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Hurrah!
I made the mistake yesterday of going to 6th Avenue Trader Joe’s right after work. I thought I’d never be able to escape the crush of business, casual, or yoga-wear-clad shoppers.
My local store is almost never full, and you don’t hear people yapping into Airpods about making deals. This is why Brooklyn is the best neighborhood. But I digress:
Autopsy of a Solana NFT marketplace
Yesterday, longtime Solana NFT marketplace Hyperspace announced it would close on September 17. It was the latest salvo in a prolonged downturn for the NFT space, which never really regained its footing after the widespread crypto collapse of 2022.
Hyperspace launched in September 2021 as hype around the emerging Solana blockchain grew and SOL approached a still-high price. At the time it was a Solana NFT tracking tool. In February 2022, shortly after NFT marketplace OpenSea reached a $13.3 billion valuation, Hyperspace raised $4.5 million in a round led by Dragonfly and Pantera.
In the time since, Hyperspace operated an NFT marketplace and launch pad and added accessibility for the Sui and Avalanche blockchains. But Hyperspace never really reached hyperspace.
Industry sources – and Hyperspace’s co-founder himself – told me that Hyperspace’s demise was caused by its inability to find a meaningful niche in an NFT market that never regained its vaunted 2021 status.
Kamil Mafoud, co-founder of Hyperspace, told me he didn’t see the platform getting big enough to justify enterprise-scale returns. He said Hyperspace has tried to adapt several times, and that the platform had achieved considerable success by “being sloppy.”
“But at least for me personally as a founder, I don’t want to be in the position of having to fight the market. It is much better for us to attack a larger market and grow that way,” said Mafoud.
When I asked what this larger market would be, Mafoud said he and his team had not yet decided, but acknowledged that “NFTs are a much smaller TAM than almost all other sectors within crypto.”
That certainly seems to be the case. NFT trading volumes remain a fraction of what they were in 2021 and 2022. Popular NFT marketplace Magic Eden is planning to expand beyond NFTs. In the past few months, Starbucks, There is already quite a large graveyard of previous Solana NFT startups. Oh, and the SEC sent OpenSea a notice to Wells last week.
It makes you wonder how NFT platforms can be profitable businesses today.
Bangerz, an anonymous contributor to NFT platform 3.land, said NFT platforms may need to adjust their expectations.
“NFTs being used as this huge way for a project to raise $$ to do something is super super over,” Bangerz said. “[A]rt is fun, and culture is fun…NFTs are fun when they don’t cost $300 lol.”
Mafoud said something similar when I asked him about the success of memecoins versus NFTs.
“NFTs are a matter of scarcity,” Mafoud said. “Which it did very well, until they didn’t.”
Mafoud added that he will remain in the Solana ecosystem for his next venture, and that Hyperspace “lost some focus” on Solana as it branched out to other chains.
– Jack Kubinec
Zero in
I’ve been looking at NFT Pulse a lot lately. It has some really well aggregated NFT data.
Here you can see how Solana, Polygon, and Base have chipped away at Ethereum’s NFT market share over the past two years. At the beginning of 2021, the NFT market consisted almost entirely of Ethereum. Today, Ethereum has a 33% market share, while Solana has a 28% market share.
And despite the challenges NFT marketplaces face, some locations are doing well, especially on Solana. Magic Eden generated $56 million in trading revenue last year, while OpenSea and Tensor collected around $26 million and $12 million to round out the top three, according to NFT Pulse.
– Jack Kubinec
One good DM
A message from Adam Gutierrezsenior developer support engineer at Phantom:
