The Future of NFTs with Zedd of Magic Eden

The Rise of Magic Eden in the Solana NFT Ecosystem

Magic Eden has become a dominant force in the Solana NFT ecosystem since its launch in October 2021. Co-founder and COO Zedd Yin shared insights into the platform's meteoric rise and the challenges they faced along the way. The journey began when Zedd and his co-founders, who were friends from the Bay Area tech scene, noticed the potential of Solana's fast and low-cost blockchain for NFT trading.

Zedd recalled the early days of Solana, saying, "I remember sitting up and thinking, oh, that's really interesting because I knew the Phantom guys from DeFi days in Ethereum." This connection to the Phantom wallet team, along with the excitement surrounding early Solana projects, sparked the idea for Magic Eden.

The platform's success was not without its challenges. Zedd described the period between January and May 2022 as "insanely stressful" due to the platform's rapid growth and the technical challenges it faced. "Not only was launchpad just taken down the network, but our site was also crashing because simultaneously when launchpad is happening, everyone's also trying to trade on secondary," he explained.

Despite these difficulties, Magic Eden's team saw the overwhelming demand as a positive sign. Zedd shared advice from one of their investors: "The fact that people are complaining and yelling at you means that they care and you should keep going."

The Evolution of NFTs and Royalties

The conversation touched on the evolution of NFTs and the ongoing debate surrounding royalties. Zedd noted that the NFT landscape has changed significantly since the panel discussion on royalties at Breakpoint six months ago. He explained, "Now you have pretty, I would say, wide accepted adoption of like operator filters on EVM that are effectively protecting royalties now. It's like the game theory has reached its end state."

On the Solana side, Zedd highlighted the adoption of Programmable NFTs (PNFTs) as a solution to enforce royalties. He stated, "Most of the new Mints, I would say, are going through that." This shift demonstrates the NFT ecosystem's ability to adapt and find solutions to complex issues through both technical innovations and social consensus.

Magic Eden's Multi-Chain Strategy

Magic Eden has expanded beyond Solana to support Ethereum, Polygon, and Bitcoin networks. Zedd explained the rationale behind this multi-chain approach: "Long term, the thesis around this is that, yes, at some point, it's going to matter relatively less what chain the user is on." He emphasized that reducing friction between chains and simplifying wallet setup across different networks is crucial for broader adoption.

However, Zedd acknowledged the challenges of gaining traction in established ecosystems like Ethereum. "ETH has been very challenging because it is a big market. There's established players. There's like all these matters that are going on," he noted. Despite these hurdles, Magic Eden remains committed to its multi-chain strategy, believing that it will ultimately lead to a more inclusive and accessible NFT marketplace.

The Future of Gaming NFTs

Magic Eden has shown a strong interest in gaming as a vertical within the NFT space. Zedd explained, "We obviously have a lean towards gaming as a use case, because we think that a lot of the behaviours that communities already exhibit with, in gaming outside of Web3 is very, very parallel similar to some of the communities we see in NFTs."

The platform sees great potential in the ownership aspect of gaming NFTs. Zedd elaborated, "If you want to grind and play something for a while, which all of us have done at some point with probably many games, you want something to show for it." He believes that NFTs can provide a way for gamers to truly own and potentially profit from their in-game achievements and items.

However, Zedd also acknowledged the challenges faced by early Web3 games, particularly in terms of economic design. He referred to projects like StepN as examples of "gen one" Web3 games that struggled with balancing their economies. "They weren't really balanced economies. They were probably the opposite of that where it was like juiced with incentives and then as a result, the rise is as fast as the fall," he explained.

Looking forward, Zedd is optimistic about the next generation of Web3 games being developed by experienced game developers. He mentioned that Magic Eden's team has been playtesting upcoming games and has been impressed by the quality of gameplay. "There's a bunch where we are actually like, we play it and we're like, holy shit, that actually is pretty fun," he shared.

The Role of PFP Collections in the NFT Ecosystem

Despite the evolution of NFTs beyond profile picture (PFP) collections, Zedd believes that this format will continue to play an important role in the ecosystem. He stated, "I actually don't think that they are going to go anywhere, to be honest, because the thing that is often overlooked with the PFP era that we are in, and maybe people are surprised we're still in it, is that it really has captured better than anything else, just a very simple use case, which is community building."

Zedd sees PFP collections as a clear and simple way to build communities, which he believes will remain valuable in the long term. This perspective highlights the importance of social and community aspects in the NFT space, alongside technological innovations.

Compressed NFTs and New Use Cases

Magic Eden is exploring the potential of compressed NFTs, particularly on the Solana blockchain. Zedd expressed excitement about this technology, stating, "Compressed NFTs is really cool. We don't get supported on Magic Eden, but yeah, it's something we're looking into." He believes that compressed NFTs could enable experimentation with very large volumes of NFTs, opening up new possibilities for the technology.

While gaming remains a primary focus for Magic Eden, Zedd also mentioned potential use cases in music and ticketing. However, he noted that these areas are still in early stages of development. Magic Eden's approach is to focus on "web3 native teams" that are pushing the boundaries of innovation, rather than diluted attempts by large companies to enter the space.

The Competitive Landscape: Blur and Tensor

The conversation touched on the rise of competitors like Blur on Ethereum and Tensor on Solana. Zedd provided a nuanced perspective on this competition, noting that it's driven by a combination of factors including the bear market, incentives, and the needs of professional traders.

"As we have entered progressively more and more into a bear market, you kind of think about what are the types of users that remain in that market. It's like the people that are pretty hardcore, the people that are really into it," Zedd explained. He also highlighted the role of incentives in driving user adoption for these platforms.

Despite the competition, Zedd emphasized the importance of taking a long-term view. "The key, I think for us and I'd say for anyone who's really building the space is that, man, you got to take the long term view here. And the long term view is how do you get like 50 X more people, 100 X more people to come into the space, right? 1000 X more people," he stated.

Solana as a Potential Layer 2 for Bitcoin

One of the most intriguing topics discussed was the potential for Solana to serve as a Layer 2 solution for Bitcoin. Zedd expressed strong enthusiasm for this idea, stating, "I'm extremely bullish Solana as a L2 for Bitcoin. Extremely." He envisioned a future where Bitcoin's immutability and security could be combined with Solana's user experience and speed.

While acknowledging the technical challenges involved, Zedd sees great potential in this concept. He explained, "If you have, if you combine sort of the on chain immutability, you know, purity of Bitcoin being the base layer and then you have the UX almost that's powered by Solana, that would be obviously insane."

This potential integration could unlock significant liquidity for the Solana ecosystem. Zedd encouraged teams working on such solutions to reach out to Magic Eden, expressing the company's interest in supporting these efforts.

The Impact of Ordinals on Bitcoin

The conversation also touched on the recent phenomenon of Ordinals on the Bitcoin network. Zedd described the rapid rise of Ordinals, noting, "To give you some sense, we launched our ordinals marketplace in around the middle of March, there's been that two months, and the very first products that were built, were built around February."

He highlighted the unique nature of Ordinals, explaining, "The really cool thing that we were drawn towards was that these are always immutable, right? The art, the text, whatever data that you want to inscribe is like directly on the blockchain." This feature sets Ordinals apart from many other NFT implementations, where the token often points to media stored off-chain.

Despite the controversy surrounding Ordinals within the Bitcoin community, Magic Eden sees potential in this new use case for the Bitcoin network. Zedd stated, "For now, I would say a lot of just given where the speed of innovation on ordinals is happening, it's all natively on chain on Bitcoin. And that's where we expect a lot of the at least near term innovation to be."

The Challenges of Mobile Gaming in Web3

Addressing the challenges of bringing Web3 gaming to mobile platforms, Zedd acknowledged the difficulties posed by app store restrictions and the complexities of on-device transactions. However, he pointed out that even traditional mobile games often use web-based marketplaces for in-game transactions.

"Given the app store stuff, I think even for a lot of popular mobile games out there, there is some behavior of going to web to basically do the transacting or like the, you know, to access a marketplace," Zedd explained. He suggested that a similar approach could be adopted for Web3 games, at least initially.

While browser-based games might serve as an entry point for Web3 gaming, Zedd believes that mobile will ultimately be crucial for widespread adoption. "Browser is like casual and it's it may be the first initial wave, but I think it's got to go mobile," he stated.

The Importance of User Experience in NFT Marketplaces

Throughout the discussion, Zedd emphasized the importance of user experience in driving adoption of NFT marketplaces. He noted that while platforms like Blur and Tensor have gained traction with professional traders, there's still a need for user-friendly interfaces that cater to a broader audience.

"OpenSee's daily volume and user base is remarkably flat actually, which tells me that there's actually just a lot of people that habitually use it and as a new user, you would go to open see first, right? That's still, I think, very true," Zedd observed. This highlights the ongoing relevance of platforms that prioritize ease of use and accessibility.

Magic Eden's Approach to Innovation and Partnerships

Zedd outlined Magic Eden's approach to innovation and partnerships, emphasizing their focus on working with "web3 native teams" that are pushing the boundaries of what's possible in the space. He stated, "We spend a lot of time thinking about partnering with finding people that are doing very like web3 native stuff because that's the stuff that I think helps push things forward faster."

This strategy reflects Magic Eden's commitment to driving long-term growth and innovation in the NFT ecosystem, rather than chasing short-term trends or diluted attempts by large companies to enter the space.

The Role of Tokens and Incentives in NFT Marketplaces

The conversation touched on the role of tokens and incentives in driving adoption for NFT marketplaces. While acknowledging the impact of token-based incentives used by competitors like Blur and Tensor, Zedd cautioned against rushing into token launches without careful consideration.

"These kinds of incentives, especially if you're going to do a token, you can only do it once. You got to be pretty thoughtful about how you do it," he advised. Zedd pointed to examples from the DeFi space, such as dYdX, where token incentives led to sustained organic usage over time.

The Potential of Compressed NFTs

Magic Eden is exploring the potential of compressed NFTs, particularly on the Solana blockchain. Zedd expressed excitement about this technology, stating, "Compressed NFTs is really cool. We don't get supported on Magic Eden, but yeah, it's something we're looking into." He believes that compressed NFTs could enable experimentation with very large volumes of NFTs, opening up new possibilities for the technology.

This interest in compressed NFTs demonstrates Magic Eden's commitment to staying at the forefront of technological innovations in the NFT space. By exploring new NFT formats and standards, the platform aims to unlock new use cases and improve the overall efficiency of NFT creation and trading.

The Importance of Community in the NFT Space

Throughout the discussion, Zedd repeatedly emphasized the importance of community in the NFT ecosystem. Whether discussing PFP collections, gaming NFTs, or the differences between various blockchain communities, the role of social connections and shared experiences was a consistent theme.

"The thing that is often overlooked with the PFP era that we are in, and maybe people are surprised we're still in it, is that it really has captured better than anything else, just a very simple use case, which is community building," Zedd stated. This perspective highlights the social and cultural aspects of NFTs, beyond their technological features.

Magic Eden's Vision for the Future of NFTs

Looking to the future, Zedd outlined Magic Eden's vision for the evolution of the NFT space. He sees potential for NFTs to expand far beyond their current use cases, while still maintaining the core community-building aspect that has made them popular.

"We are somewhere in the early stage of that S curve, right? Where it's like serving a lot of the crypto native use cases. So that this journey is still pretty early," Zedd explained. He envisions a future where NFTs are integrated into a wide range of applications and industries, driven by innovative web3-native teams.

The Challenges and Opportunities of Multi-Chain Support

Magic Eden's expansion to support multiple blockchain networks has presented both challenges and opportunities. Zedd acknowledged the difficulties of gaining traction in established ecosystems like Ethereum, but remains committed to the multi-chain approach.

"Long term, the thesis around this is that, yes, at some point, it's going to matter relatively less what chain the user is on," Zedd stated. This vision of a more interconnected blockchain ecosystem drives Magic Eden's strategy, despite the current fragmentation of communities across different networks.

The Evolution of NFT Marketplaces

The conversation highlighted the rapid evolution of NFT marketplaces, from simple trading platforms to complex ecosystems supporting various use cases and user types. Zedd noted the emergence of specialized platforms catering to professional traders, while also emphasizing the continued importance of user-friendly interfaces for mainstream adoption.

This evolution reflects the maturing of the NFT market, with different platforms carving out niches to serve specific user needs. Magic Eden's strategy involves balancing innovation with accessibility, aiming to serve both experienced traders and newcomers to the NFT space.

The Potential of Solana in the Gaming Industry

Zedd expressed particular enthusiasm for Solana's potential in the gaming industry. He highlighted the blockchain's speed and low transaction costs as key advantages for gaming applications. "There's some shit you can do here that you cannot do anywhere else," Zedd stated, referring to Solana's capabilities.

This optimism about Solana's role in gaming reflects a broader trend of blockchain technology being integrated into the gaming industry. Magic Eden's focus on gaming NFTs positions the platform to potentially play a significant role in this emerging sector.

The Importance of Long-Term Thinking in the NFT Space

Throughout the discussion, Zedd repeatedly emphasized the importance of taking a long-term view in the NFT space. Whether discussing product development, community building, or expansion strategies, he stressed the need to look beyond short-term trends and focus on sustainable growth.

"The key, I think for us and I'd say for anyone who's really building the space is that, man, you got to take the long term view here. And the long term view is how do you get like 50 X more people, 100 X more people to come into the space, right? 1000 X more people," Zedd stated. This long-term perspective guides Magic Eden's approach to innovation and market expansion.

The Role of Experimentation in Driving Innovation

Zedd highlighted the importance of experimentation in driving innovation in the NFT space. He expressed support for projects pushing the boundaries of what's possible with blockchain technology, even if they face initial challenges or skepticism.

"Anyone who's experimenting with tokens and incentives, I feel like it's actually is pushing the space forward," Zedd stated. This openness to new ideas and approaches reflects Magic Eden's commitment to fostering innovation in the NFT ecosystem.

The Potential of Bitcoin Ordinals

The discussion touched on the recent phenomenon of Ordinals on the Bitcoin network. Zedd described Magic Eden's quick entry into this space, launching an Ordinals marketplace just months after the technology emerged.

He highlighted the unique nature of Ordinals, explaining, "The really cool thing that we were drawn towards was that these are always immutable, right? The art, the text, whatever data that you want to inscribe is like directly on the blockchain." This feature sets Ordinals apart from many other NFT implementations, where the token often points to media stored off-chain.

The Challenges of Balancing Game Economies in Web3

Zedd acknowledged the challenges faced by early Web3 games in balancing their economies. He referred to projects like StepN as examples of "gen one" Web3 games that struggled with this aspect.

"They weren't really balanced economies. They were probably the opposite of that where it was like juiced with incentives and then as a result, the rise is as fast as the fall," he explained. This observation highlights the need for more sophisticated economic design in future Web3 games.

The Potential of Solana as a Layer 2 for Bitcoin

One of the most intriguing topics discussed was the potential for Solana to serve as a Layer 2 solution for Bitcoin. Zedd expressed strong enthusiasm for this idea, stating, "I'm extremely bullish Solana as a L2 for Bitcoin. Extremely."

While acknowledging the technical challenges involved, Zedd sees great potential in combining Bitcoin's security and immutability with Solana's speed and user experience. This concept could potentially unlock significant liquidity for the Solana ecosystem and create new opportunities for cross-chain interactions.

The Importance of User Experience in Driving Adoption

Throughout the discussion, Zedd emphasized the crucial role of user experience in driving adoption of NFT platforms and Web3 technologies in general. He noted that while some platforms cater to experienced traders with advanced features, there's still a need for user-friendly interfaces that can onboard new users to the space.

This focus on user experience aligns with Magic Eden's goal of bringing NFTs and Web3 technologies to a broader audience, beyond the current crypto-native user base.

The Future of Mobile Gaming in Web3

Addressing the challenges of bringing Web3 gaming to mobile platforms, Zedd acknowledged the current difficulties but remained optimistic about the long-term potential. He suggested that initial solutions might involve web-based marketplaces for in-game transactions, similar to how some traditional mobile games operate.

"Browser is like casual and it's it may be the first initial wave, but I think it's got to go mobile," he stated, emphasizing the importance of mobile platforms for widespread adoption of Web3 gaming.

Facts + Figures

• Magic Eden launched in October 2021, about 18 months ago from the time of the podcast recording.
• The platform experienced rapid growth, facing technical challenges between January and May 2022 due to high user demand.
• Magic Eden currently supports four blockchain networks: Solana, Ethereum, Polygon, and Bitcoin.
• The platform launched its Ordinals marketplace for Bitcoin in mid-March 2023, just two months before the podcast recording.
• Magic Eden has a dedicated Chief Gaming Officer, highlighting their focus on the gaming vertical within the NFT space.
• The company has partnered with traditional game developers to explore Web3 gaming, including a recent partnership with Wildcard.
• Zedd estimates that mobile gaming accounts for about 50% of the gaming market, with consoles taking 20-30% and other platforms making up the remaining 20-30%.
• The NFT market cap is estimated to be only 1-5% of the total market cap of fungible tokens in the crypto space.
• Magic Eden had a team of about 15 people during its early rapid growth phase.
• The platform sees most new NFT mints on Solana using the Programmable NFT (PNFT) standard, which enforces royalties.
• Zedd mentions that some of the upcoming Web3 games they've playtested have impressed the team with their gameplay quality.
• The discussion references the Wall Street Cheat Sheet, suggesting that the current crypto market may be in the "depression" stage of the cycle.
• Zedd highlights that the Ordinals technology for Bitcoin only emerged in January 2023, demonstrating the rapid pace of innovation in the space.

Questions Answered

What is Magic Eden's approach to multi-chain support?

Magic Eden currently supports four blockchain networks: Solana, Ethereum, Polygon, and Bitcoin. The platform's long-term thesis is that the specific blockchain a user is on will become less important over time. Magic Eden aims to reduce friction between chains and simplify wallet setup across different networks to promote broader adoption. However, they acknowledge the challenges of gaining traction in established ecosystems like Ethereum.

How does Magic Eden view the future of gaming NFTs?

Magic Eden sees great potential in gaming NFTs, believing that the ownership aspect aligns well with gamer behavior and desires. They have a dedicated Chief Gaming Officer and are partnering with experienced game developers to create high-quality Web3 games. The platform is focusing on games that balance traditional gameplay with token economies, learning from the challenges faced by early Web3 games. Magic Eden believes that gaming could be a significant driver of NFT adoption in the future.

What is Magic Eden's stance on PFP (Profile Picture) NFT collections?

Despite the evolution of NFTs beyond PFP collections, Magic Eden believes that this format will continue to play an important role in the ecosystem. Zedd argues that PFP collections have effectively captured the use case of community building, which he sees as a fundamental value proposition of NFTs. The company expects PFP collections to coexist with newer, more advanced NFT use cases in the future.

How does Magic Eden view the competition from platforms like Blur and Tensor?

Magic Eden acknowledges the rise of competitors like Blur on Ethereum and Tensor on Solana, particularly their appeal to professional traders. Zedd sees this competition as part of the ecosystem's evolution, driven by the bear market and the needs of hardcore users. However, Magic Eden maintains a long-term perspective, focusing on how to bring in many more users to the space rather than solely catering to existing crypto-native traders.

What is Magic Eden's view on Solana potentially serving as a Layer 2 for Bitcoin?

Zedd expressed strong enthusiasm for the idea of Solana serving as a Layer 2 solution for Bitcoin. He believes that combining Bitcoin's immutability and security with Solana's user experience and speed could create an "insane" opportunity. While acknowledging the technical challenges, Magic Eden is interested in supporting efforts to explore this potential integration, seeing it as a way to unlock significant liquidity for the Solana ecosystem.

How does Magic Eden approach innovation and partnerships in the NFT space?

Magic Eden focuses on partnering with "web3 native teams" that are pushing the boundaries of what's possible in the space. They prioritize working with innovators who are developing truly novel applications of blockchain technology, rather than large companies making diluted attempts to enter the space. This approach reflects Magic Eden's commitment to driving long-term growth and innovation in the NFT ecosystem.

What are Magic Eden's thoughts on compressed NFTs?

Magic Eden is exploring the potential of compressed NFTs, particularly on the Solana blockchain. While they don't currently support compressed NFTs on their platform, Zedd expressed excitement about the technology. He believes that compressed NFTs could enable experimentation with very large volumes of NFTs, potentially opening up new use cases and improving the efficiency of NFT creation and trading.

How does Magic Eden view the challenges of bringing Web3 gaming to mobile platforms?

Zedd acknowledges the current difficulties in bringing Web3 gaming to mobile platforms, primarily due to app store restrictions and the complexities of on-device transactions. However, he remains optimistic about the long-term potential of mobile Web3 gaming. He suggests that initial solutions might involve web-based marketplaces for in-game transactions, similar to how some traditional mobile games operate. Ultimately, Zedd believes that mobile adoption is crucial for the widespread success of Web3 gaming.