Dialogue with Magic Eden Co-founder: Only native Bitcoin L2 will be considered, and multi-chain market incentives should be aimed at buyers

Original Title: 《Zedd: Unpacking the long march of Magic Eden towards the market winner》

Author: Mabel Jiang, HODLong

Translation: Ladyfinger, Luccy, BlockBeats

This article is translated from the podcast "The Backwave" (HODLong), which aims to explore the development of the Web3 community with its audience. Guests include project operators, investors, and other ecosystem participants, with a special focus on the Web3 community in Asia. This episode features an interview with Zedd, co-founder of Magic Eden, hosted by Mabel Jiang, the host of "The Backwave." Mabel Jiang was a partner at Multicoin Capital and currently serves as the growth officer for STEPN, Gas Hero, FSL Ecosystem, and MOOAR.

Before entering the cryptocurrency field, Zedd's early career was spent at Bain & Company, providing consulting services to corporate clients. In 2017, Zedd joined dYdX, marking the beginning of his journey into the crypto space. It was also during his time at dYdX that Zedd met Mabel Jiang.

Since 2017, Zedd has been working full-time in the cryptocurrency industry, at a time when the crypto market ecosystem was still small, and people were mainly building some DeFi protocols. Subsequently, Zedd left dYdX to join Coinbase as a product manager, working there for about a year and a half until founding Magic Eden in September 2021.

At that time, NFTs were very popular on Solana, so Magic Eden initially focused on the Solana market for about a year. Currently, Magic Eden has expanded into other chains like Bitcoin and Polygon, with its close ties to the Bitcoin ecosystem almost making it a "king." According to DappRadar data, Magic Eden's NFT market had a 24-hour trading volume of $6.76 million, only behind Blur's $15.93 million, making it the second-largest NFT market by trading volume.

Magic Eden's biggest advantage is its extremely low transaction costs, providing users and creators with more economical trading options compared to traditional NFT markets. Additionally, the platform does not charge creators for listing NFTs, further lowering the barrier for artists and creators to enter the market. This episode of the podcast discusses the work Magic Eden has done to explore the multi-chain market, and BlockBeats has compiled the original text as follows:

How does Magic Eden build a multi-chain market?

From Solana to EVM Ecosystem

Mabel Jiang: When you decided to expand to the Polygon market, did you consider other options?

Zedd: Although there weren't as many choices as there are now, we did have a few options at that time. During the evaluation process, we also considered Immutable, which had already achieved some small successes in the gaming field. We also looked at Polygon and Avalanche (Avax). However, at that time, no platform showed a clear competitive advantage that made us feel we had to choose it, so each choice came with certain risks and uncertainties.

After careful consideration, the main reason we chose Polygon was that many teams had already begun trying new projects there, and Polygon was actively collaborating with numerous gaming projects for business development. So we thought this would be an appropriate starting point and would help us smoothly enter the EVM ecosystem.

Mabel Jiang: You were already influential on Solana, but Ethereum and Polygon are entirely new territories for you. How has the experience been building on Polygon and Ethereum? How did you initially enter this ecosystem?

Zedd: I must say, the whole process has been quite challenging for several reasons. First, it was a very unwise decision to launch our product at that specific time. We launched our product on the Polygon platform two months after the FTX incident. We had already started integrating with Polygon before the FTX incident erupted.

However, the Solana ecosystem was also affected by the FTX incident, leading some to mistakenly believe that we had abandoned Solana, which is absolutely not true. For us, the real challenge was our failure to effectively communicate our vision, plans, and our long-term commitment and loyalty to Solana.

Another challenge we faced was deeply understanding and integrating into the community. First, we needed more talent within the company who had a deep understanding of EVM and Ethereum. Second, establishing our influence in this community was more difficult than we imagined. Although we had achieved some success in the Solana community, which gave us confidence, gaining the same recognition in the Ethereum community required more effort.

If we were to grade our initial work in the Ethereum community, I would say it was a B, meaning there is still room for improvement. We have not yet achieved widespread success in the Ethereum ecosystem, especially outside the existing NFT market.

However, as we continued to deepen our work in the EVM space, we began to find opportunities for collaboration. We established partnerships with senior creators in Ethereum, such as Yuga Labs, Pudgy, and Azuki, helping them address issues like royalties. These collaborations not only helped us better integrate into the market but also gradually made us a true multi-chain market participant. Despite the initial challenges, we made progress in the Ethereum community through persistent efforts and strategic adjustments.

Mabel Jiang: Can you share specific details about your collaboration with Yuga Labs? I understand you built an NFT market for them; is it similar to a white-label solution?

Zedd: We have been in continuous communication with the Yuga Labs team for the past six months, and our connection was facilitated by our Chief Gaming Officer, who had previously collaborated with Yuga Labs' former Chief Gaming Officer, Spencer. Through this relationship, we gradually got to know each other. During the process of addressing royalty issues on the Solana platform, Yuga witnessed our efforts.

When the existing market on Ethereum decided to stop supporting royalties, Yuga reached out to us. We then discussed whether we could create a platform that would benefit not only Yuga but also the entire creator ecosystem, which led to us building a market that respects royalties and launching it about four to five months ago. Essentially, this provided us with more footholds and breakthroughs in the Ethereum ecosystem, which we previously lacked.

Delving into the Bitcoin Ecosystem from Ordinals

Mabel Jiang: How did you decide to build a Bitcoin market?

Zedd: We had an internal hackathon where ten engineers developed for a week in California, and we quickly launched the market. The whole process took about three weeks, and we were also developing a multi-chain wallet to allow assets to be exchanged across different chains.

Mabel Jiang: What was the process like for you to start building in the Bitcoin ecosystem?

Zedd: The whole process was indeed quite crazy. In 2022, the Ordinals protocol was far from our radar. However, by early 2023, one of our team members introduced us to the Ordinals protocol, and initially, we thought it was just a theoretical concept. But soon, we realized that this technology was feasible and that there was a real demand for it. We observed in the Ordinals Discord channel that people had already started trading there, even using spreadsheets for over-the-counter transactions. These activities convinced us that users were eager to trade such assets.

Based on this discovery, we decided to start building a market. At that time, we were unsure if we could create a trustless, non-custodial market environment. At this critical moment, my co-founder Rex designed an architectural plan over a weekend. He showed us that this idea was entirely feasible.

Mabel Jiang: What company-level adjustments did you make for this?

Zedd: This was indeed a challenge. We essentially adopted a business unit model, where each market operating on a chain is treated as an independent business unit. Each unit is equipped with dedicated product managers, engineering teams, and business teams. This structure ensures that the engineering team and business team can work closely together to respond quickly to market changes and implement decisions. At the same time, we needed to ensure that the teams could collect user feedback in a timely manner and quickly iterate on products based on that feedback.

Mabel Jiang: For Solana users, when they transition to Bitcoin, they may need to find a new wallet extension or other usage methods. Would they prioritize using your wallet?

Zedd: Yes, many users will download the Magic Eden wallet, convert some Sol to Bitcoin, and then start using Ordinals. In addition, there are other Bitcoin wallets, such as OKX and Uniswap, which mainly serve Chinese users, while Xverse serves both Western and Chinese users, these are the main Bitcoin wallets outside of Magic Eden.

Mabel Jiang: What characteristics do your target users for Bitcoin NFTs have?

Zedd: We found that Asian users using Bitcoin products are far more numerous than those using Solana. Additionally, we have many users who use Solana and are also using our Bitcoin products. The cross-ecosystem overlap is more than people imagine. We have many users willing to try new things, and they have a growth mindset.

Mabel Jiang: What trends do you foresee for Bitcoin NFTs in the future?

Zedd: I believe there will be more NFT Ordinals creations emerging. These projects are not utility NFTs, and I think that's actually a good thing. We can just call it a collectibles market; you don't need to attach any utility features to them. This is the main difference between NFTs on Bitcoin and the NFTs we see on Solana and Ethereum.

Currently, many people are building tools around how to mint and inscribe Ordinals and runes. Many are also trying to find other ways to simplify these transactions because trading on Bitcoin L1 is clearly more challenging. When you trade Solana meme coins and then switch to Ordinals, it feels like going for a spa.

Mabel Jiang: Can you quickly explain what Runes and NFTs are and the differences between them?

Zedd: Ordinals can basically be seen as NFTs, but they differ from NFTs on ETH and SOL in that they actually inscribe media or data directly on the chain. BRC20 and runes are essentially different FT standards. There are actually more, like BRC420, but the main ones are BRC20 and runes.

Runes are very new, only about three to four weeks old, while BRC20 has been around for almost a year. Runes are somewhat like a more user-friendly version of BRC20, allowing them to be transferred without certain inscription activities. Runes are also developed by the same team that developed the Ordinals protocol. A small team is responsible for the core development of Ordinals, which is one of the reasons Runes have gained a lot of attention and hype.

Mabel Jiang: Have you built a DEX?

Zedd: We are actually collaborating with Exodus. Users can convert Sol, ETH, Bitcoin, etc., into USDC through the Magic Eden wallet.

Mabel Jiang: Have you considered building your own L2?

Zedd: We currently do not have enough resources to handle this issue. If we were to discuss Bitcoin L2, we would only consider building a native Bitcoin L2, rather than the so-called L2s that exist now. Because they are clearly not native Bitcoin L2s; they just call themselves Bitcoin L2 for narrative purposes, but they are more like Bitcoin sidechains.

Mabel Jiang: In the future, do you plan to expand support to other blockchains?

Zedd: We are closely monitoring market dynamics. Although we are not actively developing at the moment, we have noticed that activity on EVM chains is not very frequent. At the same time, we are also paying attention to some projects building their own chains.

How to deeply understand and integrate into the community?

Directing incentives towards buyers

Mabel Jiang: Blur seems to have achieved good results in liquidity incentives; how do you view the competition with them?

Zedd: Since we have not yet entered the Ethereum space, we do not have much perception of the dynamics on that platform. Our core focus is on the actual usage of users rather than just trading volume, as trading volume is a metric that can easily be influenced by incentives. We focus more on analyzing user activity and actual revenue.

Blur has performed excellently in incentivizing liquidity, and we think it's a clever strategy. However, we always believe that the platform we pursue should not solely rely on liquidity incentives. We prefer to focus on user activity and revenue, as these metrics more accurately reflect the health of the platform. Additionally, we also realize that overly relying on trading volume as a measure can be risky.

Mabel Jiang: How effective has the gamification strategy of trading rewards implemented on Magic Eden been?

Zedd: We implemented a reward called "Diamonds," which has been very effective. Our intention was to explore various ways to incentivize and reward users, rather than turning it into a purely zero-sum game. Especially in the Bitcoin market, our rewards and incentives are primarily directed towards buyers, aiming to encourage people to purchase NFTs. We do not want all incentives to favor sellers, as this could adversely affect floor prices. Our goal is to create a more robust and healthy market environment.

Mabel Jiang: In the gaming sector, especially last year, we noticed that Magic Eden put in a lot of effort. How do you evaluate the effectiveness of these efforts? What learnings and insights can you share from this process?

Zedd: Since the end of 2022, we have formed a gaming team of about four people, primarily focused on business development and driving initiatives. The main task of this team is to collaborate with gaming projects, assisting them in launching NFTs and providing support in using the market. Looking back over the past 18 months, we found it to be a very interesting experience. The gaming industry experienced a wave of hype in 2021 and early 2022. However, over the past year and a half, many gaming teams have been focusing deeply, and there haven't been many new activities in the market.

Additionally, we faced another challenge, which is that the infrastructure required by each gaming project is highly customized, and we have not provided sufficient in-depth customized support for each game. This means we need to make more efforts in understanding and meeting the unique needs of each gaming project.

Building a Strong Native Community

Mabel Jiang: What effective measures have you taken to establish and nurture a native community?

Zedd: To build a strong native community, we have taken several key measures. First, we ensure that there are members within the company who can represent and understand the community culture, which is crucial. Second, we place great emphasis on communication with the community and social media interaction, maintaining activity and engagement.

Third, we actively host offline events; no matter which conference it is, we organize related activities to strengthen our connection with community members. Finally, we learn from past mistakes and continuously improve, which has significantly strengthened our relationship with the community. Through these efforts, our connection with the community is now closer than ever.

Mabel Jiang: Has your user base changed over the years?

Zedd: Aside from geographical changes, there hasn't been much change. There are now many more users on Bitcoin than there were two years ago.

Mabel Jiang: How large is your team now?

Zedd: About 100 people.

Mabel Jiang: What does it mean for you that your Bitcoin users come from Asia? Do you want to expand your community in Asia?

Zedd: We have many Solana users who are also using our Bitcoin products, which indicates user crossover. Currently, we are not specifically building a community in Asia, but that is a goal we want to achieve.

Mabel Jiang: How have you built the community without local language team members?

Zedd: I admit this is indeed difficult; we have not truly established a community in Asia yet. We need to find the right people and then invest resources to achieve this goal. If someone is passionate about NFTs and our products and is willing to develop the community in Asia, we would be very open to talking to them.