By Min Jung, Presto Research
Compiled by: Ismay, BlockBeats
Editor's Note: This article focuses on Metaplex's implicit dominance in the Solana ecosystem. As the core infrastructure of Solana's digital assets, Metaplex supports the creation of the vast majority of NFTs and fungible tokens. In March of this year, Metaplex announced that 50% of the protocol fees would be used to purchase MPLX and send it to Metaplex DAO. In September, several crypto funds such as Pantera Capital purchased a large number of Metaplex tokens from Wave Digital Assets. In this article, the author analyzes Metaplex's project mechanism and token economics and its repurchase plan to prove Metaplex's long-term investment potential. As Metaplex continues to expand in the infrastructure field, its irreplaceability and growth potential in the Solana ecosystem make $MPLX an undervalued asset worthy of investors' attention.
Figure 1: Metaplex’s hidden dominance in the Solana ecosystem; Source: imgflip, Presto Research
Metaplex is a core pillar of the Solana ecosystem, responsible for over 99% of NFTs and 90% of fungible tokens created on the network. Through tools like Core and Bubblegum, Metaplex enables creators to mint and manage digital assets efficiently, establishing its position as the core infrastructure for Solana digital assets.
Given Metaplex's market dominance and strong revenue growth, $MPLX is currently undervalued. As Metaplex expands to more blockchains and expands support for fungible tokens, its influence and utility continue to grow, making it an attractive project for long-term investment. The ongoing buyback program further increases the value of the token.
By strategically long $MPLX/short $TNSR trades, it is possible to capture the benefits of Metaplex's dominance while hedging the risk of the NFT market. Although Metaplex has a lower fully diluted valuation (FDV), it generates far more fees than Tensor and has no direct competitors, while Tensor faces challenges from competitors such as Magic Eden. This trade can capture Metaplex's growth opportunities in a highly competitive market while reducing risk.
introduction
What is a great business? While this question can be answered from many angles, one clear sign is a dominant position in a growing market. In the Solana ecosystem, names like Jupiter or Pump.fun may come to mind as they each have unique advantages. However, Metaplex is a hidden giant. Despite its little-known status, 90% of Solana’s tokens and 99% of all NFTs are created through the Metaplex protocol. Most users are not even aware of their interaction with Metaplex as they pay to use its services, and these fees are then used to strategically buy back its native token $MPLX. Now, it’s time to recognize Metaplex as a key player in the Solana ecosystem.
What is Metaplex
The Metaplex protocol is a decentralized platform built on Solana that supports the creation, sale, and management of digital assets. By providing tools and standards for developers, creators, and businesses, Metaplex supports a variety of digital assets, from NFTs and fungible tokens to real-world assets (RWAs) and game items. Metaplex has minted more than 550 million assets through more than 5.5 million unique wallets to date, making it one of the most widely used blockchain protocols and developer platforms.
Metaplex's main products
Core
Core is the next generation NFT standard on the Solana blockchain. This innovation uses a single-account design, significantly reduces minting costs, and reduces the burden on the Solana network, which is more advantageous than other protocols.
Its features include high cost-effectiveness, low computing power, support for advanced plugins, and mandatory payment of royalties, setting a new benchmark for NFT standards.
Bubblegum
Bubblegum is Metaplex's program for creating and managing compressed NFTs (cNFTs). Through compression technology, creators can mint large quantities of NFTs at extremely low costs, with the cost of minting 100 million NFTs being only 500 SOL, providing unprecedented scalability and flexibility.
Token Metadata
The Token Metadata program allows for additional data to be attached to both fungible and non-fungible tokens on Solana. While NFTs are the primary use case, the program also supports semi-fungible and fungible assets. All tokens created on Pump.fun rely on Metaplex’s metadata service.
Core/Candy Machine
Metaplex’s Candy Machine is the leading NFT minting and issuance program that enables efficient and fair launch of NFT collections. It has become the go-to solution for creators to issue NFTs on Solana, ensuring a decentralized and transparent issuance process.
Other services include MPL-Hybrid, Fusion, Hydra and Sugar, further expanding the platform’s reach across various verticals of digital asset standards.
Figure 2: Overview of Metaplex projects and tools; Source: Metaplex
In short, Metaplex is the base protocol that supports the creation of most NFTs and fungible tokens in the Solana ecosystem, becoming the standard for digital asset creation.
Key data
Metaplex’s recent performance data shows its dominance in the Solana ecosystem, especially in the past three months:
(1) August 2024:
10.2 million digital assets minted
382,000 fungible tokens created, representing 90% of all fungible tokens minted on Solana
393,000 unique wallets sign transactions directly with Metaplex
Total collectors reached 57 million unique wallets
(2) July 2024:
16.5 million digital assets minted
451,000 fungible tokens created, representing 91% of all fungible tokens on Solana
530,000 unique wallets use the protocol
Total number of collectors reaches 56 million wallets
(3) June 2024:
30 million digital assets minted
452,000 fungible tokens created
657,000 unique wallets interacted with Metaplex
Total number of collectors reaches 55 million wallets
Since Metaplex was founded, more than 257,000 collections, 512 million NFTs have been created, and $1.2 billion in revenue has been generated for creators.
history
Metaplex was originally incubated by Solana Labs and is led by former Solana Labs Product Head Stephen Hess. Since 2021, the team has operated independently and focused on building products that help creators and brands mint NFTs and launch decentralized applications. This solid foundation has attracted high-profile backers and earned Metaplex a reputation as a technological innovator and industry leader.
Here are some recent important news:
In January 2022, Metaplex raised $46 million from Multicoin Capital, Jump Crypto, with additional support from Solana Ventures, Alameda Research, and Animoca Brands.
In September 2024, Pantera Capital and ParaFi Capital acquired a large number of $MPLX tokens from FTX Assets.
Notable investors also include Modular Capital, Syncracy Capital, and Frictionless Capital.
Investment Thesis
Leading position and expanding into new areas
Metaplex’s dominance in the Solana ecosystem is unquestionable. It supports the creation of 99% of NFTs and 90% of fungible tokens on Solana, establishing its undisputed position as a digital asset infrastructure provider. This level of market penetration makes it difficult for any competitor to shake Metaplex’s dominance in the short term.
Despite volatility in the broader NFT market, Metaplex’s role as critical infrastructure has enabled it to successfully expand into the fungible token space, proving its utility far beyond NFTs. Platforms like Pump.fun are increasingly adopting Metaplex’s Token Metadata program, ensuring that 90% of tokens minted on Solana in the past three months are associated with Metaplex. This broadens its use cases and establishes Metaplex as a cornerstone for the creation of fungible and non-fungible tokens.
Figure 3: Metaplex’s growing influence on fungible tokens (FT)
Looking ahead, Metaplex is preparing to expand its influence into two highly anticipated networks, Sonic and Eclipse. Sonic is Solana’s first Layer 2 solution designed for sovereign gaming, offering particularly compelling opportunities for growth. As the integration of gaming and blockchain continues to deepen, the role of NFTs in in-game assets will be critical, and Metaplex is well-positioned to support the creation of this new wave of digital assets.
While the NFT market may be at a low point, Metaplex is poised to benefit from a recovery in the market, and its expansion into the fungible token creation space further reduces dependency on NFT market cycles. As new layers and new use cases are developed within the Solana ecosystem, Metaplex’s role as an infrastructure provider will become even more integral.
Token Economics and Buyback Mechanism
Much of Metaplex’s appeal stems from its token economics and strategic buyback program. In May 2023, Metaplex introduced a micro-fee mechanism to support the long-term development of the ecosystem, especially projects like Core and Token Metadata. To date, total revenue since launch has reached 128,347 SOL.
Figure 4: Details of the agreed fees for each project; Source: Metaplex
In March 2024, Metaplex commits to use 50% of all protocol fees to repurchase $MPLX and transfer the repurchased tokens to the Metaplex DAO. This allocation includes historical and future fees, ensuring that $MPLX continues to accumulate in the DAO treasury. The remaining 50% of fees are used for the continued development of the Metaplex Foundation.
Since June 2023, Metaplex has repurchased 10,000 SOL worth of MPLX per month, and as of August 2023, the total amount of MPLX repurchased has reached 13,437,215 (about 30,000 SOL). As the price of SOL rises, the value of these repurchases will also increase accordingly. Currently, 10,000 SOL is approximately equal to $1.4 million, accounting for more than 1% of Metaplex's market value, becoming an important and stable force in reducing the circulating supply.
Figure 5: Total revenue and $MPLX buybacks over the past three months; Source: Metaplex public dashboard
Pair trading opportunity: long $MPLX, short $TNSR
Figure 6: Metaplex’s performance over the past year; Source: Coinmarketcap
Through a pairing trade, long $MPLX and short $TNSR (Tensor), you can capture the upside of $MPLX while hedging the risk of the broader NFT market. This strategy believes that $MPLX is undervalued relative to $TNSR for the following three reasons:
1. Higher fee income: Over the past three months, Metaplex has generated fees that are comparable to or more than Tensor, mainly due to its continued dominance in the NFT and fungible token space. Nonetheless, $TNSR currently trades at a fully diluted valuation (FDV) of $350 million, significantly higher than $MPLX. This disparity suggests that $MPLX is undervalued relative to its revenue-generating potential, especially with strong support from its ongoing buyback program.
Average monthly bill for Tensor over the past three months: $777,273
Average monthly cost of Metaplex over the past three months: 7,956 SOL (based on a conservative estimate of $130 SOL, that’s about $1,034,323).
Figure 7: Metaplex fees vs. Tensor fees; Source: Metaplex Dune dashboard
2. No direct competitors: Unlike Tensor, which faces fierce competition from Magic Eden, which is planning to launch its own token, which may grab market share. Metaplex has no direct competitors in the infrastructure field, which consolidates its position as the pillar of the Solana digital asset ecosystem and further supports its long-term value.
3. Hedge against NFT market volatility: For investors who are concerned about NFT market volatility, $MPLX provides more diversified opportunities. Metaplex’s influence has now expanded to the field of alternative tokens and is no longer solely dependent on NFTs, providing exposure to a wider range of assets and reducing dependence on the NFT market.
Metaplex’s current undervaluation may be related to its role as a behind-the-scenes infrastructure provider - unlike more consumer-oriented platforms like Tensor or Pump.fun, most users use Metaplex’s products without knowing it. As a result, the token has not made it to the public’s radar despite its huge impact on the Solana ecosystem. However, as Metaplex’s contribution to the ecosystem grows, this perception may change and market attention will rise accordingly.
Conclusion
Metaplex has quietly become a cornerstone of the Solana ecosystem, powering over 99% of NFTs and 90% of fungible tokens created on the platform. While its critical role in the ecosystem is widely known, it remains underappreciated, operating behind the scenes as users interact with its infrastructure unknowingly. This hidden dominance of Metaplex, coupled with strong token economics and a robust buyback strategy, makes $MPLX an undervalued asset. The protocol has driven steady revenue growth through growing fees in the NFT and fungible token space, supporting ongoing buybacks, further increasing its value over time. As Metaplex continues to expand its reach, support new use cases, and solidify its market position, the upside potential for $MPLX increases. For investors looking to invest in the Solana ecosystem infrastructure for the long term, Metaplex offers a unique opportunity to invest in a project that has demonstrated dominance, continued growth, and tremendous potential.
