Quietly Dominating Solana Ecosystem Cash Flow, Why is $MPLX Undervalued?

Original title: "Why Buy Meta? Buy Metaplex"

Original author: Min Jung, Presto Research

Original translation: Ismay, BlockBeats

Editor's note: This article focuses on Metaplex's implicit dominance in the Solana ecosystem. As the core infrastructure of Solana 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 buyback 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 that deserves 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. Dominance and expansion into new areas

   b. Token economics and buyback mechanism

4. Pair trading opportunities: 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 more than 99% of NFTs and 90% of fungible tokens on the network. Through tools like Core and Bubblegum, Metaplex enables creators to efficiently mint and manage digital assets, establishing its position as the core infrastructure for Solana digital assets.

$MPLX is currently undervalued given Metaplex's market dominance and strong revenue growth. As Metaplex expands to more blockchains and expands support for fungible tokens, its influence and utility continue to grow, making it an attractive long-term investment. The ongoing buyback program further enhances the value of the token.

By executing a strategic long $MPLX/short $TNSR trade, 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 transaction captures Metaplex's growth opportunities while reducing risk in a competitive market.

Introduction

What is a great business? While there are many ways to answer this question, 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. Although it is little known, 90% of the tokens on Solana and 99% of all NFTs are created through the Metaplex protocol. Most users are not even aware of their interaction with Metaplex when 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 to significantly reduce the cost of minting and reduce the burden on the Solana network, which is superior to other protocols.

Its features include high cost-effectiveness, low computing power, support for advanced plugins, and mandatory payment of royalties, setting a new bar 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 a very low cost, with the cost of minting 100 million NFTs being as low as 500 SOL, providing unprecedented scalability and flexibility.

Token Metadata

The Token Metadata program allows additional data to be attached to 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, 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 underlying 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 dominant position 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 signed transactions directly with Metaplex

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 used the protocol

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 interacted with Metaplex

Collectors totaled 55 million wallets

Since Metaplex’s inception, over 257,000 collections, 512 million NFTs, and $1.2 billion in revenue for creators have been created.

History

Metaplex was originally incubated by Solana Labs and led by former Solana Labs Product Lead Stephen Hess. Since 2021, the team has operated independently, focusing 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 technological innovator and industry leader.

A few recent news highlights:

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

Dominance and Expansion 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 its successful expansion into the fungible token space, proving its utility far beyond NFTs. The increasing adoption of Metaplex’s Token Metadata program by platforms like Pump.fun has ensured 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 both fungible and non-fungible tokens.

Figure 3: Metaplex’s Growing Influence on Fungible Tokens (FTs)

Looking ahead, Metaplex is preparing to expand its influence to two highly anticipated networks, Sonic and Eclipse. Sonic is Solana’s first Layer 2 solution designed for sovereign gaming, offering a particularly compelling opportunity for growth. As the integration of gaming and blockchain continues to deepen, the role of NFTs in in-game assets is critical, and Metaplex is well-positioned to support this new wave of digital asset creation.

At a time when 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 its reliance on NFT market cycles. As new layers and 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

Metaplex’s appeal stems largely 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: Protocol Fee Breakdown for Each Project; Source: Metaplex

In March 2024, Metaplex committed to using 50% of all protocol fees to buy back $MPLX and transfer the repurchased tokens to the Metaplex DAO. This allocation includes both 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 every month. 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 US dollars, 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

Paired trading opportunity: long $MPLX, short $TNSR

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

A paired trade, long $MPLX and short $TNSR (Tensor), allows you to capture $MPLX upside while hedging against the broader NFT market. This strategy is based on the following three reasons why $MPLX is undervalued relative to $TNSR:

1. Higher Fee Revenue: Over the past three months, Metaplex has generated comparable or even more fees than Tensor, primarily due to its continued dominance in the NFT and fungible token space. Nonetheless, $TNSR currently has a fully diluted valuation (FDV) of $350 million, significantly higher than $MPLX. This difference suggests that $MPLX is undervalued relative to its revenue-generating potential, especially with the strong support of an ongoing buyback program.

Tensor's average monthly fees over the past three months: $777,273

Metaplex's average monthly fees over the past three months: 7,956 SOL (conservatively estimated at a SOL price of $130, about $1,034,323).

Figure 7: Metaplex fees vs. Tensor fees; Source: Metaplex Dune Data Board

2. No direct competitors: Unlike Tensor, which faces fierce competition from Magic Eden, which is planning to launch its own token, it may seize 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 the volatility of the NFT market, $MPLX provides a more diversified opportunity. Metaplex's influence has now expanded to the field of alternative tokens and is no longer dependent on NFTs alone, 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-facing 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 eye, despite its huge impact on the Solana ecosystem. However, as Metaplex’s contribution to the ecosystem grows, this perception may shift, and market attention will rise accordingly.

Conclusion

Metaplex has quietly become a cornerstone of the Solana ecosystem, supporting the creation of over 99% of NFTs and 90% of fungible tokens on the platform. Despite its widely known critical role in the ecosystem, it still does not receive the attention it deserves, operating silently behind the scenes, with users interacting with its infrastructure without knowing it. This hidden dominance of Metaplex, combined with strong token economics and a robust buyback strategy, makes $MPLX an undervalued asset. The protocol is driving solid 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, $MPLX's upside potential 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.

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