Since April this year, Pantera Capital and other crypto funds have begun to purchase a large number of MPLX tokens from Wave Digital Assets, an FTX-related asset-undertaking entity. Prior to this, several institutions had publicly stated that they were purchasing MPLX tokens. After the announcement of the new protocol repurchase mechanism in March, Metaplex's fundamentals and long-term potential began to attract investors' attention. As Metaplex continues to expand in the infrastructure field, its irreplaceable nature and growth potential in the Solana ecosystem make $MPLX a severely undervalued asset in the eyes of institutions, and with the recent announcement of Aura Network, the price of $MPLX has also begun to rise gradually.
This Solana "ecosystem veteran" launched in 2021 is now returning to people's attention with its new ecological niche development and excellent fundamental data. But this time, it wants to do more than just NFT. During this year's Token2049 event, BlockBeats sat down with Stephen Hess, chairman of the Metaplex Foundation, for an in-depth interview to discuss his personal crypto career, Metaplex's past and current experiences and thinking, and the future ambitions of the new product Aura Network.
Origin Stories: Mt. Gox, Solana, and Metaplex
Like many founders of the crypto industry, Stephen's blockchain journey stems from his interest in information technology. While studying at Stanford University, Stephen began to understand the potential of Bitcoin and distributed ledgers. In his view, decentralized systems are the inevitable evolutionary direction of today's digital technology. Future business and finance will definitely shift from centralized systems to peer-to-peer networks. In this process of transformation, these systems will ultimately empower individuals and promote the development of autonomy.
In 2013, Stephen bought his first Bitcoin at Mt. Gox. Soon after, he quit his job at a tech company and began to try day trading in the cryptocurrency field. But Stephen, who always pays attention to product development, does not intend to become a full-time crypto trader. At that time, he was facing the first major choice of his career: stay in the tech health industry to engage in AI research, or go all in the cryptocurrency industry. Interestingly, because he pays great attention to product details, Stephen noticed serious problems with the platform shortly after Mt. Gox started trading and quickly transferred funds, becoming one of the few investors who avoided the Mentougou crash, but because there was no "passive lock-up" Buff, he sold a lot of Bitcoin to cover personal taxes and missed the huge gains later.
In 2020, Stephen's former colleague in the field of technology health, Raj Gokal, co-founder of Solana Labs, found him and invited him to join his team. This period was just before Solana's underlying technology was proven and began to be vigorously promoted and applied. For Stephen, who loves product development, this was undoubtedly a perfect job. In this way, he became the first product manager of Solana Labs as the head of the product department. Later, Stephen helped co-found Metaplex and experienced the Solana summer and FTX crash. Looking back on his crypto career, Stephen's own summary is: "In a volatile field like cryptocurrency, what looks like a disaster in front of you often becomes the biggest opportunity."
BlockBeats: Where did your crypto career begin?
Stephen: Early in my career, I was struggling with whether to pursue crypto full-time or pursue a career in AI-focused healthcare. Around 2014, I started emailing a lot of crypto founders asking if they needed designers, product managers, or engineers. I was also very interested in the AI/healthcare career path at the time, and interestingly, this is what led me back to crypto. My thinking was simple: if I found the right team, I would absolutely join and do whatever was needed. Working at Solana Labs was exactly that for me, where I designed the merchandise suite, ecosystem diagrams, participated in the first staking pool contract, designed the first UI for Wormhole, helped write the first NFT and token standards and launched Metaplex, etc.
I was mainly connected to big projects like Ripple and Stellar, but since I didn’t find the right position, I returned to the healthcare industry after returning from South America. I worked as a product designer at Stride Health, building a health insurance marketplace, then I joined Atomic Labs, developing disease management software for breast cancer patients, and then I joined Omada Health.
I worked for Raj while at Omada Health, where Eric Williams was the head of data science. When they left Omada to start Solana, Eric designed Solana’s token economics, and I joined Solana Labs as the head of product shortly thereafter.
BlockBeats: How did Raj invite you to join the Solana team?
Stephen: We were helping companies build systems to train medical models, especially machine learning models based on the data we generated. To ensure the quality of the training data, we needed to increase the diversity of the data, so we needed to ask clinicians to occasionally give some "random suggestions" like taking a walk or recommending a new recipe, but this was difficult to achieve in the healthcare field because people were more conservative at the time.
Raj, Eric, and I were all working to advance the field of artificial intelligence, and we firmly believed that this was the future. Although Omada is now quite successful, we did experience a lot of setbacks at the time, so Raj and Eric began to look for a less restrictive field, and cryptocurrency happened to provide this creative freedom. So they left the company and co-founded Solana with Anatoly.
I remember Raj saying to me, "I don't have a job title for you right now, but we have a table, come and work with us." Solana was still in its early stages, and it took me a while to officially join them. When I joined, they had been operating for a year or two. But I remember clearly that they started out with just a few folding tables above a mall in downtown San Francisco, and now Solana has grown into a global community.
Solana’s office opened in New York City in May 2023. Image source: Decrypt
BlockBeats: What ultimately made you decide to join the Solana team?
Stephen: I see this as a "second chance" for me to seek work in the crypto space early in my career. I believe it is very important for individuals to be able to conduct digital transactions and businesses, and that commerce and finance will gradually move towards peer-to-peer and decentralization. In my opinion, technology is definitely always improving. The key is that you have to play a short-term offensive while focusing on the long-term vision. This is the difference between strategy and tactics.
BlockBeats: If you had chosen to stay in the healthcare industry at the time, would you still consider entering the now-growing crypto industry today?
Stephen: Of course. I am a very patient person. I will not be too anxious about the small progress every year, but look to the future and think about the development in ten, twenty, or even a hundred years. As a member of this field, one of my important tasks is to develop the business steadily in line with the pace of the market and avoid blind expansion. A common mistake of many entrepreneurs is to rush to invest too much money before the market is ready, which often ends in failure. If they can be more patient, down-to-earth, and persevere, their chances of success will be much greater.
To be clear, I care about small improvements every year. It’s just about knowing where you are in the technology adoption lifecycle and not rushing into the mainstream when the underlying infrastructure isn’t there yet. That means finding more specialized use cases with high differentiation and then charting a course to get to your ultimate vision.
Looking back at history, whether it is Mt. Gox or BitFenix, many once glorious trading platforms no longer exist today. In the field of cryptocurrency, over-optimism and a quick-success mentality often lead to waste of resources and unrealistic expectations, which may ultimately hurt the team and the community.
For us, Metaplex was built for the long term, to create an indestructible long-term project. I recommend this long-term mindset to every entrepreneur: success requires focus, diligence, and patience, which is a huge advantage in itself.
BlockBeats: How did you later found Metaplex?
Stephen: When I first joined the Solana team, they had already proven the core foundation of the Solana Virtual Machine (SVM), which is still the most efficient execution environment for decentralized state machines. The SVM enables state transitions to be performed efficiently and at scale in a decentralized manner, unlocking a new generation of applications and use cases.
From the beginning, I focused on product design and development from start to finish. In the early stages, I had the opportunity to participate in the development of Stake Pools, which later evolved into Liquid Staking, and now it has become a key component of the Solana ecosystem, with many excellent projects centered around it. I also participated in governance work, especially SPL governance, which provided support for tools like Realms and Squads. In addition, I participated in the development of Wormhole during the Solana Labs incubation stage.
I was also part of the team that built the first version of the NFT standard, which eventually became Metaplex. I have been helping lead Metaplex over the past few years while also contributing to the growth of Solana and helping it become the platform of choice for Web3 developers. As a product developer, this is a perfect opportunity because this infrastructure innovation enables Solana to build new products and services in a variety of markets.
Solana’s “Ecosystem Index”: NFT, but more than just NFT
Metaplex was founded at the end of 2021, when Solana was at the climax of the NFT summer. As the designer of the main NFT standards in the Solana ecosystem, Metaplex became the "behind-the-scenes creator" of the NFT market, and its valuation rose along with the ecosystem.
In January 2022, Metaplex received a strategic investment of $46 million from institutions such as Multicoin, Jump, and Alameda. However, with the collapse of FTX, the Solana ecosystem suffered a serious setback, and the Metaplex team was also hit. At the end of the year, Stephen announced the company's decision to lay off employees on Twitter. He wrote in the tweet: "While our financial situation has not been directly affected by the collapse of FTX, the indirect impact on the market is significant, which requires us to take a more conservative approach moving forward."
But Metaplex did not stop moving forward. What seemed like a disaster often becomes the biggest opportunity. A year later, Solana was reborn and Metaplex returned to the stage, but this time, it wanted to do more than just NFT.
The creator behind NFT summer
In May 2022, the Solana network experienced downtime again, after which the Metaplex team announced through its official Twitter account that the network outage was mainly caused by the crawler of its Candy Machine program, and quickly deployed a robot penalty program against the program to stabilize the network.
"Candy Machines" is a set of development programs launched by Metaplex that allows creators to flexibly mint tokens and distribute them to their communities. Its V3 version introduced an integrated program that allows people to mint NFTs through SOL, tokens, and burning. The subsequent launch of Bubblegum is an extension of this program, mainly providing a solution for "compressing NFTs."
Looking back at 2021, Metaplex has single-handedly supported the golden age of Solana NFT, from the early independent community to Magic Eden's popular NFT Launchpad. Metaplex is behind almost every NFT asset. Even Stephen bluntly stated that the NFT wave was of great significance to the growth of Metaplex. "That period was of great significance to us, especially in the Candy Machine era. The generation of thousands of PFP projects helped Solana build its own ecological social layer, which became the basis of the community scale we see today."
Comparison of Ethereum and Solana NFT market transaction volumes. Although the overall NFT market has declined significantly, Solana NFT has shown greater resilience; Data source: Dune
BlockBeats: How does Metaplex explore and seize opportunities in the Solana ecosystem NFT market?
Stephen: It all started with the Ethereum NFT creators who contacted us. They were dissatisfied with the existing platforms. At that time, platforms such as Nifty Gateway were the main way to issue NFTs on Ethereum, but creators always faced delays, slow payments, and other problems that prevented them from bringing their projects to market quickly.
The starting point of Metaplex is that individual creators can directly connect with their fans and audiences. So our first product was an open source NFT store that anyone could deploy and host NFTs themselves just like using WordPress. After that, we launched the Candy Machine program, which became our killer feature.
Candy Machine has experienced the ideal situation that all early product development hopes to encounter since its launch: the demand for Candy Machine has been huge since its launch, and we are racing against user demand almost every week to keep up with the evolution and demand of the market. We have experienced a series of major launches such as Degen Ape and Aurory, and for almost a whole year, there have been multiple multi-million dollar NFT projects launched through Metaplex's Candy Machine every week.
BlockBeats: But at that time, most NFTs were released and promoted on Magic Eden, and Metaplex itself did not gain much recognition. Do you think that you "gave" market share to Magic Eden at that time? If it happened again, would you consider launching Metaplex's own NFT issuance platform?
Stephen: Magic Eden built an incredible platform for creators and collectors and grew into one of the most successful dApps in the entire cryptocurrency space. In fact, Magic Eden's launchpad was also built using Metaplex's Candy Machine technology. They used the same technology, just branded it and integrated it into their marketplace platform, and their early growth was instrumental in our growth. I don't like hypothetical questions too much because you never know exactly how things will turn out when you are there, and we are obviously very happy with where Metaplex is now and what we have achieved.
Ultimately, I think the answer is no, we will not build our own issuance platform. What has given us strength and momentum over the years is our commitment to developers and creating value for applications built on our protocol. If applications built on Metaplex can generate value and profits far beyond our own, that is the most strategic thing we can do for our long-term success. Their success is our success.
BlockBeats: Does the Metaplex protocol generate revenue through Magic Eden?
Stephen: Absolutely. The Metaplex Protocol generates revenue by charging fees to applications, all of which is publicly disclosed. 50% of the protocol revenue is used to purchase $MPLX, which is then contributed to our DAO for community grants, and the other 50% is used to support the non-profit operations of the Foundation. The Foundation has no shareholders or investors, and its sole goal is to drive the future development of the DAO and the Metaplex Protocol.
BlockBeats: After observing a round of NFT bull market, what do you think is the key to the success of NFT projects?
Stephen: I think at the end of the day, the key to the success of an NFT project is whether it can find a community that connects with common values or interests. The measure of success should not only be market capitalization or trading volume, but also whether the project can cultivate a meaningful community around these common interests.
In fact, one of the best things an NFT project can do is to get rid of the excessive focus on price. Instead, the focus should be on finding and screening individuals who truly align with the community's goals. The mistake many NFT projects make is to rely too much on whale investors, which can have a negative impact. When the market declines, you may lose core members who really care about the project's mission. Therefore, building around a strong and actively engaged community is the key to long-term success.
BlockBeats: Do you think NFT is over? If not, what is its future?
Stephen: I think avatar NFT (PFP) is the first real breakthrough in decentralized social networks. Many people ask when decentralized social networks will come. I believe it has been realized through NFT. For example, projects like MadLads, Solana Monkey Business, and Cyber Frogz are real communities with teams developing products and holding events every day to provide social opportunities for crypto users.
So far, these communities have been very successful in attracting users who work full-time in crypto. The next big challenge is whether they can break through the limitations of the crypto industry and expand outward. NFTs have strong organizational capabilities within the crypto industry, but their success rate in creating communities outside the industry is not high. I think this is the next key challenge for such NFT projects.
On the other hand, meme coins are actually a continuation of this trend - in our view, they are also on-chain communities. We recently launched a framework called MPL-404, designed for hybrid NFT projects (picture-to-coin conversions, such as DeGods and Mutantmon). This standard combines the advantages of meme coins and NFT images. Meme coins provide a wider distribution channel through trading platforms, making it easier for users to obtain liquidity and capital, while NFTs provide unique value through online experiences or offline activities.
I believe this trend will continue to be a big theme. I want to highlight in particular that decentralized social networking is already here — it’s already being built on Solana and Metaplex, and we think this will be the social foundation that drives the next generation of applications.
「Ecological Index」
On September 9, The Block reported that several crypto funds including Pantera and ParaFi purchased a large number of $MPLX tokens from Wave Digital Assets. These tokens were originally held by FTX estate. In the past five months, 65.1 million of the 72.6 million MPLX held by FTX have been sold, leaving 7.5 million. As of September 19, 2024, all initial allocations of MPLX have been fully vested and unlocked.
The over-the-counter redistribution of a large number of MPLX token shares marks the end of the stable development under the influence of FTX. After a year of solid foundation, Metaplex has returned to the market with a new attitude, and has once again become a hot commodity in the eyes of institutions as it pays more attention to the narrative of profitability and application scenarios.
A few days ago, Stephen, chairman of the Metaplex Foundation, tweeted on X, showing the economic activities and benefits that Metaplex, as a protocol, has created for the Solana ecosystem. Since its launch in 2021, Metaplex has cumulatively facilitated more than $5.5 billion in on-chain economic activities, covering tens of millions of wallet addresses in the ecosystem. During the meme craze at the beginning of the year, Metaplex generated $12 million in protocol revenue through Pump.fun.
On the other hand, according to the existing repurchase policy, Metaplex has been able to repurchase approximately 10,000 SOL worth of MPLX every month since June 2024. As of August 2024, the total value of repurchased MPLX has reached approximately 30,000 SOL, accounting for more than 3% of Metaplex's market value, becoming an important and stable force in reshaping the circulating supply.
All of this stems from Stephen and his team’s vision for Metaplex. In their view, Metaplex is more than just an NFT development package. What it has to do is to be the technical cornerstone for the development of the Solana ecosystem.
Related reading: (Quietly dominating Solana ecosystem cash flow, why is $MPLX undervalued?)
Cumulative economic activity and fees generated by the Metaplex protocol. Source: Stephen (@meta_hess)
BlockBeats: If we compare it to the industrial ecological niche of the traditional Internet, can we understand Metaplex as the technical database of the Solana ecosystem?
Stephen: I think one of the core components of the Metaplex protocol is the digital asset standard and the ability to create and manage digital assets, which is indeed similar to database technology. However, our goal is not limited to this. We are focused on building a fully integrated full-stack tool for developers, which allows them to not only deploy digital asset protocols, but also develop complete end-to-end applications.
BlockBeats: Metaplex has generated approximately $12 million in revenue through Pump.fun in the past few months. Can you talk about how this collaboration came about?
Stephen: We don’t actually have a formal partnership with them, they’ve built a fascinating product using our development tools. Pump.fun primarily uses Metaplex’s token metadata program and some SDKs, and whenever a user creates a meme coin through Pump.fun, they’re actually using Metaplex’s token infrastructure.
In both the Magic Eden Launchpad and Pump.fun cases, a small fee is charged every time an application creates a new NFT or FT using our protocol, which is where the Metaplex protocol revenue comes from. Our philosophy is to charge a small fee when an asset is created, and use these protocol fees to develop development tools and on-chain programs that support and promote these standards.
Our goal is to support hundreds or even thousands of applications built using our tools. Our tool design is open source, and anyone can build with our SDK and development tools. We also provide detailed documentation and have community development team support in Discord. We encourage developers in the Chinese community to join us. If you have any questions, you can always come to participate in the discussion.
BlockBeats: What is Metaplex’s fee ratio?
Stephen: For every new token created, we charge 0.01 SOL for the token metadata mint and 0.0015 SOL for the Core mint. Half of this fee is used to purchase MPLX tokens, which are then contributed to the DAO. This makes us one of the few protocols with a durable and sustainable revenue model that is directly tied to the DAO.
Metaplex Program Library (MPL) fee standard, source: Metaplex
BlockBeats: In your opinion, is Pump.fun the best application built on Metaplex? What other “Metaplex applications” do you think are interesting?
Stephen: It’s a really great product. I personally didn’t make a lot of money in memes, but it’s really addictive and they did a great job with the user experience. So many products built on Metaplex are great though, so it’s hard to pick a favorite.
From an infrastructure perspective, we have major wallets like Phantom, Solflare, and Backpack, and marketplaces like Tensor and Magic Eden. In the gaming space, there are great projects like Star Atlas. Even Nyan Heroes is a game based on Metaplex, and we've been working with them for several years. Game development takes a long time, but the quality of the project is very high.
There are some really great NFT communities like Mad Lads and Solana Monkey Business. In addition, there are projects like Baxus in the RWA space, a company that tokenizes alcohol, and we think it will be one of many pioneers that bring real-world and commercial assets to the blockchain.
There are also projects like Radium and Orca that are using Metaplex - whether it is for token metadata or to tokenize LPs. Almost all Solana projects that use FTs or NFTs are built on Metaplex. With so many great teams and companies, it’s hard to pick just one as a highlight.
BlockBeats: Unlike Ethereum's EIP and ERC, the Metaplex protocol and the standards it provides are not part of Solana's native L1, but most Solana applications need to be developed based on Metaplex. From the perspective of economic interests, what do you think is the development relationship between Metaplex and Solana L1?
Stephen: In general, Metaplex has become a must-have protocol for building applications on the Solana Virtual Machine (SVM). We found that any chain based on the SVM needs the Metaplex library in order to run programs that are interoperable with the Solana mainnet. Therefore, we have worked with Eclipse and Sonic, etc. to deploy the MPL, and look forward to expanding it as the SVM ecosystem grows.
As for the economic model, you're right, it's different than Ethereum, and I think that's why it's hard for people to understand Metaplex. There's no direct analog on Ethereum, but I think Metaplex plays a central role in accelerating application development and driving overall growth of the Solana ecosystem. We have direct incentives to drive growth, adoption, and success of digital asset-related products and services, which community-driven standards alone can't do.
This incentive structure has allowed us to provide tremendous value through a wide range of projects in the Metaplex library, such as compressed NFTs (Candy Machine), NFT combination tools (Fusion), and on-chain tax environments and hybrid DeFi solutions (MPL-404). Overall, this incentive design has allowed Metaplex to thrive and has been critical to Solana’s growth and competitiveness over the past few years.
BlockBeats: If a competitor to Metaplex emerges in the market in the future, where do you think it will come from?
Stephen: I see the current centralized services - existing commercial, financial and community building infrastructure, etc. - as real competitors. The real competition is, do people invest their online social life in the on-chain community, or continue to use platforms like Instagram or TikTok? Or play games like Star Atlas or traditional games like Fortnite? This is what we focus on.
This is why we chose this space for the long term. I think the crypto industry sometimes does itself a disservice by being too closed. While Solana is a permissionless network where anyone can deploy their own digital asset standard, what’s different about Metaplex is our level of integration. We are supported by every wallet, every exchange, every DeFi product, and every service in the Solana ecosystem. This breadth of distribution makes us unique and hard to replicate.
Aura Network and the Future
Recently, the Metaplex Foundation officially released the Aura Network, a decentralized indexing and data availability network designed specifically for Solana and SVM. It provides efficient digital asset data indexing, helping applications to easily read blockchain status without relying on centralized infrastructure.
The three core functions of the Aura network include: data availability of digital assets, multi-program consistent indexing, and elastic state management. The former provides decentralized data storage and retrieval services for applications, while the latter two provide indexing and asset conversion across Solana and SVM respectively.
Currently, dApps face challenges competing with centralized counterparts due to Solana’s expensive and slow process for reading and displaying blockchain state data. Aura solves these problems by complementing SVM and the Metaplex Library (MPL) with a decentralized network of Aura nodes.
It is worth noting that after the launch of Aura Network, $MPLX will become the incentive token for Aura nodes and the gas token for the network. This will be a new consumption scenario for $MPLX in addition to the repurchase demand of 50% of the Metaplex protocol revenue. In a recent research report published by Sistine Research, MPLX was compared with other existing data availability solutions, and an optimistic outlook for the future of Metaplex was given, believing that $MPLX was underestimated by 3 to 10 times.
Related reading: (Sistine Research: Why we are optimistic about Metaplex (MPLX))
Left: MPLX token circulation and FDV comparison, right: MPLX token repurchase; Source: Sistine Research
BlockBeats: Many Solana developers have reported that they encounter many headaches when dealing with data indexing? Aura is mainly designed to solve this ecological pain point, right?
Stephen: Exactly. One of the biggest challenges developers face today is reading accurate on-chain state. SVM and Solana do a great job of performing state transitions — when state changes, it efficiently performs and verifies interactions. But the challenge is updating those state changes, replicating them, and making them available to developers so their applications can be in sync with the latest state.
This delay makes it difficult for dApps to compete with centralized applications because end users have very limited patience for waiting for applications to load or update. Even if Solana’s validators have verified the state change, the application still needs to wait for the infrastructure to update before it can read that state.
The solution provided by Aura Network helps solve these problems through performance, decentralized indexing, and data availability.
BlockBeats: In your opinion, what is the strategic significance of Aura Network?
Stephen: From a strategic perspective, our goal is to provide a comprehensive developer platform that reduces complexity for developers. Today, building an application requires piecing together a variety of services and technologies. Part of the reason for this expansion is to simplify this technology stack.
With Aura, we will have SVM as the fastest engine for executing state transitions + MPL as the smart contract layer and digital asset standard, with broad integration across the ecosystem, along with the decentralized indexing, data availability, and content distribution services provided by Aura.
BlockBeats: What is the next development direction of Metaplex?
Stephen: Aura is another major product release for the Metaplex protocol following compressed NFTs and on-chain royalty execution. Our focus is on building a global network of Aura nodes and securing and decentralizing the asset database with $MPLX. We view this release as a first step and will continue to improve and expand it in the future.
As for Metaplex, I still see it as critical infrastructure for decentralized commerce, just as Serum was in the DeFi space at the time.
We have achieved initial success in early application scenarios such as digital artists, on-chain communities, and crypto games, bringing their economic systems to the chain, but I think this is just the early stages of a larger change - all future business activities, whether physical or digital, will operate through decentralized systems. Now that real-world assets (RWA) have begun to be tokenized, I see no reason why platforms like Amazon or Alibaba cannot operate in a peer-to-peer decentralized manner.
Metaplex is not just an NFT platform, it is also the standard for NFTs and FTs on Solana. Metaplex has been used to create over 3 million FTs and over 500 million NFTs, supporting a variety of projects from DeFi applications to on-chain games. I believe that both FTs and NFTs are the infrastructure needed for peer-to-peer commerce.
A similar situation can be seen in the early development of database technology. In the early days of computer development, operating systems appeared first, followed by database technology, which enabled applications to create and manage data more efficiently. A large ecosystem of services was built on top of these databases to help developers create various types of applications. Today, thousands of devices and applications rely on database technology, although the average user may not realize that it is the core engine that drives everything.
Similarly, digital asset protocols are the foundational building blocks of Web3 decentralized computing, just as database technology is the foundation of traditional computing.
