there, too.

But Ethereum is rel­a­tive­ly slow at pro­cess­ing trans­ac­tions, and the costs of doing so — known as “gas fees” — can increase dra­mat­i­cal­ly dur­ing spikes in vol­ume. For instance, Yuga Labs, the par­ent com­pa­ny of Bored Apes Yacht Club, had to con­tend with a surge in gas fees in May when it launched a land sale for its metaverse.

By con­trast, Solana promis­es faster speeds and low­er costs. Because of those per­ceived ben­e­fits, Solana has on occa­sion been referred to as an “Ethereum killer.”

That’s like­ly an over­state­ment, said Ethan Daly, a part­ner at the ven­ture cap­i­tal firm Shine Cap­i­tal who focus­es on Web3 invest­ments. (He is not an investor in Mag­ic Eden or OpenSea.) 

“I still see a pre­mi­um asso­ci­at­ed with Ethereum,” he told Insid­er. Solana’s mech­a­nism for ver­i­fy­ing trans­ac­tions makes some slight com­pro­mis­es in secu­ri­ty and decen­tral­iza­tion as com­pared with Ethereum, he said, but it also makes Solana a bet­ter blockchain for cer­tain appli­ca­tions, such as gaming.

Zhuojie Zhou, cofounder and chief engineer of Magic Eden, wearing black shirt, standing in front of two building columns.

Zhuo­jie Zhou, cofounder and chief engi­neer of Mag­ic Eden.

Mag­ic Eden


Mag­ic Eden’s cofounders, for their part, don’t nec­es­sar­i­ly see Solana as an “Ethereum killer,” either. But the increased pop­u­lar­i­ty of the blockchain sig­nals a ris­ing move­ment to make Web3 more acces­si­ble to a wider group of users as cryp­to makes a stronger bid for the main­stream. Among the top Solana NFT col­lec­tions are DeGods, The Catali­na Whale Mix­er, and Degen­er­ate Ape Academy.

Mag­ic Eden’s team built its mar­ket­place from the start with the goal of acces­si­bil­i­ty in mind, Tiffany Huang, its head of mar­ket­ing and con­tent, said. The aver­age NFT price on Mag­ic Eden has been about $250 over the mar­ket­place’s lifes­pan, accord­ing to the com­pa­ny. By con­trast, the aver­age price for Ethereum NFTs on OpenSea in May was $1,756, based on data from Dune Analytics.

That low­er bar­ri­er to entry is also ben­e­fi­cial to cre­ators seek­ing to reach wider audi­ences, Huang told Insid­er. “We want­ed to build what we thought could be a bet­ter ecosys­tem for cre­ators,” she said.

The grow­ing pop­u­lar­i­ty of Solana has also caught the eye of oth­er mar­ket­places, includ­ing OpenSea and Rari­ble, which now both sup­port the blockchain. So far, Mag­ic Eden has kept its posi­tion as the lead­ing venue for Solana-based NFTs, accord­ing to Dapp Radar.

Going all in on Solana, how­ev­er, does entail some risk. The blockchain has on occa­sion faced some tech­ni­cal chal­lenges, includ­ing out­ages in May and ear­li­er this month that left users unable to make trans­ac­tions for hours.

Some data sug­gests that over­all NFT vol­ume has peaked. In May, The Wall Street Jour­nal cit­ed fig­ures from Nonfungible.com that showed a steep drop in NFT trans­ac­tions. But data on NFTs has occa­sion­al­ly come under dis­pute from Web3 founders and investors: Some panned the Jour­nal’s analy­sis, argu­ing that Nonfungible.com’s num­bers were invalid.

Data from Dune Ana­lyt­ics shows that total dai­ly vol­ume in dol­lars on both OpenSea and Mag­ic Eden has dropped since ear­ly May. That drop, accord­ing to Mag­ic Eden, stems large­ly from the plum­met­ing val­ues of cryp­tocur­ren­cies in recent weeks. Mea­sured in solana, its vol­ume has trend­ed upward and reached a month­ly record in May, the com­pa­ny said.

“We think NFTs, in gen­er­al, are super ear­ly,” Lu said. “There will be some cycli­cal peaks and troughs in the over­all mar­ket, but we real­ly believe the use cas­es are only going to go up from here.”



Source link

Please fol­low and like us:
Pin Share

Leave a Reply

Your email address will not be published. Required fields are marked *