When non-fungible tokens, or NFTs, were first introduced in 2014, no one imagined that they would disrupt the digital asset space a few years later and then garnering a lot of attention after their mainstream debut in 2021. It wouldn’t be an exaggeration to say that, at present, for tech investors and companies, NFTs translate to money. The rate at which NFT markets reach maturity is no less than astonishing.
For example, CryptoPunks NFTs released for free in June of 2017 reached a selling price of $10 million each by the end of 2021. This burgeoning space is presently littered with several thousand projects funded and led by big names and companies. The situation makes it hard for newcomers to find an appropriate, safe, and legitimate marketplace to buy and sell NFTs. That is exactly why Magic Eden, an NFT marketplace like OpenSea, exists.
We have built the most liquid secondary marketplace on Solana and we are the first marketplace to implement bidding, a rarity index, and a dedicated minting platform that automatically connects to our secondary marketplace. We’re just getting started: Magic Eden website.
Magic Eden started last year under the leadership and guidance of Jack Lu, Sidney Zhang, Zhuoie Zhou, and Zhuoxun Yin. For a company that has been operational for just a year, Magic Eden has achieved unicorn status at a surprising pace. Among several other reasons, behind the success of this early-stage venture is the growing desire to discover and buy new collectible tokens that have dominated the market.
Let us unravel how Magic Eden originated and went on to become a kingpin of NFT Marketplaces on the Solana blockchain.
The origin story of Magic Eden starts with its four co-founders: Jack Lu, Zhuoxun Yin, Sidney Zhang, and Zhoujie Zhou. Each of these individuals had different experiences before eventually teaming up to start what’s now the dominant NFT marketplace on Solana. Jack Lu, the current CEO of Magic Eden, was born in China and migrated to Australia. He got a double degree in Commerce and Law from Monash University.
Lu started his professional journey in 2014 as a software engineer at Hello Block, a developer API for the blockchain. While Lu became obsessed with blockchain innovations, the company Hello Block was accepted into the US accelerator Techstars. Unfortunately, the team shut it down after raising $120,000 from backers because the market was not as big as needed for it to flourish.
Lu started working as a product manager at Google and, after 3 years, on-boarded the FTX team as Corp Dev. FTX was, and still is, one of the leading crypto derivatives exchanges based in Hong Kong, SAR. Lu was astonished by the catalyzing popularity of NFTs, and while he worked for FTX, he felt that the buying and selling experience could’ve been better.
"It has been a fast and wild ride," Lu said. "There was a huge amount of [NFT] growth in the last cycle, but this is nothing compared to the headroom and growth potential in the future."
Jack Lu was the first one to realize the need for a platform that simplified the process of discovering new NFTs without involving steep transaction prices. The past experiences with Google and FTX allowed Lu to pursue building a product that he wanted to see in the market. As a Chinese man who landed in Silicon Valley, Lu had to start by gaining relevant experience and expanding his network.
Zhuoxun Yin, on the other hand, developed a business-centric mindset and pursued a Bachelor’s degree in Commerce, Finance, and International Trade from The University of Queensland. Yin got involved with the world of digital assets in 2018 when he joined dYdX, one of the world’s decentralized exchanges, as the head of strategy and business operations. As the second employee at dYdX, Yin worked to establish the DEX from scratch as it later received financial backing from Paradigm, a16z, and Polychain.
Sidney Zhang, the current CTO of the company, had experienced subsequent failures before Magic Eden. Zhang and Scott Li co-founded Hello Block, which is where he met Jack Lu for the first time. Nobody knew that, eventually, these two would end up co-creating a large-scale Solana-based NFT marketplace one day. After Hello Block, Zhang worked at UberEats for 5 years before switching to Facebook, where he met Zhoujie Zhou, now chief engineer at Magic Eden.
Zhuoxun Yin, COO of Magic Eden, says, "We love experimenting and our fundamental belief is there will be many new types of assets using NFTs as technology."
Zhang’s 2015 failure due to the massive crypto bear market taught him many lessons that helped him stay afloat. Zhang was broke for a while after Hello Block and stayed on a friend’s sailboat, only to realize that an opportunity within the market for digital assets like NFTs was building. That is why when Jack Lu pitched his idea to him, Zhuoxun Yin, and Zhoujie Zhou, they all responded positively.
"At our heart, we are users first and want to go where they are and better serve them," Jack Lu, CEO of Magic Eden, told TechCrunch. "I think when you think about different use cases in crypto overall, right now, it is clear that NFTs are a bridge from the average consumer to the blockchain world." It’s cultural and about communities on the internet and is much more emotionally relatable. "
The only way to create a marketplace like Magic Eden with low-cost transactions was to make the most of the Solana blockchain. The founders of this startup realized Solana’s untapped potential could fill the gaps in other NFT marketplaces easily. Together they started Magic Eden as a community-based company where it is easier, faster, and more affordable to discover, buy, and sell emerging NFTs.
"When we started, we weren’t the first movers on Solana. We had to play catch-up, "Yin said "So this didn’t fall in our laps; we built on the community’s wants and did what they wanted to do, and I think it served us well and is something we’ll continue to focus on."
The variety of use cases and rising NFT trading volumes that topped its Ethereum counterpart have made the startup roughly claim up to a 90% share of Solana’s NFT secondary market. With new trends surfacing every week, Lu and the other founders believe that it’s enough to keep NFT collectors engaged. The best thing about Magic Eden is that its founders possess experience in various sectors, like DeFi, crypto, and consumer internet companies.
NFTs thrive on Ethereum and Ethereum-based marketplaces like OpenSea, but an alternative like Magic Eden was needed to disrupt this particular space using the Solana blockchain. Slowly, Solana-powered projects are taking over the industry as they provide a competitive environment, fast transactions, and low network fees. Here’s an explanatory comparison between OpenSea and Magic Eden:
Getting started with Magic Eden and OpenSea is easy and straightforward. An interactive user interface allows you to link any portfolio you have within seconds and requires a few clicks only. Wallet compatibility is key to make the on-boarding process smooth, which is why Magic Eden takes the cake because it supports multiple Solana wallets.
Both of these marketplaces have made it easy for users to list and sell their Solana NFTs in an effortless way. All you have to do is connect your wallet with the platform (either one) and then you are able to pick whichever collectible you want to list for selling purposes. Magic Eden has conveniently removed any additional charges for listing/delisting NFTs, but the 2% transaction remains all the same.
OpenSea, on the other hand, requires minimum costs for listing and delivery and 2.5% transaction fees across the platform. In addition to this, the creator royalty fee is also cut from the final sale price on this marketplace.
Wallet support is an important feature that separates Magic Eden from the longstanding OpenSea marketplace. Though OpenSea’s Solana integration is not that old and still in beta version, it supports only two of the Solana wallets, which are: Phantom and Glow. Solana Magic Eden, on the other hand, leads the way in this case by supporting 13 different and popular Solana wallets, including Phantom, Soflare, Solet, and Exodus.
Both OpenSea and Magic Eden are known as secondary marketplaces for NFTs. Though the San Francisco-based company is built on the Solana blockchain, OpenSea also supports Solana-based NFTs. DappRadar, a leading online resource that tracks global decentralized apps, revealed that Magic Eden has nearly 300,000 active wallets, making it the top NFT marketplace built on Solana. Following it is Ethereum-based OpenSea, with over 80,000 active wallets as of May 2022.
In the middle of 2021, the Solana NFT market grew at an encouraging pace both in terms of daily transactions and in terms of revenue, and ended up rivaling and topping OpenSea, which is its Ethereum counterpart. For crypto enthusiasts, the rivalry between Ethereum and Solana is nothing new. Solana is often dubbed as Ethereum killer, and the cause is likely to be the huge difference between their network fees.
"We think NFTs, in general, are super early," Jack Lu, co-founder and CEO of Magic Eden, 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."
From every aspect, the NFT market has shifted its gears, moving away from Ethereum-dominated alternatives. According to CoinDesk, a leading blockchain and crypto news provider, usage statistics of OpenSea indicate a 1% drop in March 2021, while Magic Eden shows growth of 316%. The number of unique users who trade NFTs using these two rival platforms is greater for OpenSea, but these stats keep changing.
But, over the last few months, our business has been growing incredibly. We announced a $27 million raise in March... and we continued to have a lot of appetite from different investors. Our existing investors had the appetite to double down, and we had new investors wanting to come in. And while things are crazy in the market, May was our best month ever, doing just over 5 million SOL (the native token on Solana, equivalent to $330 million at the time)," says Zhouxun Yin, COO of Magic Eden.
It is a fact that the NFT market is largely dominated by OpenSea, but investors back Magic Eden because it is powered by Solana, which reduces average NFT prices. Founders of the company are also preparing to explore Solana's use case in gaming. Owing to its consistent growth in users, Magic Eden has received funding from some notable VCs in the industry.
"It's really clear that we are in—and we'll be in—a multi-chain world for a while," explained COO and co-founder Zhouxun Yin. He suggested that some types of NFTs, such as games, artwork, and music, are coalescing around certain blockchain platforms and that Magic Eden hopes to serve them, but would not specify any blockchains that the marketplace plans to adopt.
This marketplace currently has an excess of 7,000 NFT collections, up to 10 million unique monthly visitors, hundreds of thousands of daily wallet collections, and a secondary trading volume of $1.8 billion.
Now let’s take a look at 3 of Magic Eden’s well-established competitors:
SolSea launched in August 2021 as a Solana-centric NFT marketplace with some groundbreaking features like embedded licenses for NFTs, a rarity index for collections, and FTX integration for wallet funding. It is run by a community of crypto-curious individuals who prioritized Solana NFTs with integrated mining features. According to DappRadar stats, SolSea's all-time trading volume is close to $32.5 million and the total number of active traders is over 80,000.
LooksRare is a brainchild of Zodd and Guts (pseudonyms), which started as a decentralized NFT marketplace to end OpenSea’s monopoly. In January 2022, LooksRare launched a vampire attack on OpenSea to suck its existing users by offering superior incentives in the form of $LOOK. Total users on LooksRare are around 101,776, while the all-time trading volume is $26 billion. This early-stage private company is backed by Assembly Partners.
Another early-stage company developing an NFT-based platform that allows self-hosted NFT storefronts on its website is MetaPlex. It connects artists and NFT enthusiasts directly to the Solana blockchain by lowering minting costs. Based in San Jose, California, Metaplex has been in the same space as Magic Eden since 2021.
The CEO Stephen Hess shared that so far, more than a million wallets have been opened with Metaplex. The company has received backing from several industry leaders, including Animoca Brands, Alameda Research, Solana Ventures, and Multicoin Capital during its initial coin offering.
The surge in NFT has been nothing short of exhilarating and somewhat unexpected because earlier people referred to it as artwork and profile pictures. Now NFT projects are exploring gaming to reach more users and secure financial support from notable VCs around the globe. Magic Eden has made consistent progress financially by gaining Electric Capital and Greylock Partners as investors and reaching unicorn status within 9 extraordinary months.
"[This valuation] more than ever validates the industry and market we’re in," Zhuoxun Yin, COO of Magic Eden, told TechCrunch. "There’s investor appetite to bet on this market." We’re very bullish on the horizon; there’s a lot to build and most of the use cases are still early, so this gives us an opportunity to do that. "
In 9 months, the founders of Magic Eden have taken their marketplace from nothing to $1.8 billion (20 billion SOL tokens worth) in total trading volume after reaching out to more than 800,000 creators and collectors. Since its launch, Magic Eden has successfully completed 3 financing rounds and raised $159.5 million. The last valuation of this company was over $770 million, while the post-money valuation is up to $900 million after the Series B round.
After spending hours on the company’s timeline, valuation funding, and taking into consideration the NFT market growth, our team of experts has given Magic Eden the Oddup score of 47.31. This score is incredibly low for a growing startup like Magic Eden because of its dependence on a highly volatile asset, i.e., non-fungible tokens, whose values have crashed several times before.
The seed round of Magic Eden was announced in October 2021, just 8 months after the company’s launch. During this round, the early-stage venture raised $2.5 million from the participating investors, whose names were not disclosed at the time. With this raise, Magic Eden launched its NFT platform for the public and started gaining users at a surprising rate.
Back in March this year, Magic Eden held a Series A funding round that ended up successfully gaining $27 million with five world-famous investors in the NFT and crypto space, including Greylock, Paradigm, Solana Ventures, Sequoia Capital, and Electric Capital. It was an equity funding round that helped the company to focus on the blockchain gaming sector with the launch of Eden Games, a hub made for game publishers. After the raise, co-founders hinted at launching a new venture unit by the name of "Magic Ventures" within a few weeks.
"We didn't want to feel resource-constrained," he explained, "and we wanted to build for the next five to 10 years."---Jack Lu, Magic Eden
Just when experts thought that investors might be pulling back from the broader crypto and NFT markets, Magic Eden announced its Series B funding round in June 2022 with a pre-money valuation of $1.5 billion. Greylock and Electric Capital led this round, with other participants including Sequoia Capital, Paradigm, Lightspeed Venture Partners, and others joining the Magic Eden team as partners.
"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."
What started as a side project by the founders has now turned into a full-fledged leader in terms of Solana-based NFTs. Both the trading volume and active traders’ numbers indicate the dominance of Magic Eden in an industry that has been influenced by Ethereum-based projects for far too long. Dune analytics show that up to 93% of all NFT transactions on the Solana blockchain are taking place on Magic Eden, but these numbers are still small as compared to OpenSea.
"Magic Eden will be much more than a place for users to purchase NFTs," co-founder and CEO Jack Lu said in a statement. "Our goal is to make a clear distinction between Web2 and Web3, allowing creators, collectors, and supporters to engage with each other and lead the direction of their online interactions."
In May, just a month prior to Magic Eden’s successful Series B, Magic Eden experienced the most transaction volume and earned revenue of $7.5 million with a positive cash flow. But it is a fact that the company’s monthly transaction numbers still need to grow by at least 3x to reach the same level as those of OpenSea. Interestingly enough, both of these competitive ventures share the same investor, which indicates a potential conflict of interest.
"I think the mental model for us is: everyone is really getting into this space to bet that this is going to be 100x to 1,000x bigger in the future than what it is today," says Lu.