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Magic Eden, The leading NFT marketplace on Solana, is fighting back against the wave of criticism and claims to change the way user assets are managed.
Magic Eden currently the largest NFT exchange on blockchain Solana. Launched last fall, the exchange regularly accounts for more than 90% of NFT Solana trading volume and it is this dominance that has raised the company’s valuation to $1.6 billion since its most recent funding round.. Continuing the momentum, Magic Eden established an investment branch focusing on building Web3 infrastructure on July 12.
However, recently, the exchange is facing a lot of FUD. From the community of members to developers and collectors are expressing concern that Magic Eden is becoming too “focused”. Recent changes to the exchange that have restricted access from third-party tools and aggregators, as well as the way the exchange manages user assets, pose a major threat.
MartyFounder of Zion Labs, which produces auxiliary tools for NFT Solana, shared:
“Everyone should know 100% that a hacker can get the keys to Magic Eden and ‘rug’ all the NFTs on the floor. This will not happen if the exchange is decentralized and has an open source code.”
In the comments sent to Decrypt, Magic Eden does not specifically address the risks of the current margin trading model, but they believe the alternative is currently less secure. Song claims to be planning to adopt another system in the future, but still doesn’t believe the technology is secure enough.
Concerns about escrow issues
Magic Eden’s policy of keeping users’ NFT assets in escrow wallets is not new, but the debate has only really surfaced recently. Accordingly, Magic Eden takes control of all listed assets instead of keeping them in the user’s own wallet.
This practice was considered common in the early days of Solana NFT exchanges, but OpenSea and Hyperspace – the leading marketplaces today do not apply that approach. When you list Solana NFT on these exchanges, the NFT remains in your wallet.
1/🧵We’ve been seeing a lot of chatter lately about Solana marketplaces taking custody of NFTs, so we wanted to share our POV on custodial listings
— OpenSea (@opensea) July 27, 2022
Last Wednesday, OpenSea tweeted its objections, but did not specify which exchange:
“We believe that exchanges that hijack users’ NFTs limit choice and utility, and compromise the security of the entire system.”
Magic Eden then “twisted” the above argument with a link recalling the OpenSea incident sued by NFT owner Bored Ape about having NFT stolen due to an interface flaw.
“We are actively exploring and planning to move to zero-escrow models, but we believe that the current smart contracts to implement the zero-escrow mode that other markets are using are not safe. There are many security implications of this transition, and we want to do it carefully to ensure that users lose their assets.”
Magic Eden threatens partner?
Aside from concerns about the escrow model, Magic Eden also faces scrutiny in how the exchange operates and how third-party applications and protocols are collaborating with the exchange.
The discussion became more engaging last week thanks to a viral Twitter thread from user Pland, who assumed that Magic Eden “no longer a permissionless dApp” due to a change smart contract recently.
Magic Eden is not a permissionless Dapp anymore
Me had a smart contract upgrade that went for most users unnoticed but does have a big impact on the ecosystem
In order to buy an NFT from ME, you need 2 signers for each transaction and one of the signer is ME pic.twitter.com/uNFMkepE0j
— Plan (@Pland__) July 24, 2022
According to some developers, the contract change caused Magic Eden to sign every transaction that took place on the platform, which was not possible before. As a result, some third-party apps that aggregate listings from multiple markets have broken, along with so-called “sniper bots” tools that can be used to purchase specific NFTs.
Magic Eden has also acknowledged this change, explaining that transactions now require two signatures: one from the end user and an API key provided by Magic Eden. API keys are used to authenticate third-party developers and programs that want to access an application or service. NFT marketplaces like OpenSea also have an API system.
Magic Eden Co-Founder and Chief Technical Officer Zhuojie Zhou replied:
“This change has been implemented so that we can maintain the core credibility of the site and reduce the jeopardy of jeopardizing our users’ listings and transactions. We welcome the ecosystem to participate in this API program.”
However, some developers in the space see this change as a rejection of the principles of decentralization, not to mention the decision was made to thwart potential rival developers in the industry.
Representative from hyperspace comment:
“We were surprised to hear they were doing this, because it was completely centralized with no logical benefit to the end user. In fact, it is detrimental to users, as it increases the dependency on the server and thus the failure rate of transactions will also increase.”
Another source said that Magic Eden contacted Hyperspace prior to the policy change, “threatening to shut down if we don’t change our platform to bring them full benefits/services.” .”
Thank God for open Web! pic.twitter.com/tHo8KErF69
— Hyperspace ✨ Solana NFT Marketplace & Aggregator (@hyperspacexyz) aMay 23, 2022
Soon after, Magic Eden denied this allegation:
“We do not threaten them at all. On the contrary, we always encourage our partners to integrate with Magic Eden as deeply as possible to provide the fullest possible technical and operational support. Unfortunately, Hyperspace was not interested in such a partnership which has been hostile ever since.”
Magic Eden is “estranged”?
Furthermore, Magic Eden has struggled to implement new features that appear to be heavily inspired by external Solana applications. Last week, the announcement of the Magic Eden List feature — which allows projects to create user lists before listing NFT — was opposed because it is very similar to the tool Mercury by Blocksmith Labs.
NFT collector Topo Gigio shared:
“It seems like a direct attempt to weed out anyone who can do anything better remotely. Meanwhile, Marty of Zion Labs alleges that Magic Eden is using venture capital as a weapon as the exchange rapidly expands to become the all-in-one Solana NFT resource.”
Say goodbye to other WL wallet collection projects because ME must eat the whole pie. They must do it all; can’t let others win… https://t.co/qtSylN5oLi
— blockchainpan.sol 👁️🐢👻🦉 (@blockchainpan) July 27, 2022
Magic Eden argues that the company implements additional features mainly based on user requests and rejects the argument of centralization.
Criticism of Magic Eden is still growing, but it remains to be seen whether many NFT projects will retire from the floor and choose to move to another location. as well as whether notable collectors choose to withdraw from the exchange.
I’ll fall on my sword here, I’ll be forgoing liquidity moving forward and no longer listing on or buying from @MagicEden.
No longer feel comfortable escrowing my expensive NFTs https://t.co/ldd7VTuoFU
— Topo Gigio | topogigio.sol 🥐 (@TopoGigio_sol) July 24, 2022
“I will give up liquidity in the future and not list or buy anything from Magic Eden anymore. So I need a day to delete and move assets to hyperspace and coralcubenft. I no longer feel comfortable with my expensive NFT deposit up here.”
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