Like its competitors, NFT marketplace Magic Eden has had a rough year.
It dominates the NFT market on Solana, handling at least 90% of the trading volume on any given week, according to an analysis of data from Nansen. On Ethereum, NFT trading volume is a fraction of what it was at the beginning of 2022 – on Solana, trading volume has held steady.
But that volume is denominated in Solana’s native token, SOL, which cratered in the wake of FTX’s collapse. SOL has enjoyed a remarkable rally to begin the new year, but is still worth half as much as it was in August. That means less revenue for creators on Solana, and less for marketplaces like Magic Eden, which take a cut of every transaction.
“That last few months have been challenging at Magic Eden, to say the least,” a woman intones towards the end of a year-in-review video Magic Eden shared on social media last month. “And we’re working hard to get back on track.”
It’s trying a couple of things. Magic Eden is attempting to realize its goal of becoming a true multi-blockchain marketplace, Tiffany Huang, the company’s head of marketing, told The Defiant this week. It’s turning to tried-and-true methods to boost user retention. But it’s also trying something more ambitious: expanding the purpose of an NFT marketplace.
In a crowded industry where trends spread like wildfire — see, for example, the boom in royalty-free platforms last year — it has the chance to upend how the gatekeepers of the NFT world do business.
Magic Eden launched on Polygon, a popular scaling solution for Ethereum, in mid-December.
But it has a daunting task ahead.
OpenSea dominates NFT sales on Polygon. A trio of lesser-known marketplaces, NFTrade, Treasureland and Refinable, debuted on Polygon in the latter half of 2022, according to data collected by NFT indexer Zash. About $400 worth of NFTs were sold on NFTrade, the largest, in the week ending Jan. 23.
Element, once the largest NFT marketplace on Polygon, has since fallen to a distant second, having processed less than $100,000 that week. OpenSea processed more than four times that.
Magic Eden declined to provide data regarding its performance on Polygon. Through a PR representative, Polygon said it could not provide that data before publication.
Asked why Magic Eden chose Polygon as its next home, Huang cited the blockchain’s success in getting new people to dip their toes in crypto.
“Polygon is known for the power of its business development,” Huang said, “and its ability to forge relationships and partnerships with really powerful brands that are actually onboarding a lot of people into the space, whether it’s Nike, Starbucks, Reddit, you name it.”
Polygon recently paid DeLabs, the company behind some of Solana’s most popular NFT collections, $3M to move from Solana.
DeGods’ head, the pseudonymous Frank, addressed the move in a message to followers on Discord.
”DeLabs received a $3M non-equity grant from Polygon to help fund the expansion of the DeLabs team,” he wrote in the Y00ts Discord channel. “I’m sure there will be tons of slander on Twitter about the reasoning behind this decision. … Next time, let’s chat about the actual game plan of how we’re about to go mainstream.”
Magic Eden also intends to make a “stronger re-entry” on Ethereum in March.
“Right now we have more of an aggregator experience, but we don’t have proprietary listings,” Huang said. “In March, we’ll have proprietary listings. … You’ll be able to list your NFTs across multiple marketplaces, so Magic Eden will just be another marketplace you can list on.”
Magic Eden is also trying new methods of boosting user retention.
“The first thing that we shipped was fee discounts based on trading volume, which no other marketplace is doing,” Huang said.
Magic Eden users earn points for using the platform. Based on the number of points they’ve accrued, they are sorted into one of five tiers, with higher-tier users enjoying deeper discounts. A January promotion put every user into tier 4, which offers a 25% fee discount.
Where other marketplaces apply transaction fees to the seller of an NFT, Magic Eden has also tried to split the burden between buyer and seller in an effort to bring more liquidity to its marketplace.
“We’re in a bear market,” Huang said. “I think everyone is just trying to find ways of holding on to the user [in order to] to win their attention.”
Magic Eden will be tracking several metrics to gauge the effectiveness of its strategy.
To see and claim accrued rewards, users must connect their digital wallets — standard for any crypto application — but they also have to sign into Magic Eden.
“That’s very Web2, because in Web3, the connector wallet is kind of like the stop point,” Alexis Miller, Magic Eden’s product marketing team, said. “So you don’t really have any clear picture of who that customer was, or any identity model associated with it.”
But part of crypto’s appeal is the default anonymity. To overcome this, Magic Eden is considering ways to incentivize logging in.
“We’re also looking at claim rates,” Miller said. “Are our users claiming these rewards? Do they care about these rewards?”
Magic Eden doesn’t just want to be an NFT marketplace, however.
“When we think about time spent on the platform, we want to think about what else people can do in this ecosystem besides just transact,” Miller said.
To that end, Magic Eden is eyeing a transition to something more like a social media platform, so that “all of the socializing [isn’t just] happening on Discord and Twitter,” Miller said. “How do we look at our platform as another destination for people to interact and get to know each other within this space?”
Huang said it’s all about trying to separate Magic Eden from the pack.
“If you think about NFT marketplaces right now, they’re all very transactional. There are no switching costs,” she said. “That’s why you see all these different competitors who are offering a lot of these short-term incentives. But ultimately, in order to have longevity, you need to think differently.”