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Magic Eden: Is the 10K PFP Playbook Dead? | Zedd, Tiff and Rex

By Lightspeed

Published on 2023-08-24

Magic Eden's leadership discusses the future of NFTs, multichain strategies, and the evolution of creator monetization in the Web3 space.

The notes below are AI generated and may not be 100% accurate. Watch the video to be sure!

The Evolution of NFTs: Beyond the 10K PFP Model

The non-fungible token (NFT) landscape is undergoing a significant transformation, moving away from the once-dominant 10,000 piece profile picture (PFP) collections. Zedd, co-founder and COO of Magic Eden, believes that while the 10K PFP model isn't entirely dead, its form factor is certainly up for debate. He draws a parallel to the early days of cryptocurrency when people prematurely declared ERC-20 tokens dead after the initial coin offering (ICO) boom. Just as those tokens evolved into various models including governance and DeFi applications, Zedd anticipates a similar evolution for NFTs.

Tiff, the general manager for Solana at Magic Eden, offers a unique perspective on the origin of the PFP craze. She points out that the current iteration of NFTs gained popularity during the pandemic as people, primarily men, sought to make friends online. The PFP collections provided a sense of community and belonging. However, Tiff notes that this format may not be sustainable for maintaining true connections and relationships in the long term.

One of the challenges facing the 10K PFP model is its inherent scarcity. Tiff explains, "PFPs are inherently markets built on scarcity, right? And there are only a number, a small number of social clubs that can be considered cool, otherwise, you know, the whole thesis falls apart." This limitation suggests that while NFTs will continue to be a way for people to connect and form deeper relationships, the 10K PFP supply may not be the driving force behind the next bull market in the space.

The Future of NFTs: Engagement Tools and IP Development

As the NFT space matures, its role is shifting from primarily a fundraising tool to an engagement mechanism. Tiff envisions NFTs being used more for user acquisition, engagement, and retention rather than as a direct monetization strategy. She states, "I think in the near term, as we're all deep in the bear, I still think of NFTs now as primarily engagement tools rather than monetization tools."

This shift in perspective aligns more closely with the true nature of NFTs as easily transferable digital assets that can represent a connection between creators and their audience. Tiff explains, "There is still an expression of value, but it's not such that like, oh, I'm gonna build a multi-billion dollar business off of these JPEGs, which I think in retrospect, we can look back on and think it was kind of comical, right?"

The future of NFT monetization may lie in the development of intellectual property (IP). Tiff points out that to truly monetize, the content needs to become IP – something that others create businesses and content around. She uses Barbie as an example, noting that its value comes not just from the dolls but from the broader cultural impact and associated businesses. However, she acknowledges that the NFT space is still a long way from consistently producing this level of IP.

Challenges in Creator Monetization and Royalties

One of the most significant challenges facing the NFT ecosystem is the ongoing debate around creator royalties. Rex, co-founder and chief engineer at Magic Eden, explains that the root of the royalty enforcement problem lies in the concept of digital ownership. When collectors are given 100% true ownership of an NFT, including the ability to freely transfer it, it becomes technically challenging to enforce royalty payments on secondary sales.

Rex details the efforts made by Magic Eden and the broader Solana ecosystem to address this issue. He mentions the Open Creator Protocol (OCP) and the Programmable NFT (PNFT) standard as attempts to create protocol-level enforcement of royalties. These solutions involve a trade-off between true ownership and royalty enforcement, requiring creators and collectors to accept some limitations on transferability in exchange for ensuring ongoing royalty payments.

Zedd adds that while royalties have been a contentious issue, their return to the Solana ecosystem is a positive development. He states, "We're actually really happy about that. And I think that's actually like a really, really strong, just even if it may not be the most revenue generating thing, but the narrative is really strong around it." This sentiment underscores the importance of royalties not just as a revenue stream, but as a core part of the NFT value proposition for creators.

The Rise of Compressed NFTs on Solana

Compressed NFTs (cNFTs) represent a significant technological advancement in the Solana ecosystem, potentially shifting the NFT paradigm from scarcity to abundance. Rex explains that cNFTs allow for the minting of a significant number of NFTs at a much lower cost compared to traditional NFTs. This technology leverages Solana's high transaction speed and low costs to enable use cases that require a large number of NFTs.

Tiff discusses Magic Eden's plans to support cNFTs, revealing that secondary market functionality for collecting and trading cNFTs is expected to launch in mid-September, with primary minting experiences following shortly after. She emphasizes the importance of focusing on use cases rather than technology when presenting cNFTs to creators and users outside the crypto space.

The potential of cNFTs extends beyond just cost savings. Zedd sees them as an opportunity to challenge the notion of NFTs as purely speculative assets, instead positioning them as collectible moments. He draws inspiration from projects like Viboo, which are working with creators to bring more culture to the Solana ecosystem through merchandise and brand building.

Magic Eden's Multichain Strategy

Magic Eden's decision to expand beyond Solana to support multiple blockchains has been a topic of much discussion in the NFT community. Zedd provides insights into the reasoning behind this strategy and the challenges they've faced along the way.

The expansion to Polygon was primarily driven by the opportunity to work with gaming projects. Zedd explains, "Polygon did a great job signing a lot of gaming IP, both Web2 and Web3 native gaming IP." This move positioned Magic Eden to be ready for the next wave of high-quality games that are expected to develop over the coming years.

The decision to support Bitcoin Ordinals was motivated by the unique collectibility mechanics and on-chain activity that this technology enables. Zedd notes that the average value of items traded on Ordinals is significantly higher than what they see on other chains, making it an interesting market to explore.

Ethereum support was driven by the chain's historical significance and the gravitational pull it exerts in terms of liquidity and innovation. Zedd acknowledges that despite the challenges, "there is some level of like, yeah, there's some gravitational pull there, right? Regardless."

Rex adds a broader perspective to the multichain discussion, likening different blockchains to countries but reminding us that there's a whole universe of potential users who haven't yet been introduced to NFTs or crypto. He emphasizes the importance of learning from each other and focusing on mass adoption rather than inter-chain competition.

Horizontal vs. Vertical Marketplaces

The discussion turns to the future of NFT marketplaces, particularly the balance between horizontal (broad) and vertical (specialized) platforms. Zedd describes Magic Eden's current position as closer to the Amazon model than Shopify, offering a wide range of NFTs across multiple chains. He explains that their primary thesis is to provide users with access to all NFT inventory from various chains in one seamless experience.

While there has been speculation about the potential for more verticalized marketplaces focusing on specific niches like gaming or music, Zedd believes this trend hasn't fully materialized yet. He explains, "The order of operations is like, there has to be some use case that forms, creators have to come in, and then the creators then launch a bunch of assets and then the assets dictate what the needs are on the marketplace, right?"

Magic Eden has experimented with verticalization by providing back-end infrastructure for games to build their own white-label marketplaces. However, Zedd emphasizes that their primary focus remains on being present and available wherever NFT content is being created, with a particular emphasis on Solana's strong grassroots community.

The Challenges of Cross-Chain User Experience

As Magic Eden expands its multichain support, the team is grappling with how to create a seamless user experience across different blockchains. Zedd outlines several key areas they're focusing on:

  1. Discovery: Making it easy for users to find NFTs regardless of the underlying blockchain.
  2. Transactions: Simplifying the process of purchasing NFTs across chains without requiring multiple wallets or complex setup procedures.
  3. Profile Experience: Creating a unified view of a user's NFT collection across all supported chains.

Zedd acknowledges that their initial attempts to introduce users to cross-chain content may have been premature, given the existing technical limitations. He states, "Maybe the thing we did wrong was actually, we tried to do that a little bit too early, right? When some of this in for some of the stuff that we feel like is quite possible in the near town was actually not really that possible."

Tiff adds that one of the challenges is managing user expectations and preferences, particularly among Solana enthusiasts who may be resistant to seeing content from other chains. She explains, "We want people to be able to discover projects across chains, but we wanna do it in a way that doesn't offend users."

The Future of NFT Monetization and IP Development

The conversation delves deeper into the future of NFT monetization, with Zedd and Tiff offering insights on how creators might generate sustainable revenue in the evolving landscape.

Tiff emphasizes the shift towards using NFTs as engagement tools rather than direct monetization vehicles. She explains, "I think that's actually a more sincere expression of the content because they're really easy to acquire, they're really easy to transfer." This approach aligns with the idea of NFTs as a means of strengthening the connection between creators and their audience.

Zedd builds on this, discussing the potential for NFTs to evolve into more substantial intellectual property. He draws parallels to the traditional collectibles market, suggesting that as physical collectibles are digitized into NFTs, the focus will shift from the underlying blockchain technology to the value and cultural significance of the digital asset itself.

The team at Magic Eden envisions a future where users can seamlessly purchase and collect NFTs without needing to worry about which blockchain they're minted on. Zedd provides an example: "As a user who wants to collect like the Charizard holographic from 1999, I actually don't wanna know where, it doesn't matter to me, like where the thing has been minted."

Lessons from Magic Eden's Multichain Expansion

Magic Eden's journey into supporting multiple blockchains has provided valuable insights into the challenges and opportunities of cross-chain NFT marketplaces. Zedd reflects on their experience, noting that while the technical aspects of expanding to new chains are relatively straightforward, the real challenge lies in becoming truly relevant and native to each ecosystem.

He explains, "You've got to be relevant. You've got to be native. You've got to understand what is the discourse in that community. That all still applies." This understanding has shaped Magic Eden's approach to expansion, emphasizing the importance of deep integration and community engagement in each new blockchain they support.

The team also discusses the potential for creators to leverage multiple chains for different aspects of their projects. Zedd sees this as an ongoing trend, stating, "I do feel like if creators are trying to achieve different things, they will still try things on different chains." He cites examples of Solana creators launching rarer, higher-priced collections on Bitcoin Ordinals, demonstrating the flexibility that a multichain approach can offer.

The Role of Rewards and Incentives in NFT Marketplaces

The conversation turns to the effectiveness of incentivization programs in attracting and retaining users, particularly in bear market conditions. Tiff expresses a critical view of existing reward systems, stating, "I think all the incentivization programs today have been incredibly mercenary and only reward one side of the market."

She hints at Magic Eden's plans to introduce a more balanced approach, saying, "What we wanna do is slip the table and reward all sides of the market." This suggests a shift towards creating value for both creators and collectors, potentially addressing some of the sustainability concerns surrounding current reward models.

Zedd adds that while rewards can be effective, they need to be more than just financial incentives. He emphasizes the importance of making the rewards "more magical," indicating a desire to create experiences and benefits that resonate on a deeper level with users.

The Impact of Compressed NFTs on Solana's Ecosystem

The introduction of compressed NFTs (cNFTs) on Solana represents a significant technological advancement that could reshape the NFT landscape. Rex explains the technical innovation behind cNFTs, highlighting how they dramatically reduce the cost of creating and maintaining NFTs on Solana.

He states, "It's not like compressed for, that's like O and scale. This is like log dance now. It's way powerful to kind of like cheaply create a CNFTs." This efficiency opens up new possibilities for large-scale NFT projects and use cases that were previously cost-prohibitive.

Zedd sees cNFTs as an opportunity to shift the narrative around NFTs from speculative assets to collectible moments. He envisions this technology enabling more creators to enter the space and experiment with new forms of digital collectibles and experiences.

Challenges and Opportunities in User Onboarding

As the NFT space evolves, one of the persistent challenges remains user onboarding, particularly for those new to cryptocurrency. Tiff shares an unpopular opinion, stating, "I think most people are not gonna mess with a non-custodial wallet." She emphasizes that the complexity of managing private keys and interacting with decentralized applications remains a significant barrier to mainstream adoption.

This observation highlights the ongoing tension in the crypto space between decentralization and user-friendliness. While non-custodial wallets offer users full control over their assets, they also introduce complexities that may deter less tech-savvy individuals.

The Ongoing Importance of Royalties in the NFT Ecosystem

Despite the challenges surrounding royalty enforcement, Zedd believes that royalties will continue to play a crucial role in the NFT space. He states, "I think we haven't seen the last of royalties by any means. Like there's gonna be just more drama, more shit to happen. But I actually think they're a critical part of what makes the NFT narrative really viable."

This perspective underscores the importance of finding sustainable solutions for creator compensation in the secondary market. As the industry continues to evolve, balancing the interests of creators, collectors, and marketplace operators will remain a key challenge and opportunity for innovation.

The Future of Web3 Development and Adoption

Rex offers an optimistic view on the future of Web3 development, stating, "Web three is easier than web two." He elaborates that the infrastructure, tools, and ecosystem in Web3 are more accessible and convenient compared to the fragmented landscape of Web2, where developers often have to contend with established tech giants.

This perspective highlights the opportunities for innovation and rapid development in the blockchain space, particularly on platforms like Solana that offer high performance and a growing ecosystem of tools and resources.

Conclusion: The Evolving Landscape of NFTs and Digital Ownership

As the conversation with the Magic Eden team demonstrates, the NFT space is in a state of rapid evolution. From the shift away from pure speculation towards utility and engagement, to the technical innovations like compressed NFTs, the industry is continuously adapting to meet the needs of creators and collectors alike.

Magic Eden's multichain strategy and focus on user experience position them at the forefront of these changes. By bridging different blockchain ecosystems and working to abstract away technical complexities, they aim to create a more accessible and engaging NFT marketplace for all users.

The future of NFTs likely lies in their ability to represent meaningful digital ownership and facilitate deeper connections between creators and their audiences. As the technology matures and new use cases emerge, we can expect to see NFTs become an increasingly integral part of the digital economy and culture.

Facts + Figures

  • Magic Eden powered 10 times the number of transactions as OpenSea in 2022, with over 280 million transactions.
  • The average session length on Magic Eden is around 14 minutes, which is one and a half times that of TikTok.
  • Magic Eden plans to launch secondary market functionality for compressed NFTs (cNFTs) in mid-September, with primary minting experiences following shortly after.
  • The average value of items traded on Bitcoin Ordinals is 5 to 10 times greater than the value seen on Solana and Polygon, and sometimes even higher than Ethereum.
  • Magic Eden expanded to support multiple blockchains, including Polygon, Bitcoin Ordinals, and Ethereum, in addition to its original Solana focus.
  • The company put up a million dollars for a "tagathon" to incentivize creators to think about ways to monetize beyond royalties.
  • Compressed NFTs on Solana allow for the minting of a significant number of NFTs at a much lower cost compared to traditional NFTs.
  • Magic Eden's decision to support Polygon was driven by the opportunity to work with gaming projects and Web2/Web3 gaming IP.
  • The NFT space is shifting from primarily fundraising tools to engagement mechanisms for user acquisition, retention, and community building.
  • The 10K PFP (profile picture) model, while not entirely dead, is being challenged as the primary format for NFT collections.

Questions Answered

Is the 10K PFP (Profile Picture) NFT collection model dead?

The 10K PFP model is not entirely dead, but its dominance is certainly being challenged. While it has been the most successful use case for NFTs so far, the industry is evolving towards new formats and utilities. The future of NFTs likely involves more diverse applications beyond profile pictures, focusing on engagement, utility, and representing meaningful digital ownership.

How are NFTs evolving beyond the speculative asset model?

NFTs are increasingly being viewed as engagement tools rather than purely speculative assets. They are being used for user acquisition, retention, and community building. The focus is shifting towards creating meaningful connections between creators and their audience, as well as developing intellectual property (IP) that can generate value beyond the initial sale of the NFT.

What are compressed NFTs (cNFTs) and how do they impact the Solana ecosystem?

Compressed NFTs are a technological innovation on Solana that allows for the minting of a large number of NFTs at a significantly lower cost. This technology leverages Solana's high transaction speed and low costs, enabling use cases that require a high volume of NFTs. cNFTs have the potential to shift the NFT paradigm from scarcity to abundance, opening up new possibilities for creators and projects.

Why did Magic Eden decide to expand to multiple blockchains?

Magic Eden expanded to multiple blockchains to capture different opportunities and serve a broader range of creators and collectors. The move to Polygon was primarily driven by gaming projects, Bitcoin Ordinals offered unique on-chain collectibility mechanics, and Ethereum support was motivated by its historical significance and liquidity. This multichain strategy aims to provide users with access to NFT inventory from various chains in one seamless experience.

How is Magic Eden addressing the challenge of creator royalties?

Magic Eden has been actively working on solutions to ensure creator royalties, including the development of the Open Creator Protocol (OCP) and support for the Programmable NFT (PNFT) standard on Solana. These efforts aim to create protocol-level enforcement of royalties, balancing the desire for true ownership with the need to ensure ongoing compensation for creators. Magic Eden sees royalties as a critical part of the NFT narrative and continues to explore ways to support this model.

What are the main challenges in onboarding new users to the NFT space?

One of the main challenges in onboarding new users to the NFT space is the complexity of non-custodial wallets and interacting with decentralized applications. Many potential users find it difficult to manage private keys and navigate the technical aspects of blockchain interactions. Simplifying these processes and creating more user-friendly interfaces remains a key challenge for widespread adoption of NFTs and cryptocurrency in general.

How does Magic Eden view the future of NFT marketplaces?

Magic Eden sees the future of NFT marketplaces as a balance between horizontal (broad) and vertical (specialized) platforms. While they currently operate more like a broad marketplace similar to Amazon, they recognize the potential for more specialized marketplaces to emerge as the ecosystem matures. Their focus is on being present wherever NFT content is being created and providing a seamless experience for users to discover and collect NFTs across multiple blockchains.

What role do incentives and rewards play in NFT marketplaces?

Incentives and rewards play a significant role in attracting and retaining users on NFT marketplaces, especially during bear market conditions. However, Magic Eden believes that current incentivization programs have been too focused on short-term gains and often only reward one side of the market. They are working on developing more balanced reward systems that create value for both creators and collectors, aiming to make the rewards "more magical" and resonant with users on a deeper level.

How does Magic Eden view the potential of Web3 development compared to Web2?

Magic Eden's team, particularly their chief engineer Rex, believes that Web3 development can be easier than Web2 in many aspects. The infrastructure, tools, and ecosystem in Web3 are seen as more accessible and convenient compared to the fragmented landscape of Web2. This perspective highlights the opportunities for innovation and rapid development in the blockchain space, especially on platforms like Solana that offer high performance and a growing ecosystem of resources.

What is Magic Eden's vision for the future of NFTs and digital ownership?

Magic Eden envisions a future where NFTs represent meaningful digital ownership and facilitate deeper connections between creators and their audiences. They aim to create a seamless experience where users can easily discover, purchase, and collect NFTs without needing to worry about the underlying blockchain technology. The company is working towards abstracting away technical complexities and bridging different blockchain ecosystems to make NFTs more accessible and engaging for all users. They see NFTs evolving beyond simple JPEGs to become integral parts of the digital economy and culture, potentially representing various forms of intellectual property and digital experiences.

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