Original title: “Why Buy Meta? Buy Metaplex”

Original author: Min Jung, Presto Research

Original compilation: 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 this year, Metaplex announced that 50% of the protocol fees would be used to purchase MPLX and sent 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, token economics and its buyback plan, proving 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.

Table of contents

1. Introduction

2. What is Metaplex? a. Metaplex’s main products b. Key data c. Historical evolution

3. Investment thesis

a. Dominant position and expansion into new areas

b. Token economics and repurchase mechanism

4. Pair trading opportunity: long $MPLX, short $TNSR

5. Conclusion

Figure 1: Metaplex’s implicit dominance in the Solana ecosystem; Source: imgflip, Presto Research

Metaplex is the core pillar of the Solana ecosystem, responsible for the generation of over 99% of NFTs and 90% of fungible tokens on the network. Through tools such as Core and Bubblegum, Metaplex allows creators to efficiently mint and manage digital assets, establishing its position as the core infrastructure of Solana’s 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 conducting strategic long $MPLX/short $TNSR trades, you can capture the benefits of Metaplex’s dominant position while hedging the risks 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 transaction will 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 dominating a growing market. In the Solana ecosystem, names like Jupiter or Pump.fun might come to mind because they each have unique advantages. However, Metaplex is a hidden giant. Although it is little known, 90% of tokens and 99% of all NFTs on Solana are created through the Metaplex protocol. Most users are not even aware of their interactions with Metaplex when they pay to use its services, fees that are then used to strategically buy back its native token $MPLX. Now, it’s time to consider Metaplex a key player in the Solana ecosystem.

What is Metaplex

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 enterprises, 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, which significantly reduces minting costs and reduces the burden on the Solana network, giving it advantages over other protocols.

Its features include high cost-effectiveness, low computing power, support for advanced plug-ins, 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 amounts of NFTs at extremely low costs. The cost of minting 100 million NFTs is only 500 SOL, providing unprecedented scalability and flexibility.

Token Metadata

The Token Metadata program allows appending additional data to fungible and non-fungible tokens on Solana. While NFTs are the primary application scenario, 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, enabling efficient and fair launch of NFT collections. It has become the preferred 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 influence in various verticals of digital asset standards.

Figure 2: Overview of Metaplex projects and tools; Source: Metaplex

In short, Metaplex is the basic 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, accounting for 90% of all fungible tokens minted on Solana

393,000 unique wallets sign transactions directly with Metaplex

The total number of collectors reached 57 million unique wallets

(2) July 2024:

16.5 million digital assets minted

451,000 fungible tokens created, accounting for 91% of fungible tokens on Solana

530,000 unique wallets use the protocol

The total number of collectors reached 56 million wallets

(3) June 2024:

30 million digital assets minted

452,000 fungible tokens created

657,000 unique wallets interact with Metaplex

The total number of collectors reached 55 million wallets

Since Metaplex was founded, more than 257,000 collections, 512 million NFTs, and $1.2 billion in revenue have been created for creators.

history

Metaplex was originally incubated by Solana Labs and is led by former Solana Labs product lead 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, earning Metaplex a reputation as a technology innovator and industry leader.

Some recent important news are as follows:

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, Synracy Capital and Frictionless Capital.

investment thesis

Dominance and expansion into new areas

Metaplex’s dominant position 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 challenge Metaplex’s dominant position in the short term.

Despite volatility in the broader NFT market, Metaplex’s role as critical infrastructure has allowed it to successfully expand into the field of fungible tokens, 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 linked to Metaplex. This broadens its application scenarios 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 reach to two highly anticipated networks, Sonic and Eclipse. Sonic is Solana’s first Layer 2 solution designed for sovereign gaming, providing particularly compelling opportunities for growth. As gaming and blockchain continue to converge, the role of NFTs in in-game assets is critical, and Metaplex is well-positioned to support the creation of this new wave of digital assets.

At a time when the NFT market may be at its trough, Metaplex is poised to benefit from a market recovery, and its expansion into fungible token creation further reduces reliance 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 launched a small fee mechanism to support the long-term development of the ecosystem, especially projects like Core and Token Metadata. As of now, total revenue since launch has reached 128,347 SOL.

Figure 4: Details of agreement fees for each project; Source: Metaplex

In March 2024, Metaplex committed to use 50% of all protocol fees to repurchase $MPLX and transfer the repurchased tokens to Metaplex DAO. This allocation includes historical fees and future fees, ensuring that $MPLX continues to accumulate in the DAO treasury. The remaining 50% of the fee is used for the continued development of the Metaplex Foundation.

Since June 2023, Metaplex has repurchased 10,000 SOL worth of MPLX every month. As of August 2023, the total amount of MPLX repurchased reached 13,437,215 pieces (approximately 30,000 SOL). As the price of SOL increases, the value of these buybacks will increase accordingly. Currently, 10,000 SOL is equivalent to approximately US$1.4 million, accounting for more than 1% of Metaplex’s market value, becoming an important and stable force in reducing circulating supply.

Figure 5: Total revenue and $MPLX buybacks over the past three months; Source: Metaplex Public Dashboard

Pairs Trading Opportunity: Long $MPLX, Short $TNSR

Figure 6: Metaplex’s performance over one year; Source: Coinmarketcap

Through a paired trade, long $MPLX and short $TNSR (Tensor), you can capture the opportunity for $MPLX to rise while hedging the risks of the broader NFT market. This strategy believes $MPLX is undervalued relative to $TNSR for three main reasons:

1. Higher fee income: In the past three months, Metaplex has generated fees that are equivalent to or more than Tensor, mainly due to its continued dominance in the NFT and fungible token fields. 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 cost of Tensor over the past three months: $777,273

The average monthly cost of Metaplex in the past three months: 7,956 SOL (according to a conservative estimate, the SOL price is $130, which is approximately $1,034,323).

Figure 7: Comparison of Metaplex costs and Tensor costs; Source: Metaplex Dune data board

2. No direct competitors: Unlike Tensor, which faces fierce competition from Magic Eden, Magic Eden is planning to launch its own token and may seize market share. Metaplex has no direct competitors in the infrastructure field, which solidifies its position as the backbone of Solana’s digital asset ecosystem and further supports its long-term value.

3. Hedging NFT market fluctuations: For investors who are worried about NFT market fluctuations, $MPLX provides more diversified opportunities. Metaplex’s influence has now expanded into the field of fungible tokens and no longer relies solely on NFTs, thus providing access to a wider range of assets and reducing reliance on the NFT market.

Metaplex’s current undervaluation may have to do with 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 their knowledge. Therefore, despite its huge impact on the Solana ecosystem, the token has not entered the public consciousness. However, as Metaplex’s contribution to the ecosystem increases, this perception may shift and market attention will increase.

Conclusion

Metaplex has quietly become the cornerstone of the Solana ecosystem, supporting the creation of more than 99% of NFTs and 90% of fungible tokens on the platform. Although its key role in the ecosystem is widely known, it remains underappreciated, operating silently behind the scenes and users interacting with its infrastructure unknowingly. This implicit dominance of Metaplex, combined with strong token economics and a solid buyback strategy, makes $MPLX an undervalued asset. The protocol drives steady revenue growth through growing fees in the NFT and fungible token space, supporting ongoing buybacks, further increasing their value over time. As Metaplex continues to expand its reach, support new use cases and solidify its market position, the upside potential of $MPLX increases. For those investors looking to invest in the infrastructure of the Solana ecosystem for the long term, Metaplex offers a unique opportunity to invest in a project that has proven its dominance, continues to grow and holds significant potential.

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