Decoding Metaplex: The Unsung Hero Behind Reducing Solana NFT Minting Costs by 1000x
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Decoding Metaplex: The Unsung Hero Behind Reducing Solana NFT Minting Costs by 1000x
Since its inception, Metaplex has generated $23.5 million in revenue, billed at the daily SOL price.
Navigating Web3 tides with focused insightsAuthor: James Ho
Translation: TechFlow
Solana's ecosystem is recovering, and Metaplex, an NFT infrastructure protocol within it, has seen a 10x surge in the past month.
However, compared to other application-layer projects on Solana, Metaplex seems less discussed, and due to its foundational nature, its products and technical principles are not particularly intuitive.
Two months ago, crypto VC Modular Capital published an in-depth analysis of Metaplex on its blog. We have translated it to help readers better understand this rapidly rising project.
Summary
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Metaplex is a mature NFT infrastructure protocol in the Solana ecosystem. It has facilitated over 99.9% of NFT mints. It established infrastructure standards for NFTs (token metadata) and developed applications like Candy Machine and Creator Studio, enabling creators to more easily set up fair launches.
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Despite a massive downturn in the NFT market (floor prices and trading volumes down 85–99%), Metaplex’s mint volume grew more than fivefold year-over-year, thanks to Bubblegum, its project for minting compressed NFTs.
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Metaplex’s compressed NFTs reduce minting costs by over 1,000x (from over $10 on Ethereum to under $0.001 per mint on Solana). This has triggered a surge in experiments integrating NFTs into social, payment, creator, and physical infrastructure applications. Metaplex mints 180 million NFTs annually, compared to Ethereum’s 25 million (over 7x more).
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Metaplex recently began charging fees to sustain operations. If fees had been enabled in 2022, Metaplex would have generated $13.9 million in revenue.
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Solana, with its unique parallel computing architecture and native fee markets, has achieved success in mainstream web3 consumer use cases. We believe NFTs can play a crucial role here as a narrative representing any unique digital content.
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Unlike the highly competitive NFT marketplace landscape, we believe Metaplex faces little competition and is likely to continue leading NFT minting through its infrastructure standards and front-end applications.
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Metaplex has the potential to become a Shopify-like product, allowing creators to mint, manage, and monetize their NFTs. Over the next 3–5 years, we see Metaplex potentially supporting billions of annual NFT mints and generating between $25 million and over $100 million in revenue.
Background
NFTs were a key innovation in the last crypto cycle. NFTs are unique digital identifiers recorded on a blockchain that prove provenance, authenticity, and ownership of digital assets.
The first attempts at NFTs involved the ERC-721 standard on Ethereum, introduced in September 2017. CryptoKitties created one of the first blockchain games, allowing users to collect and breed digital cats (represented as NFTs). This caused network congestion on Ethereum in November/December 2017, accounting for over 20% of network activity.
Centered around digital images, NFTs made a major push into mainstream audiences. CryptoPunks (launched June 2017) and Bored Ape Yacht Club (BAYC, launched April 2021) became among the most valuable NFT collections, with individual NFTs worth over $400,000 at the peak of the 2021–22 market. During that period, NFT trading volume surged from zero in 2020 to an annualized $60 billion. NFT marketplaces like OpenSea reached valuations over $13 billion at peak, with monthly trading volumes exceeding $2–3 billion and annualized revenues over $1 billion at a 2.5% take rate.
Like other areas of crypto, NFT floor prices and trading volumes have declined significantly over the past two years. Blue-chip NFTs like Punks and BAYC are down 80–90% from their peaks, while NFT market trading volume has dropped from an annualized $60 billion to over $3 billion. However, NFTs still achieve over $3 billion in annualized trading volume, with Punks and BAYC floor prices at $35k–70k, demonstrating the power of digital communities and culture. For reference, eBay processed $74 billion in GMV in 2022.
During 2021–22, NFTs were primarily associated with speculative JPEGs, similar to how Ethereum was linked to ICOs during 2017–18. Yet since then, Ethereum and smart contracts have evolved into much more. Today, smart contracts power permissionless finance, stablecoins, DAOs, governance, tokenization of real-world assets, and physical infrastructure networks. Similarly, we believe NFTs represent a narrative for the next decade—one that enables digital property rights and ownership across all forms of content.
Historically, a key barrier to NFT adoption has been minting cost, which has limited growth beyond highly speculative use cases. For a standard 10,000-NFT collection, the cost today on Ethereum is 176 ETH—nearly $300,000 (about $800,000 at peak), or roughly $30 per mint ($80 at peak). This may be acceptable for speculative users, but too high for everyday use.
For NFTs to become ubiquitous, they must structurally shift from scarcity to abundance.
Introducing Metaplex
Metaplex is the protocol behind the NFT standard in the Solana ecosystem. Initially incubated at Solana Labs, the company was founded by a team including Stephen Hess (former Head of Product at Solana Labs) and began operating independently in the fall of 2021. Metaplex has developed a suite of products enabling artists, brands, and creators to mint NFTs and launch self-hosted mint pages via APIs and low-code tools.
Metaplex drives the vast majority of activity (99.9% of NFT mints), spanning multiple product lines across infrastructure and application tools. Examples include:
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Token Metadata – A Solana program responsible for attaching additional metadata to fungible or non-fungible tokens. For NFTs, this includes name, symbol, URI, attributes, royalty fees, etc.
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Candy Machine – The leading minting and distribution platform for launching fair NFT drops on Solana. It allows creators to securely and customizably bring their digital assets on-chain.
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Auction House — A protocol allowing marketplaces to implement non-custodial sales contracts.
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Fusion – A program enhancing on-chain tracking and composability around NFT ownership. Used by creators to implement complex ownership models.
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Creator Studio – A no-code, web-based tool for creators to easily create, sell, and manage NFTs on Solana without writing code.
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Bubblegum – A program for creating and interacting with compressed Metaplex NFTs secured on-chain using Merkle trees.
Since inception, Metaplex has facilitated the minting of 144K+ collections, 61.7M+ NFTs, 14M+ collectors, and over $1.1B in creator earnings. Minting a 10,000-NFT collection costs just $2,500–3,000 ($0.25–0.30 per mint), versus $250K–300K on Ethereum ($25–30 per mint).
Metaplex’s most widely used programs are Candy Machine and Token Metadata. Unlike most other blockchains, Solana separates logic and data into two distinct components—called programs and accounts. Programs (which hold application logic) do not store data internally but interact with accounts (which hold state and data) and can modify them. Candy Machine is one such program—the leading minting and distribution program for fair NFT launches on Solana. Token Metadata is another such program, attaching metadata to both fungible and non-fungible tokens on Solana.
Metaplex’s programs are publicly available and forkable under open-source licenses. While the source code is public, Metaplex’s license prohibits others from copying or forking the code for profit or offering competing products or commercial alternatives that conflict with Metaplex’s economic interests. Additionally, Solana’s architecture—separating programs and accounts—means that if a new startup forks Metaplex’s NFT standard, many key participants in the ecosystem (like NFT marketplaces, wallets, custodians, and node providers) would need to integrate the new program, resulting in significant coordination overhead.
Indeed, Magic Eden (a Solana NFT marketplace) previously attempted to launch its Open Creator Protocol (OCP), defining a new standard for NFT collections with enforced royalties. This effort saw limited success and was later shut down.
As a result, Metaplex holds a strong, dominant position in the Solana NFT ecosystem, building programs across both application and infrastructure standard layers.
Compressed NFTs
Despite challenging NFT and crypto market conditions, Metaplex has significantly increased weekly NFT mints—from about 500K per week for most of 2022 to over 3M+ today. This over 5x growth is driven by the rollout of the compressed NFT standard, further reducing minting costs. Today, minting 100,000 compressed NFTs costs only $100, or less than $0.001 per mint.
Metaplex’s compressed NFT program (called Bubblegum) achieves this breakthrough via Solana’s Merkle tree program (known as account compression). It moves storage of NFT metadata (image URLs, attributes) off-chain through indexers and RPC node providers. Instead of storing metadata in typical Solana accounts, compressed NFTs store metadata in the ledger.
The result is that compressed NFTs inherit Solana blockchain’s security and speed while lowering storage costs by moving such data off-chain. Since the entire computation history resides on Solana’s ledger, if any indexer or RPC provider goes down, the full state data can be reconstructed by replaying all historical transactions. Notably, all compressed NFTs are compatible with standard NFTs and can be losslessly decompressed into regular Metaplex NFTs. In some ways, this resembles Ethereum rollups offloading computation and state storage to L2 blockchains (Optimism, Arbitrum), while Ethereum itself stores Merkle roots and ensures data availability—allowing Ethereum to trustlessly reconstruct state if L2 rollup chains are compromised.
Metaplex launched compressed NFTs in November 2022. Since then, over 57M+ compressed NFTs have been minted. Due to ultra-low minting costs, many applications have found creative use cases:
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DripHaus – A platform connecting creators and fans by airdropping works (art, music, games, comics) to fans. On Solana, over 20M compressed NFTs were minted for $2,000—costing over $300M on Ethereum.
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Helium – A decentralized network of over 2M user-owned IoT hotspots. Helium migrated from its own blockchain to Solana, issuing over 1M compressed NFTs on Solana to represent user-owned hotspots.
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Dialect – A wallet-to-wallet messaging app. Emojis and stickers are tokenized as compressed NFTs, making them collectible and ownable. Users can mint custom emojis and stickers and share them with friends. Over 20,000+ users have minted and collected these stickers.
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Tiplink – A crypto payments app allowing users to send and receive funds via web links or URLs. Tiplink lets new users claim AI-generated compressed NFTs as a product trial strategy. Through this acquisition tactic, Tiplink has gained over 1M users (unique minter addresses).
Use cases like Dialect, Tiplink, and DripHaus adopting compressed NFTs would be impossible on Ethereum or other ecosystems. With NFT minting costs now below $0.001, applications are innovatively integrating NFTs into daily use cases—including payments, art, chat stickers, and physical infrastructure networks. Moreover, Magic Eden and Tensor have added support for compressed NFTs on their marketplaces, signaling broader adoption of the compressed NFT standard within the Solana ecosystem.
Monetization
For most of its history, Metaplex operated all its products for free. The company raised $47 million in venture capital from Multicoin Capital, Jump Crypto, Asymmetric, and many other leading funds, selling 10.2% of tokens in a strategic round. These funds supported the development and maintenance of a broad library of programs. In late May 2023, Metaplex announced plans to further enhance protocol sustainability. These changes included:
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Plans to transition the Token Metadata program to full immutability, meaning it can no longer be upgraded or modified.
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Access to the Token Metadata program will remain permissionless, all users will be treated equally, and there will be no token gating with $MPLX before or after.
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Introduction of a small fee for using the Token Metadata program, primarily charging 0.01 SOL (about $0.20) for each non-compressed NFT creation.
Fee revenue will fund development of other programs maintained by Metaplex (such as Candy Machine, Auction House, and Bubblegum). Notably, these changes received strong support from key players including Solana Labs (from which Metaplex spun out), Magic Eden, and Tensor (the largest Solana NFT marketplaces).
In 2022, Metaplex facilitated the minting of 22M NFTs. At current prices, if Metaplex charged 0.01 SOL ($0.20) per mint, this would translate to $4.4M in revenue; at daily SOL prices, it would generate $13.9M in revenue. Since inception, Metaplex would have earned $23.5M in revenue if charging based on daily SOL prices.
Since the introduction of compressed NFTs, over 99% of ongoing NFT mints now occur under Bubblegum. Note that compressed NFT mints are currently not monetized. Only standard NFT usage via the Token Metadata program is monetized. We believe Metaplex’s mid-term focus should remain on further driving experimentation, usage, and adoption of Bubblegum, which holds enormous growth potential in mainstream consumer crypto applications.
Historically, NFTs were scarce. In a world where minting costs were $20–30, it was logical to support only high-value, artificially scarce assets like CryptoPunks and BAYC. But with costs reduced by over 1,000x, we believe NFTs are transitioning into core infrastructure enabling digital experiences—across consumer payments, gaming, social, identity, music, physical infrastructure, and beyond.
Looking ahead, we believe NFTs will increasingly be about abundance.
Metaplex has already built leading NFT infrastructure standards and applications that are the most usable and scalable for consumer products reaching over 100 million users. In 2022, Metaplex demonstrated a revenue potential of $4–14 million in limited use cases. We believe the protocol has the potential to drive billions of annual NFT mints (from the current annualized 150–200 million), continue building leading infrastructure standards and applications, and grow into a sizable revenue and business outcome.
Valuation and Scenario Analysis
Given that Metaplex’s experimentation and monetization of compressed NFTs have only just begun, it is difficult to predict its future state. We attempt to outline various scenarios:
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Our 2022 scenario highlights what Metaplex’s revenue would have been if fees had been charged. Given Solana’s minting costs are significantly lower than Ethereum’s and NFT valuations are higher, we believe Metaplex has pricing power to implement fees without losing significant mint volume, potentially earning $14 million in revenue that year.
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Our current scenario emphasizes the remarkable growth of compressed NFTs, annualizing Q3 2023 growth rates. Impressively, Metaplex annualizes over 180M mints—9x more than Ethereum today and 2.7x more than Ethereum’s 2022 volume. With minting costs reduced 100x (in SOL terms), we observe a corresponding 30x increase in mint volume—even as NFT trading volumes and floor prices dropped over 95%.
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Our fee scenario assumes Metaplex charges 83% of the fee on its compressed NFT product relative to traditional mints. Since this raises the compressed NFT price from $0.002 to $0.004, we believe it won’t significantly affect mint volume. Metaplex could generate $1M in revenue at these current levels. For reference, OpenSea generated $7.6B in revenue in 2022 and now earns $30M.
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Our base case assumes Metaplex increases usage tenfold from current levels, with SOL price rising from $20 to $40. This would yield over $20M in minting revenue at an average cost of $0.02 per NFT, totaling 2.5B NFT mints. Metaplex could also add value-added services around NFT management and sales. Similar to Shopify, which enables online merchants to create and manage stores, Metaplex aims to build a comprehensive service for NFT issuance and management. We believe this could add another $5M in app-related revenue (at $10–20/month, requiring 20K–40K subscribers). At a 20x multiple, this supports a $500M valuation.
Our optimistic scenario assumes Metaplex drives 1B annual NFT mints. For context, compare to the following annual figures:
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2.5 billion blog posts
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8.6 billion TikTok videos uploaded
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$70 billion spent on virtual goods (assuming $10 per item = 7 billion items)
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200 billion tweets
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1.8 trillion photos
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8.4 trillion text messages
Although minting cost per transaction increases as SOL price rises, we believe that if the Solana ecosystem becomes increasingly valuable, minter willingness to pay premiums aligned with Solana minting costs will persist. At a 20x multiple, this translates to a $3B outcome.
Risks and Mitigations
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NFT usage remains early and nascent. Most NFTs minted during 2021–2022 were speculative. Today, we see experimental use cases in messaging (stickers), payments (growth acquisition), creator content (discovery), and physical infrastructure (tokenized representation), but these are still in early stages and may not persist or become monetizable if apps don’t build businesses atop them.
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Risk from Solana interfaces. Because Solana separates logic and state into programs and accounts, it allows specific programs like Metaplex Token Metadata or Solana Program Library (SPL) to dominate standards for SPL tokens and NFT mints. The Solana ecosystem is actively developing interfaces to replicate EVM-like functionality, enabling developers to copy ERC-20, 721, or 1155 standards to issue fungible and non-fungible tokens. This work is ongoing, and developers will need to build new codebases to replicate or surpass the functionality Metaplex provides today at already low fees. Still, this could pose a long-term risk.
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Dependency on the Solana ecosystem. Today, most activity occurs on Ethereum or EVM-compatible ecosystems—whether DeFi, stablecoins, payments, NFTs, etc. Despite the FTX incident, Solana has proven it has a strong community and a unique architecture featuring parallel transaction processing, native fee markets, and scalability that grows with computing and Moore’s Law. However, as the Ethereum ecosystem matures and solves its own scalability challenges, even if NFTs succeed as widely adopted technology in daily consumer applications, it may not happen on Solana.
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