Why Solana’s new token extensions are a ‘game-changer’ for NFTs

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Why Solana’s new token extensions are a ‘game-changer’ for NFTs
Why Solana’s new token extensions are a ‘game-changer’ for NFTs
DeFi
Web3
By
Tim Craig
February 13, 2024 at 2:08 AM
A new token extension lets Solana developers incorporate metadata natively into NFTs.
The development disrupts Metaplex's monopoly, says a Solana infrastructure developer.
The new token extensions could help Solana NFTs catch up to those on other blockchains like Ethereum.
Solana recently rolled out 13 new token extensions that bring a host of new features for developers to build with.

In developer circles, one of these new features is generating a significant amount of excitement: the ability to incorporate metadata natively into Solana NFTs.

Metadata is an essential tool in blockchain protocols. Among other things, it allows additional information — such as images and traits — to be assigned to NFTs.

Previously, Solana tokens only had the ability to include minimal metadata, such as the supply of a given token.
Solana’s new token extensions allow for a generic metadata interface, unaffiliated with any single stakeholder. Developers can now create their own bespoke NFT standards, allowing for more competition and innovation within the Solana NFT ecosystem.

It hasn’t taken long for developers to make use of this new ability.

Ming Ng, a developer working on the popular Solana decentralised exchange aggregator Jupiter, has already released a new Solana NFT token standard in collaboration with NFT fractionalisation protocol Ovols.

A Metaplex monopoly?
Because there was previously no way to attach more metadata to Solana NFTs natively, companies independent of Solana created their own solutions.
Metaplex, a protocol that allows for the creation and minting of NFTs, was the biggest of these. The firm created its own protocol for attaching additional metadata to tokens. Due to the high costs of doing so, many NFT creators chose not to build their own metadata protocols, and instead opted to use Metaplex’s.

While much of Solana’s $4.8 billion NFT market wouldn’t exist without Metaplex, that situation was not a good long-term solution, according to Mert Mumtaz, CEO of Solana infrastructure provider Helius Labs.

“A single, centralised, for-profit entity — Metaplex — has a full monopoly on the NFT standard on Solana right now,” Mumtaz told DL News. “The lack of competition leads to a lack of innovation.”

Metaplex co-founder and CTO Nhan Phan told DL News that Metaplex “has never been a monopoly,” and that there have been several NFT standards along with Metaplex’s that have shipped in the past.

“Our focus has always been on innovating and disrupting ourselves — for example, with compression — and that’s what kept us as the go-to option for digital asset developers,” Phan said.
A September 2022 whitepaper published by Metaplex states that its protocol had been used to mint over 20 million NFTs, accounting for over 99.9% of the Solana NFT market.

Phan also said Metaplex provides more than just its metadata extension, including Solana NFT tooling, as well as on-chain NFT collection launches and on-chain NFT data storage.

‘There’s a lot to be improved’
With the ability to include NFT metadata natively, Solana’s NFT ecosystem can now play catchup to that of other networks like Ethereum, where several distinct NFT standards, such ERC721, ERC1155, and most recently ERC404, have gained popularity.

“The new token extension is a game-changer for Solana NFTs,” a spokesperson at NFT marketplace Magic Eden, told DL News. Magic Eden said that the new metadata interface will empower builders and allow them to easily innovate with new token standards.

One way they could do this is by combining the Metadata extension with the Transfer Hook extension. This would allow NFTs to execute custom logic when they are transferred, and could be used to create permissioned tokens or NFTs that automatically distribute royalties.

Magic Eden isn’t the only one to highlight the power of token extensions.

“There’s a lot to be improved with regard to Solana NFTs,” Armani Ferrante, the creator of the Mad Lads NFT project and Backpack NFT exchange, told DL News.

Ferrante said the new token extensions will make it easier to explore “important features like royalty enforcement,” and that Backpack plans to support the new standards.
The enforcement of NFT royalties — a small cut of each NFT sale sent to its creators— has historically been a contentious issue.

Some marketplaces, such as OpenSea, ultimately chose not to enforce royalties for NFTs sold on the platform due to other popular NFT marketplaces making royalties optional.

Some NFT collectors argue that not enforcing royalties hurts NFT creators and prevents them from generating a stable stream of revenue from their work.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.