Key Insights
- Metaplex is a collection of development tools and open standards for creating and launching NFTs on Solana.
- Gross merchandise value was down 4% in SOL terms in Q4 (down 43% in USD terms). This decline can be attributed to a 69% decline in the SOL price and a 28% decline in NFT mints in Q4’22.
- Daily NFT transfers were down 28% QoQ but increased 123% YoY.
- The Metaplex token (MPLX) finished Q4 trading at $0.04, down 89% since the start of the quarter while SOL was down 69% for the same period. Q4 was the first full quarter of trading for MPLX since its launch in September 2022.
- The Metaplex development team released Candy Machine V3, compression for NFTs, and programmable NFTs. The State of Open Source Github report also ranked Metaplex at #8 for contributor growth in 2022.
Primer on Metaplex
Metaplex provides NFT communities with development tools and open standards for digital asset issuance and ownership on-chain.
Source: Metaplex Docs
Metaplex maintains several programs and standards developed over time to meet the needs of its community:
- Token Metadata — Attaches additional data and utility to fungible or non-fungible tokens.
- Candy Machine (V2/V3) — Used to launch generative and PFP collections.
- Creator Studios — No-code tools to create, sell, and manage NFTs on Solana.
- Auction House — A decentralized sales protocol for NFT marketplaces.
- Gumdrop — Allows for massively scaled airdrops of NFTs and tokens.
- Compression — a program for creating and interacting with compressed Metaplex NFTs. Compressed NFTs are secured on-chain using Merkle trees.
This program library is used by creators and developers at various stages: from design (Token Metadata), mint (Candy Machine), resale (Auction House), airdrop (Gumdrop), and beyond. Metaplex is best known for its fully on-chain minting solution, Candy Machine. It empowers creators to build highly adaptable NFT minting websites where digital assets can be designed, minted, and resold. Unlike many unintuitive Web3 applications, these websites’ UIs and overall experiences are comparable to traditional e-commerce applications, such as Shopify. Though it provides solutions for the secondary market, Metaplex focuses on primary sales and minting solutions for creators.
Key Metrics
Performance Analysis
Daily Active Users
Due to the FTX collapse in early November, Q4 was tumultuous for most protocols, especially those on Solana. Daily active users, measured by the number of daily unique signers, across the Candy Machine, Metadata, and Auction House programs were down 42.0% QoQ. Compared to a year ago, daily active users were down 45.1%. The yearly decline is in line with the average active unique fee payers on the Solana network, which was down 37.5% in Q4.
Metaplex’s user base can be roughly broken into three according to its largest programs. The Token Metadata program allows creators to attach additional data to NFTs. It continues to make up the bulk of users, accounting for 80.8% in Q4. The Candy Machine program, which allows users to mint NFTs, made up 15.2% of users. Lastly, the Auction House program, which enables users to exchange NFTs, accounted for 3.9% of users.
Gross Merchandise Value
The gross merchandise value (GMV), which is a measure of the sum of the sales of Metaplex programs, declined by 4.1% in Q4. The Candy Machine program made up 91.5% of the 732,000 SOL in gross merchandise value while the Auction House made up the remaining 8.5%. Compared to the NFT bull market of a year ago, GMV is down 73.7% in SOL terms. GMV generated by the Auction House continues to decline as the development team shifts its focus more on providing more tools for creators.
GMV measured in USD terms was dramatically down from a year ago, falling by $494 million. Compared to Q3, GMV in USD terms was down $11.8 million. This was a 96.9% decrease YoY and a 42.8% decrease QoQ. Although these decreases are quite significant, they were not due to any missteps by the Metaplex team. In Q4’21, the SOL price jumped from $161 to a peak of $259 before settling at $173 to end the quarter. This price increase paired with the frenzy of the NFT market at the time resulted in highly inflated gross merchandise value in USD terms for Q4’21, which would be incredibly difficult to keep up with. Compared to Q4’22, the SOL price experienced a decline of 69.3% with a weak NFT market, resulting in significantly reduced GMV in USD terms.
Weekly volume across all major NFT marketplaces decreased by 78.5%, falling from $7.5 billion in Q4’21 to $1.6 billion in Q4’22. This further supports the notion that the decrease in GMV for Metaplex was not unique to Metaplex or even Solana NFTs for that matter. Overall, 2022 was a difficult year for cryptocurrency prices and NFT trading volumes.
Mints and Transfers
NFT mints through the different Candy Machine programs fell 38.2% in Q4, for a total of 1.2 million NFT mints. This is a 65.5% decrease compared to the 3.4 million NFTs minted in Q4’21. All things considered, Metaplex still managed to support creators in minting nearly 13,000 NFTs a day in Q4. These mint numbers were supported by a plethora of projects, including Claynosaurz and Knittables, each with collections of 10,000 NFTs minting for 10 SOL and 9 SOL respectively during the public mint phase.
The introduction of Candy Machine V3 in October provided creators with more flexibility and control. The program was separated into two separate contracts: one holding the minting logic and the other holding the access controls. This setup introduced new modular features that can be used to customize drops, including freeze and thaw permit functionality per wallet list, which was used by Knittables during their Creator Studio drop. A total of 98,600 NFTs were minted in Q4’22 using this new Candy Machine program.
One of the bright spots for Metaplex in Q4 was total NFT transfers. Although they were down 27.6% from their peak in Q3, transfers continued to top over 11 million for the third consecutive quarter. YoY. In addition, NFT transfers increased by 122.7% YoY. Although there are fewer new collections being minted, there is still a large community of traders.
Qualitative Analysis
MIP-1
Metaplex introduced a new asset class that adds programmability to NFTs. NFTs with programmability allow for the flexible configuration of various lifecycle rules, including transfer restrictions that can be used by creators to enforce royalties. The new asset class adds functionality to the existing non-fungible token asset class.
NFTs can now include “rule sets” that can be configured by creators. Creators can set rules to enable royalty enforcement by specifying which programs may transfer their NFTs. Creators will also have the option to use an allow-list or deny-list approach to royalty enforcement. The Metaplex Foundation will provide an optional rule set based on an allow-list that will be updated periodically for convenience. With royalties being a hot topic of debate in the NFT community in Q4, Metaplex has put the power in the hands of creators to do as they please.
The upgrade tool for existing collections is available at royalties.metaplex.com. Creators will have two upgrade paths for existing collections, either a timed upgrade initiated by the creator or a community vote organized by the creator for collection holders. After the minimum 14-day notice period for holders, the creator will be able to complete the upgrade. The upgrade window for migrating an existing non-fungible asset to one with programmability will be open for 90 days after which the migration will be closed. The Metaplex team plans to iterate on Token Authorization Rules as it relates to royalties enforcement over the course of the 90-day upgrade window. The team will also keep engaging with creators, developers, and collectors to strike the balance between the flexibility that NFTs with programmability provide and the predictability and transparency that buyers and holders seek.
Candy Machine V3
The Metaplex Foundation officially released the latest version of its popular minting program Candy Machine on October 11. Candy Machine V3 offers users even more flexibility and control over their minting contracts. The updated program has been separated into two separate contracts, one for minting logic and the other for access controls. This separation allows users to change the access control contract, called Candy Guard, without interfering with the underlying minting logic. The Candy Guard contract is also designed with flexibility in mind. It provides users with pre-packaged modules as well as the ability to easily add custom access controls and other features. With the new Candy Machine program, creators can more specifically customize their NFTs to their needs.
Compression for NFTs
Metaplex introduced a new upgrade on November 6 called “Compression for NFTs.” It aims to lower the cost of minting and storing digital assets on the Solana blockchain. By leveraging on-chain compression and utilizing Solana Lab’s Concurrent Merkle Tree program (Gummyroll) and the Metaplex Foundation’s Compressed NFTs program (Bubblegum), Metaplex NFTs can be encoded into the Solana ledger. This results in near-zero minting costs without compromising security.
The compressed NFTs maintain backward compatibility with Metaplex NFTs. They can be easily transferred, delegated, and even decompressed into account space for interoperability with existing smart contracts. This level of interoperability is essential for institutional adoption and for massive Web3 industries, including social media applications, gaming, ticketing, metaverses, and enterprise use cases.
Fusion Upgrade
Fusion is an NFT composability feature powered by the Trifle Program that offers creators and users even more opportunities for customization. The “token-owned escrow” capability allows NFTs to behave like wallets themselves. In other words, profile picture NFTs can launch fully customizable NFT collections or even provide new traits for existing collections. With endless customization options, creators gain yet another tool to keep their community actively engaged. Most importantly, since the Fusion NFTs run on the Metaplex standard, they are already compatible with all major marketplaces and wallets.
Closing Summary
Metaplex faced a difficult Q4 due to events surrounding the FTX collapse and the overall bear market. Daily active users, gross merchandise value, daily NFT transfers, MPLX price, and daily NFTs minted were all down in the quarter. Despite these challenges, NFT transfers managed to increase YoY. The Metaplex team was among the top open-source projects as reported by a Github report ranking Metaplex as the eighth “highest contributor growth” in 2022. In Q4 alone the Metaplex team released Candy Machine V3, compression for NFTs, on-chain royalties enforcement, and fusion NFTs. They even announced plans to send a digital artifact to the ISS.
Overall, the Metaplex Foundation has shown it is committed to supporting the NFT community on Solana, and it will be worth monitoring whether this commitment results in increased KPIs for Q1 and 2023.
