The recent surge in interest in NFTs has resulted in a profusion of blockchains claiming to be the go-to destination for NFT development, issuance, and trading. Solana has established itself as a market leader in NFTs because of its high-performance infrastructure and cheap transaction costs. In terms of NFT transaction volume, Solana is now the second-largest NFT ecosystem behind Ethereum.

The NFTs have been on a wild ride. Fear was rampant at the moment, and many NFT founders seriously considered shifting their projects away from Solana and onto another network. In retrospect, it was a test of character, and Solana looks to have passed - the Solana community has shown resilience and rebounded back strongly. The ecosystem is as alive as it has ever been.

We predict the Solana NFT ecosystem will continue to flourish and develop in the coming months. Numerous exciting chances will offer themselves to individuals who pay close attention. We'll start with an overview of Solana's NFT ecosystem and use figures. We'll also look at the strengths and shortcomings of some of the ecosystem's most important markets.

Key metrics

To be honest, it was a little unexpected to see NFTs blossom into such a thriving ecosystem on Solana. Solana was created as a blockchain to allow complex financial applications that needed highly quick and inexpensive transactions that could not be executed on the current Ethereum infrastructure. Solana NFTs now compete with Solana DeFi in terms of interest and activity. We may even claim that NFTs are the ecosystem's lifeblood.

General-purpose blockchains that obtain user acceptance are often capable of nurturing and growing a flourishing NFT ecosystem. Thousands of new users join the chain as a result of innovative and intriguing NFT initiatives. NFTs account for a considerable amount of blockchain use and are one of the fastest-growing areas of block space consumption. This has been shown by OpenSea and Ethereum.

It is important to note that NFT communities on various blockchains have their own cultures, beliefs, and interests. This is due to the nature of the users as well as the blockchain's unique features.

For example, whales drive Ethereum NFTs, which have a significant concentration on high-value PFPs and art. Ethereum is regarded as the most secure NFT chain, and it has a strong Lindy effect, which means collectors feel more comfortable holding high-value NFTs on the chain. Many of the biggest collectors on Ethereum are crypto OGs who amassed their fortunes during the early crypto bull runs and DeFi summer before alternative L1s like Solana and Avalanche gained prominence.

The NFT participants, on the other hand, are often fresh to cryptocurrency and provide a whole different atmosphere and attitude. Many people may have missed out on getting in on Ethereum NFTs before they were priced out. They are enticed by lower NFT pricing on Solana, which they see as a possibility to amass life-changing fortune. As compared to Ethereum NFT users, the Solana NFT ecosystem is driven by traders who are more financially rewarded and trade far more often. As a result, more complex financial features in the instruments they utilize, such as stop losses and take-profit order types on NFT platforms, are in demand.

With that in mind, let's take a look at some critical indicators.

Solana has increased its market share dramatically since the top of the general NFT bull market in early 2022, climbing from 6% to 14% of total NFT sales volume in less than a year. Part of this is exacerbated by the sharp drop in 30-day NFT sales volume on Ethereum, which has dropped from $2 billion to $800 million, making it easier for Solana to gain relative market share.

During the last year, Solana's NFT sales volume has also surpassed chains such as Ronin, Avalanche, and Flow, which have actually lost market share. Solana's lead over the next rival blockchain has grown dramatically. We anticipate that this tendency will continue for some time. In crypto, winners tend to keep winning because of positive network effects – increased interest in Solana NFTs => higher liquidity and transaction volume => more founders launching interesting NFT companies on Solana => more interest in Solana NFTs.

Solana NFT sales volume increased consistently through 2021, peaking at $300 million per month in April 2022. As a result of the general crypto bear market, it saw many months of down-trending volume. It has recovered well in recent months, and sales volume has been increasing since August 2022.

Despite the significant drop in the price of SOL, NFT sales volume remains quite high. In Dollar terms, it is down by less (62% from all-time highs vs. 90% for SOL).

Another encouraging sign for Solana NFTs is the ratio of unique buyers to unique sellers. During the previous Solana NFT season, when volume peaked in late 2021-early 2022, the number of unique buyers outnumbered the number of sellers for many months before giving way to the sellers. In recent months, we've begun to see unique buyers exceed sellers once again. Could this be a sign of things to come for the Solana NFT market? Only time will tell.

Solana may attract a big retail audience since its typical NFT pricing is relatively low. Prior to November 2022, the average deal size for Solana NFTs was less than $100, which is less than the cost of a family supper or a short weekend getaway. For a few SOL, you may acquire NFT collections from reputable teams. The Tatsumeeko 10k Meekolony collection, for example, has a starting price of 2.5 SOL ($60).

This also applies to top-tier NFTs. DeGods (500 SOL/7.5 ETH), Solana Monkey Business (210 SOL/3.2 ETH), and ABC (130 SOL/1.8 ETH) are the top three Solana PFP collections by floor price. This is substantially less expensive than the major Ethereum PFPs, such as BAYC, MAYC, and Azuki, whose entry costs vary from 14 to 70 ETH.

Since July 2022, the average Solana NFT deal size has increased and is presently hovering at 5 SOL ($115). As additional money and individuals join the ecosystem, the prices of the top-volume Solana NFT collections are anticipated to rise. This, from our perspective, is a positive indicator of increased liquidity and attention.

Understanding the Metaplex governance token

Before we go into Solana markets, it's important to understand how Solana NFTs vary from NFTs on other chains.

metaplex comparison

Source: Solana

Unlike Ethereum, where no "official" curator of NFT token standards exists, the vast majority of NFTs on Solana adhere to Metaplex's token standard. Metaplex is a well-funded, active organization founded by Solana Labs to deliver a best-in-class NFT developer experience. Among Metaplex's notable projects are:

Metadata for Tokens (allows data to be attached to tokens)
Candy Machine (an NFT minting and distribution protocol)
Auction House (a marketplace protocol for exchanging assets)

Metaplex is constantly updating its token requirements, allowing new services to develop. As an example:

Introducing an optional "uses" parameter, especially for gaming purposes, that allows an NFT to be designated as having a limited "life." After the specified number of "uses" has happened, the NFT is destroyed.
Tokens that are "semi-fungible," comparable to ERC-1155, are supported.
Creator Royalties are enforced through Metaplex's Programmable NFTs.

This month, Metaplex will introduce a new NFT standard dubbed "programmable NFTs" that will allow royalties to be enforced. With the use of allow and deny lists, this token standard enables designers to specify which protocols their NFTs are permitted to interface with. Creators may prohibit their works from being sold on platforms that do not accept royalties.

Most markets (including Magic Eden), wallets, and protocols are gaining support for programmable NFTs, making it the most probable standard for royalty enforcement on Solana. On February 6th, Metaplex started enabling NFT collections to upgrade to this new token standard.

Metaplex is also working on compressed NFTs, which will enable millions of NFTs to be minted at near-zero cost. This functionality is beneficial for Web2 organizations looking to engage millions of their current customers, and it may lead to use cases in gaming, ticketing, social networking, and other areas.

Solana NFT marketplace landscape

The competitive environment for Solana NFT markets is tangled - believe us when we say it's a war out there. NFT marketplaces are fighting for new customers, exclusive relationships with creators, and market share. Marketplaces often have feature sets that overlap because teams closely monitor their competition and copy/integrate components that work. Aggregators like Hyperspace, for example, are extensively advertising their own NFT launchpads.

Solana's plethora of automated market maker (AMM) marketplaces is one of its distinguishing features. This tendency was undoubtedly influenced by Sudoswap's Ethereum debut, which prompted other Solana teams to race to develop their own AMMs (including Hadeswap, Tensor, and Coral Cube). AMMs have two major advantages:

The ability to sell an NFT immediately.
The capacity to form market-making pools and profit on spreads.

Clearly, Magic Eden reigns supreme and commands the majority of market volume. In early 2022, OpenSea established its Solana marketplace, which was billed as a significant challenger to Magic Eden. But, after an early volume jump, it has failed to garner considerable momentum.

Who are the Magic Eden rivals to keep an eye on if not OpenSea? In the last 9-12 months, a new kind of marketplace has emerged and begun to take market share on Solana. Hadeswap, Hyperspace, and Tensor are a few examples. They accomplish so by delivering a better user experience for traders, such as consolidated listings, rapid liquidity through AMMs, quick transactions, and powerful analytical tools.

This article covers many markets that we believe are worth paying attention to, either because they are rapidly developing or offer distinctive product characteristics. In the end, being early in an ecosystem does not guarantee success. Some markets that debuted in 2021 have fallen behind newer competitors. Although having 90% of the market share now, Magic Eden does not have a monopoly, and switching costs are modest. Marketplaces that can keep their customers satisfied – dealers, collectors, and producers — will thrive.

>>> Read more: OpenSea and top 5 major competitors

Magic Eden

When people are asked about Solana NFTs, Magic Eden is often the first thing that springs to mind.

Magic Eden's climb has been spectacular. It began in September 2021 and developed to be the major NFT marketplace on Solana within three months. It has been the king of Solana NFTs ever since, a remarkable achievement in a dynamic and rapidly evolving environment.

Magic Eden, like OpenSea, is run by a centralized body. This implies that the Magic Eden team has complete control over which NFTs are featured on its marketplace and may delist them at any time. Nowadays, the listing procedure is pretty simple: authors submit a form, and if their collection meets Metaplex's collection guidelines, it is promptly posted. The bulk of Solana's listing liquidity is on Magic Eden.

The daily trade volume on Magic Eden varies widely, although it is generally increasing. Volume spikes are common during high-attention events. The introduction of y00ts in September and the collapse of FTX in November were two notable occurrences.

Despite a decline in December and January, the number of active traders on Magic Eden has continued increasing through 2022, with over 100k monthly active members now. Magic Eden users accounted for 10% of OpenSea users in January 2022. By the end of 2022, Magic Eden's user base had surpassed that of OpenSea (in October 2022).

We anticipate that Magic Eden will continue to develop aggressively by leveraging its brand recognition and strong position. Important developments to keep an eye on:

Magic Eden's goal is to become a cross-chain marketplace. It has already grown beyond Solana to include Ethereum and Polygon NFTs, however, its traffic on these networks is presently negligible in comparison to Solana.

Magic Eden is adopting a creative approach. In 2022, it will have collaborated with nearly 400 artists. It aims to give the proper tools for artists to flourish, share content, and reach new audiences by 2023.

In late 2022, Magic Eden started a rewards program. Lower transaction costs reward high-volume trades. There are five tiers of incentives, with the top tier offering 45% cheaper costs. Each SOL spent on Magic Eden exchanges earns you 5 reward points. Despite the fact that Magic Eden does not have a token (and is unlikely to introduce one anytime soon), it is utilizing its rewards program as an incentive mechanism.

Magic Eden appointed a new Chief Gaming Officer, Chris Akhavan, in December to expand its Web3 gaming relationships and investments. Chris has extensive game industry expertise, most recently as Chief Revenue Officer of Glu Mobile, which was bought by Electronic Arts for $2.4 billion.

With Metaplex's programmable NFTs, Magic Eden will support and preserve royalties.

Type: Consolidated order book with AMM for collecting bids.
Fees: 0.5% for makers (listing or making offers), 1.5% for takers (direct buying or selling into an offer). Discounts are available based on reward level. Magic Eden believes in royalty.
Funding: $170 million was raised in five stages, the most recent in June 2022, headed by Electric Capital and Greylock.
Token: None have been revealed as of yet.

Hadeswap

Hadeswap debuted in September 2022 and had reached 1 million SOL ($22 million) in total volume traded by the end of December. In only three months, it has risen to become the second-largest marketplace on Solana, accounting for 6% of the three-month trading volume for Solana NFTs. Magic Eden isn't sweating yet since Hadeswap is still a long distance behind the leader. Still, Hadeswap's volume and users are on the rise, making it a competition to keep an eye on.

hadeswap ux

Source: Hadeswap

In contrast to Magic Eden's centralized order book, Hadeswap is a community-driven DEX similar to Sudoswap that uses the AMM concept. On Hadeswap, users may construct liquidity pools to buy/sell NFTs (one-sided pools holding NFTs or SOL), or they can pool NFTs and SOL tokens to make trading fees (two-sided pools). On Hadeswap, anybody may freely establish a pool.

9x9x9/HGE.ABC, an anonymous NFT whale, builder, and OpenDAO creator, launched Hadeswap. They are also the creators of ABC, a 10,000 NFT compilation released barely a month before Hadeswap. As a consequence, Hadeswap and ABC are inextricably intertwined.

Hadeswap offers cheaper costs than Magic Eden since there are no markets or royalties to pay, just liquidity provider fees. With this, some have expressed fear that there would be a significant amount of wash trading on Hadeswap. Wash trading is a sort of market manipulation in which traders intentionally increase the volume of certain NFT collections to make them seem to be in great demand by buying and selling between their own wallets.

Conversely, we discovered that the degree of wash trading on Hadeswap is substantially lower than on Magic Eden, with the majority of the volume being genuine. One explanation might be that Hadeswap's costs paid to liquidity providers are changeable and unpredictable, making Hadeswap and other AMM-type markets less prone to wash trading. Because of more trader attention and a higher variety of supported collections, Magic Eden is also the favored place for wash trading.

Type: AMM.
Fees: There are no marketplace fees. Liquidity providers determine and earn all fees. Hadeswap does not presently support royalties but has claimed that it would in the future.
Funding: Thus far, all funding has been self-funded.
Token: On January 23rd, the HADES governance token was issued. The token's utility is currently entirely unclear, save that holders will be able to vote on the protocol's direction. There is a total quantity of 100 million HADES tokens, which are distributed as follows:
- 25% to the group (2-year vesting)
- ABC and HADES NFT holders will get a 30% increase in staking incentives.
- 5% goes to the DAO treasury (4-year vesting)
- Early backers will get a 10% discount (2-year vesting)
- 10% for bonding incentives
- 5% to holders of FRKX tokens (2-year vesting)
- 5% for facilitating liquidity on DEXs and CEXs

The company has claimed that HADES tokens would be distributed to early users and liquidity providers at a later date. The following are the primary methods for obtaining HADES tokens:

ABC NFTs are being staked. Currently, 82% of ABC NFTs are staked, and the reward rate (variable) is 2 HADES per NFT every day.
SOL or bonding NFTs. This process is comparable to Olympus (OHM), in which HADES tokens are released at a discounted rate in exchange for other tokens controlled by the protocol.

The cryptocurrency is presently selling at $3 on several platforms, representing an FDV of $300M. It should be noted that the present circulating supply is insignificant and will grow dramatically in the future months.

Hyperspace

At its heart, Hyperspace is an NFT marketplace aggregator — essentially, Solana's version of Gem (an NFT aggregator on Ethereum which was acquired by OpenSea). It compiles listings from Magic Eden, Elixir, Hadeswap, and other sites. The core value proposition of Hyperspace is to deliver the best costs for those looking for NFTs. This is particularly useful when liquidity is dispersed across various markets.

Yet, it is more than simply an aggregator. Hyperspace intends to serve as a one-stop store for Solana NFT customers. It includes characteristics such as:

The most active NFT wallets are tracked so you can see what they are purchasing.
You can view wallet activity from Solana NFT Twitter influencers thanks to social tracking.
Launchpad functionality for new projects.
Magic Eden-style platform-fee reduction offer for regular traders.
The ability to advertise NFTs without placing them in an escrow account (unlike Magic Eden).

hyperspace growth

Source: Hyperspace docs

The expansion of hyperspace has been spectacular. According to their Q3/2022 report, they enabled more than 20% of Solana's entire weekly trade volume. Several traders we spoke with had favorable emotions about Hyperspace, praising the simple UI, pricing, and tracking features. Before rebranding as Hyperspace and releasing its aggregator in February 2022, Hyperspace began as a data portal giving pricing information on Solana NFT collections (Solanalysis).

A word of warning about the aggregator model: aggregators that do not control their own listings or liquidity, such as Hyperspace, may face pressure from the marketplaces from which they aggregate. Marketplaces may opt to restrict access to listings in order to encourage customers to buy directly from their sites and maintain more control over the client relationship.

Type: Aggregator, tracker, and launchpad.
Fees: There is a 1% selling charge. Royalties are encouraged by Hyperspace.
Funding: In February 2022, Dragonfly and Pantera Capital led a $4.5 million seed round.
Token: None have been revealed as of yet.

Tensor

Tensor is really popular. It has recently gained popularity with Solana traders. Tensor promises to be "the fastest NFT exchange on Planet," with real-time data and the addition of new mints in real-time. This is significant since speed is key for traders.

Tensor includes an NFT marketplace aggregator as well as an AMM behind the hood. It, like Hyperspace, collects listings from ten NFT markets, including Magic Eden, Hadeswap, Elixir, and others. Tensor can now enable collection-wide bids, rapid sell-side liquidity, market making, and bonding curve-based orders thanks to the installation of an AMM.

Tensor distinguishes itself by focusing on sophisticated trading tools that appeal to experienced traders. At first view, it seems to be a Bloomberg terminal. Among these tools are:

TradingView NFT price, volume, and listing charts.
An intuitive user interface that can convey a large amount of data in a comprehensible way, enabling traders to swiftly discover and capitalize on opportunities.
Market-creating function with no fees.

Tensor is quite similar to Blur, Ethereum's trader-focused NFT marketplace. Since block times on Solana are so short, trading on Tensor seems even quicker. Tensor's features, such as the ability to submit bids across different collections utilizing a shared escrow, were most likely inspired by Blur.

Although the daily trade volume on Tensor is currently tiny (about $40k-$60k per day), it is on a rapid growth trajectory. When comparing November 2022 to January 2023, its average daily volume and transaction counts climbed by 650% and 564%, respectively – quite an accomplishment in only two months. Tensor is expected to take off in 2023, accounting for a larger percentage of NFT trade activity than it does currently.

Tensor will be available in February 2022. With just two developers, the team punches above its weight and delivers promptly. It was created by a former analyst at Bank of America Merrill Lynch and a software programmer who previously worked at Two Sigma and Google. They previously placed second in the Solana Summer Camp hackathon and third in the Solana Riptide hackathon.

Tensor has received excellent user feedback: Tensor has no set strategy, but near-term objectives include expanding to Ethereum, adding margin/leverage, perps/derivatives, and an API for programmatic trading.

Type: Aggregator + AMM
Fees: The taker pays 1% platform fee. Tensor supports royalty-enforced collections with full royalties and normal collections with 0% royalties.
Funding: The company is in the process of closing its first round of investment.
Token: A token is being developed. Tensor has implemented a gamified incentives system to encourage liquidity on its AMM. There are both trading and social benefits. Trading rewards are points earned by traders for doing different platform activities such as buying/selling NFTs and providing liquidity on the AMM. While they have not yet been activated, social awards may be won by recommending individuals and sharing progress with others. There are additional point multipliers for specific actions that will diminish with time, offering an edge to early players.

Points may be traded for TNSR tokens or Tensor NFTs in the future (estimated Q1/2023). Gaining points by providing liquidity is perhaps the greatest method for someone to possibly get ownership in Tensor (via tokens). There have been no tokenomics or information revealed as of yet.

Elixir: A notable newer marketplace

Elixir is a floor AMM that pools the purchase and sell demand for each collection. This resolves the problem of fragmented liquidity on AMMs caused by several single-LP pools. This has many ramifications:

For various collections, it may have the maximum liquidity at the floor price.
The exchange of NFTs is possible (you can swap your NFT for another one from the same collection in the pool).
It is practical for trading floor NFTs but not for rarer NFTs inside a collection.

Elixir now only supports a few NFT collections, but many more will be added in the next weeks. Elixir is powered by the NFT community (Ovols), which was formed by Swervortrades. Ovols is a ten thousand PFP collection that will feed into future Elixir-linked businesses such as a launchpad, lending/borrowing platform, and derivatives platform.

elixir mechanism

Source: Elixir

The AMM architecture in Elixir is unusual in that it features fractionalization – every NFT in Elixir is fractionalized. This opens the door for intriguing DeFi-type products, such as NFT index funds, to be constructed on top.

Type: Collection-based AMM.
Fees: Only liquidity provider costs are charged.
Funding: Seed funding of $3.2 million will be available in September 2022.
Token: None have been revealed as of yet.

Bottom lines

The Solana NFT marketplace environment is rapidly developing, but some important concerns remain:

Aggregators will find it more difficult to acquire access to marketplace listings as competition heats up and marketplaces vigorously guard their competitive moats. Magic Eden, for example, has the capacity to restrict direct access to its listings even though they seem to be on-chain. Market data is not as easily comprehensible as we would believe.

In exchange for incentives and promotion, marketplaces will actively compete for the greatest creators and builders, establishing exclusive contracts with creators and possibly dictating where their NFTs may be exchanged. Alright Bears, for example, has an exclusive arrangement with Magic Eden. Although there are currently no trading limitations, it is likely that Magic Eden may require Okay Bears to solely trade on their marketplace in the future.

Fees and royalties on the market. Each marketplace has its own cost structure. Some people favor royalties, while others oppose them. At the moment, there is no agreement on creator royalties. With more competition, we anticipate costs to trend down over time.

The markets that can successfully handle these complex challenges, onboard the top artists, and outmaneuver their rivals will win out in the long run. It's difficult to believe, but Magic Eden just opened 18 months ago. The situation might shift dramatically in a year's time.

We are paying close attention to the newest market entrants. They have shown early indications of traction and have the potential to become key participants in the coming months:

Hadeswap demonstrates the decentralized AMM model's ability to produce liquidity for NFTs.
Hyperspace has an excellent user interface and offers the greatest pricing via its aggregator, making it ideal for casual dealers and collectors.
Tensor has the potential to become the ideal marketplace for professional and high-volume traders that value speed and volume of data.

Notably, Hadeswap and Tensor have launched or will launch their own tokens this year, which may possibly accelerate their growth if dispersed carefully.

Looking at the larger picture, it seems like the Solana NFT ecosystem will continue to develop and prosper in the next months. Also, Solana offers a plethora of tailwinds. In 2022, Solana had the fastest rate of developer development among ecosystems, and infrastructural enhancements are in the works. The price of SOL has rebounded slightly, currently roughly three times higher than it was only a few weeks ago, increasing investor morale.

We anticipate that NFT development and trading activity on Solana will continue to thrive. In 2023, it is probable that it will remain the second-largest NFT ecosystem after Ethereum. Solana is still alive. Keep an eye out.

Disclaimer:
This article is intended for and only to be used for reference purposes only. No such information provided constitutes advice or a recommendation that any investment or trading strategy is suitable for any specific name.

The current state of Solana NFT