NFT on Solana, a "sinking market" in the Red Sea

KingData ·2022-06-10

Written by: 0xLaughing
「SOL Community > ETH Community.」

Orangie made such a tweet. Orangie is an NFT KOL with more than 160k followers on Twitter. Although he still uses MAYC as his avatar, it is clear that he has turned his attention to Solana NFT. With the explosion of Okay Bears, more and more NFT players have noticed the public chain of Solana.

Solana NFT emerges on OpenSea

In the NFT market, Solana's supporters have always promoted and preached with the advantages of "fast transaction speed", "almost no handling fee", and "low threshold". But at the same time, there are many criticisms of Solana NFT: "rug pulls everywhere", "frequent downtime", "not as decentralized as Ethereum", etc., even mocking it as those who can't afford gas NFT players fall back to the "poor man's blockchain".

So what does the real Solana NFT market look like? This article will start with the changes in the NFT market in recent months, and explore the potential and prospects of the Solana NFT market by comparing it with the Ethereum NFT market.

NFT Market: "The Cliff Is Now"

The popularity of NFT has been soaring since 2020, from the emergence of Cryptopunk and BAYC, to the emergence of PFP NFT projects such as Doodles, Azuki, Moonbirds, etc. At the same time, many stars such as Neymar, Jay Chou, and Eminem have entered the circle, making NFT gradually enter the public eye. And it is known to people at a very fast speed.

NFT project parties are also trying to innovate in many ways. From the first avatar NFT project to create social scenes, different styles cater to the preferences of different investors; to the later Pass NFT, which provides the rights of analysis tools or the rights of the Alpha community; issues tokens, builds IP, and continues to create income Various new ways of playing, such as the "shovel", are constantly being designed.

Changes in the total market capitalization and transaction value of the NFT market (Source: NFTGO)

In the nearly one-year-long "NFT Summer", the total market value of NFTs once exceeded US$38.6 billion. The new social narrative and strong wealth-making effect attracted all kinds of capital to enter the market, and the NFT market was unprecedentedly hot. Investors all want a piece of the story of "dots turn into gold".

ETH-based NFT volumes on OpenSea continue to decline (Source: Dune)

As time comes to April and May of this year, the entire crypto market has become exhausted under the expectation of the Federal Reserve raising interest rates. At the beginning of May, the release of the "Otherdeed for Otherside" series under Yuga Labs has squeezed out the NFT market. The last bit of liquidity, the Luna/UST thunderstorm event caused investors to panic and sell various investment assets in their hands, and NFTs are no exception. On-chain data on Dune shows that the trading volume of ETH-based NFTs on OpenSea continues to decline. The daily trading volume of the day was not even a tenth of the peak.

"The bear market is really coming."

In the process of entering a bear market, asset shrinkage is only one aspect, and NFT investors are more afraid of a sudden drop in liquidity.

It is true that compared with FT (Fungible Token), the liquidity of NFT (Non-Fungible Token) is the most important topic. "Token can at least be sold in the market with one click, and NFT can't be sold, it will really return to zero. ". The sudden drop in liquidity is reflected in the current NFT trading market: almost all NFT trading volumes have declined, and unknown NFT projects have only a few transactions a day or even zero transactions. Investors who are eager to cash out are rushing to lower prices and continue Destroying the trend of the price K-line, the consensus established in the early days collapsed one after another, and the project party could do nothing about it.

In such an upheaval of the environment, optimistic investors are betting on the future of the NFT market, eagerly waiting for potential incremental funding, but the danger is that despite the high expectations of the NFT market, its users and funds grow. has slowed down significantly.

Compared with the enthusiasm of investors, the ice-like growth data of the NFT market is like a cliff in front of all NFT projects.

Solana NFT Market: "Slam the accelerator"

The lack of incremental funds in the NFT market makes it difficult for most NFT projects to get out of the "Red Sea" of stock funds. The top blue-chip projects can still breathe after exhausting the market dividends by virtue of their first-mover advantage and the top advantages, while those new projects recently issued on the ETH chain are facing the dilemma of birth or death. The top NFT projects will also collapse.

Even so, facing the cliff of the NFT market, instead of slowing down, the NFT projects on the Solana chain stepped on the accelerator.

Solana-based NFT transactions on Magic Eden grew significantly in April and May (Source: Dune)

Solana NFT total floor prices have continued to rise over the past few months (Source: SolanaFloor)

From Dune's analysis data, we can see that the number of NFT transactions on Magic Eden, the largest NFT trading platform on the Solana chain, increased significantly in April and May. Data on SolanaFloor also shows that the total floor price of Solana-based NFTs has continued to rise over the past few months. As Solana NFT continues to heat up, Magic Eden's daily transaction volume even surpassed OpenSea at one point.

There is no doubt that these data are rare positive signals in the cold winter of NFT. At least to some extent, it can be proved that the NFT market still has a certain degree of heat on the Solana chain, and this heat is still rising. Among them, an NFT project called Okay Bears performed very well.

Floor prices skyrocketed after Okay Bears launch (Credit: Sol Sniper)

On April 27th, Okay Bears went on sale at the price of 1.5 SOL on the Solana NFT market Magic Eden. Since then, the price has skyrocketed, and the floor price once exceeded 260 SOL. In the past less than a month, Okay Bears has created very amazing transaction data: the cumulative number of transactions exceeds 20,000, the cumulative transaction volume exceeds 1.4 million SOL, and the total market value ranks second in Solana NFT.

The huge wealth effect generated by Okay Bears in a very short period of time made it explode rapidly. It has added fuel to the rise of the Solana NFT market, proving that there is also a "rich machine" here.

Solana vs Ethereum: "The Battle of the Public Chains"

As one of the earliest public chains, Ethereum (Ethereum) was once dubbed the "King of Public Chains", with a prosperous ecosystem and all kinds of DAPPs blooming. There are many challengers in other public chains, and Solana is one of many "Ethereum killers".

Transaction speed and transaction fees

Solana has been committed to being the "fastest high-performance public chain" from the very beginning.

It uses the Proof of History (PoH), Tower BFT algorithm, Turbine propagation protocol, Sealevel and other technologies to build a completely different system architecture, which makes it faster and lower than other blockchains. the cost of.

Bitcoin can process about 7 transactions per second (7 TPS), Ethereum can process 30 transactions per second, and Solana can currently process 65,000 transactions per second, its TPS is comparable to Visa and Mastercard, making it in the Fast becoming an industry leader in speed and global scalability. While Eth 2.0 may see significant performance improvements in the future, its launch plan has also been repeatedly delayed.

Average transaction fee of each chain (source: A16Z)
In addition to transaction speed, Solana also has much lower transaction fees than Ethereum. While a transaction on Ethereum typically costs $10+ in Gas Fee, it only costs $0.00001 to do a transaction on Solana.

Over 70,000 ETH burned on May 1st (source: glassnode)
Taking the sale of the Yuga Labs Otherside project as an example, data from Glassnode and Data Always show that during the Otherside sale on May 1, about $227 million in fees were spent on Ethereum that day, and more than 70,000 ETH were burned, and the average user The processing fee is $197.

Yuga Labs says it will refund users gas fees for failed transactions

After the Otherside launch, Yuga Labs tweeted that it would refund users gas fees for failed transactions. "Obviously, ApeCoin needs to be migrated to its own chain in order to expand properly." It can be seen that facing the high fees on Ethereum, even a leading project like Yuga Labs is unbearable, and NFT players are even more unbearable. its disturbance.

Degree of decentralization

The "Trilemma" of Blockchain

Vitalik Buterin, the founder of Ethereum, once proposed that there is a "Trilemma" (Trilemma, also known as the impossible triangle) in the development of blockchain, which means that it is difficult to guarantee decentralization, security, and scalability. both at the same time. Compared to Ethereum, Solana sacrifices some decentralization while maintaining security and high performance.

From a validator node development perspective, Solana can currently handle up to 65,000 transactions per second, and high throughput means the hardware to run validators is extremely demanding. The high threshold makes the Solana Foundation the only entity developing a core node on the Solana blockchain, which means it can control the network, thereby reducing the degree of decentralization of the network. The Solana network has been down many times, and the top-down solution has drawn a lot of skepticism: it appears to be a "centralized bank with a more advanced database" rather than a so-called decentralized blockchain.

The initial token distribution of the public chain announced by Messari

On different blockchains, delegating tokens to validators is an inherent driving force in securing the network. Therefore, when comparing the degree of decentralization of Solana and Ethereum networks, it is also important to compare the token distribution of the two.

Solana has a high percentage of tokens held by insiders compared to Ethereum. According to Messari, roughly 48 percent of Solana’s tokens are owned by insiders, including Solana Labs team members and venture capital firms. Additionally, another third of the supply has been allocated to ecosystem development, with relatively few tokens allocated in Solana’s public sale. Whereas Ethereum distributes about 80% of its tokens through a public sale, insiders only hold 15% of the total supply.

Prospects for Solana NFT: "Curve Overtaking"

Nobel laureate Herbert Alexander Simon once pointed out: "In today's era of rapid information development, the value of attention will exceed the value of information."

It is true that the new NFT projects that emerge every day are dazzling. Whoever attracts the attention of capital will win the first opportunity.

DeGods founder Frank thanks Okay Bears for bringing Solana NFT to the attention of more people

The explosion of Okay Bears has made more people realize that Solana NFT has a strong wealth-making effect. Frank, the founder of DeGods, Solana’s NFT-ranked project by market cap, even tweeted his thanks: “DeGod holders would like to thank Okay Bears for bringing more attention to Solana.”

NFTs on Ethereum take advantage of the first-mover advantage and attract most of the attention in the market, but in the face of Ethereum's "winner-takes-all" Matthew effect, Solana NFT still has the opportunity to achieve "curve overtaking".

Magic Eden helps Solana NFT grow

Magic Eden leads "SOLANA SUMMER"

As the largest NFT exchange on Solana, Magic Eden has a lot of exchanges with NFTs on Solana. There were "DeFi SUMMER" and "NFT SUMMER" before. Magic Eden even wanted to launch "SOLANA SUMMER" with the popularity of Okay Bears.

Comparison of the trading volume of the three major ETH NFT exchanges (Source: Dune)

In the article "ETH or Solana's NFT: The Problem of Chicken and Eggs", the author Mr. Fox believes that even if NFT trading platforms such as LooksRare and X2Y2 use "vampire attacks" such as low fees and token rewards to compete with OpenSea, The main reason they still can't win is that the same NFT is more liquid on OpenSea. This is indeed the case. From the data on Dune, we can see that OpenSea's transaction volume share for ETH NFT has always remained above 50%.

But for Solana NFTs, can OpenSea still win? But in fact, it's not.

Okay Bears trade volume comparison between OpenSea and Magic Eden (Source: Dune)

Since April, OpenSea began to support transactions based on NFTs issued by Solana. When Okay Bears exploded, it once rushed to the top of OpenSea’s trading volume. But even so, as you can see from Dune's data, the vast majority of Okay Bears are traded at Magic Eden.

The proportion of Magic Eden's trading volume in the Solana NFT market (Source: Dune)

Not only Okay Bears, Magic Eden accounts for more than 95% of the total Solana NFT market trading volume, that is to say, for all Solana-based NFTs, Magic Eden has absolute dominance in terms of liquidity.

It can be seen that in the "chicken-egg problem", the "ETH network effect" has brought many NFT users to Ethereum, and Solana NFT is temporarily behind because it has less first-mover advantage than Ethereum. In terms of liquidity, Solana's native NFT trading market, Magic Eden, only focuses on the development of Solana NFT, and is more like a potential "OpenSea killer". Going further, it also seems to be challenging the entire Ethereum NFT.

The "sinking market" may be the mainstream market

Pinduoduo has brought the concept of "sinking the market" into the public eye. Looking back on 2018-2019, Pinduoduo first tore a crack in the e-commerce industry dominated by Alibaba and JD.com, and turned this crack into a territory with rapid growth again and again. Today, Pinduoduo has become a heavyweight player in the e-commerce market that cannot be ignored.

What did Pinduoduo do right? Obviously, there is definitely more than one reason, but the sinking market has played an absolutely important role in this.

And Solana NFT's low selling price and low transaction fees also seem to be developing a "sinking market" belonging to Web 3.0.

More and more NFT KOLs are investing in Solana NFT (Source: Inspect)

Many Ethereum NFT fans believe that those who run to Solana to invest in NFTs are because they cannot afford high fees on Ethereum, and even ridicule Solana as a "poor man's blockchain". Saving more fees to invest in your favorite NFT has become a disadvantage, which is really puzzling. In fact, many well-known NFT KOLs and giant whales are also investing in Solana NFT.

It is true that NFTs have certain social attributes and luxury attributes. People can guess the value of the person on the opposite side of the screen through the hexagonal avatar on social media. NFTs are trying to create a new class ladder, but for those who stand at the door of the Web 3.0 world and look in, the entry threshold of hundreds or even thousands of dollars is not conducive to NFTs getting out of the circle. If you bet on the future of NFTs It is the standard configuration of every Web3.0 member, and the low-priced NFT will also be a necessity in the market. NFTs should not be just games for the rich or capital, and the artistic value behind them also needs to be touched by the public.

The popular and civilian "sinking market" represented by Solana NFT may be the mainstream market of Web 3.0 in the future.

Summarize

The competition of public chains is "thousands of troops crossing a single-plank bridge", and the development of NFT essentially depends on the development of the public chain on which it is based. Compared to Ethereum, Solana is currently not as decentralized as many would like, but it is believed that this problem will improve over time. For Solana NFT, the concept of parity has been deeply rooted in the hearts of the people, but more "popular items" like Okay Bears are still needed to prove that they also have amazing wealth-making ability.

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