Shots fired at Solana’s biggest NFT marketplace
The largest Solana NFT platform , Magic Eden, has faced a lot of scrutiny lately by many project heads. The marketplace is the biggest on the Solana chain with its biggest competition being the multi chain OpenSea market. Magic Eden commands 90% of the trading volume on Solana and commands a $1.6Bn valuation as of funding finished in June.
Of course as the saying goes “heavy is the crown” and the king of Solana NFT marketplaces has had shots taken at it from builders and collectors, all stating that ME has become far too centralized. Some of the issues are the fact that the marketplace limits access from third-party aggregators and tools, some find issue with the way custody of user’s NFTs are handled-leaving customers open to attack.
The founder of Zion Labs- a company that creates NFT tools for those on the Solana chain, who goes by the pseudonym “Marty” has stated that “People should be aware that a hacker could get the keys to Magic Eden and “rug” everyone” The belief is that if the company were decentralized and open sourced there would be no need to worry.
The company is escrow based and none of the perceived risks have been addressed by Magic Eden at this time. A spokesperson for the company did state that any other alternative might be more dangerous for users. The team of Magic Eden has plans for an escrow-less future but the tech is not considered strong enough yet to produce such an offering.
The idea of escrow on ME is not new at all but recently there are many that have begun to speak out against it. The way things work on ME is all NFTs listed are taken into custody by Magic Eden and away from the user’s own wallets, the NFTs are then held in an escrow wallet by the smart contract of the marketplace.
In the beginning of the NFT push this was a common practice but lately platforms like OpenSea and Hyperspace allow for NFTs to remain in your wallet even when you are selling.
OpenSea has openly spoken out against the practice stating a belief that marketplaces that hold your NFT in custody consequentially take away choice and utility along with compromising security. The thread is an obvious shot at Magic Eden and their business practices. This is not the first time the two have tweeted shade as Magic Eden has already tweeted about OpenSea and their lawsuit involving an unwitting Ethereum NFT sale due to a loophole in the platform UI.
The Magic Eden marketplace contract has been confirmed to be based off an earlier version of Metaplex’s Auction House protocol- a peer-to-peer , permissionless trading system. Metaplex’s Auction House currently has no need for taking custody of others NFTs. It would be fair to note that changes have been made to the code of the Metaplex offering by Magic Eden and the substantial changes to that code have also been coupled with a launchpad contract based on Metaplex’s Candy Machine, which is a widely used minting tool for Solana NFT. The code has also been made close-sourced and permissioned.
Closed source software poses a risk as it can’t be audited and cannot benefit from bug bounty programs. The code of Magic Eden is so secretive that even Metaplex has no real idea what is going on under the hood.
One worrying thought in the minds of these critics of Magic Eden is the consequences of the escrow wallet being compromised. What would be the end result if Magic Eden were to fall and shutter like some of the latest firms that had to do that. Three Arrows Capital had all of its assets liquidated or destroyed, what happens to the more than 180,000 NFTs on the platform?
While the team at ME does have plans for an escrow-less platform Sidney Zhang, current CTO of Magic Eden states that current security solutions aren’t adequate in the eyes of his team. Zhang once again reiterated issues OpenSea faced earlier this year that saw a disconnect between the UI and Ethereum that ended up costing OpenSea $1.8M in ETH for reimbursing customers.
The escrow wallet is not the only issue people are taking with Magic Eden as changes on how the platform operates and how apps made by third-parties can build are also being scrutinized.
A tweet from @pland describes Magic Eden and states that the marketplace is no longer a permissionless offering. There seems to be a need for 2 signers for each transaction with one of those being Magic Eden
This change in the contract caused a few issues with third-party apps that aggregate listings from multiple marketplaces and tools that aided in NFT purchases such as “sniper bots” were no longer useful. The contract made each transaction dependent upon Magic Eden signing off on the trade.
Magic Eden stated the transactions would need two signatures one from the end user and one from an API key which is used to authenticate developers and third party programs. The change has been stated to be rolled out for security reasons- maintaining site reliability and reduce bottling. Magic Eden co-founder Zhuojie Zhou stated 300 API keys have already been given out to date to developers and aggregators which include Tensor, Exodus,Slopem and NFTSoloist.
The shift has been seen by some in the Solana Space as a shift away from decentralization and an outright rejection of those principles. This way of business is being touted as completely beneficial only to Magic Eden. One Hyperspace representative that wants to remain anonymous told Decrypt that a representative of Magic Eden reached out to them and threatened legal action and to shut them down if they didn’t change their platform to fully benefit Magic Eden, meaning to “exclusively direct listings to Magic Eden and only operate via their API”, Magic Eden has since denied these allegations and said that Hyperspace has been antagonistic towards them.
Hyperspace has since found a workaround to Magic Edens API and continues serving aggregated listings but they are lucky as other aggregators have lost functionality, such as CoralCube
There are some that believe this was a deliberate move by ME in order to maintain it’s 90% hold over the NFT space on Solana. Hyperspace continues to state they are against such moves and feel strongly about decentralization.
The hits don’t stop at those two points as ME is also being criticized for a move that many are saying ripped off Blocksmith Labs’’ Mercury tool.
The rollout of this feature allows projects to create allowlists of users ahead of the NFT drops. The move has been stated as Magic Eden trying to outdo anyone that has anything remotely better than them by taking the idea and tweaking it. One twitter user @blockchainpian states Magic Eden is “using venture capital as a weapon”
The Magic Eden platform has been said to be user-first and the team states that additions are made at the request of users and that features on the platform are made to be a service to the collectors. Zhou fiercely denies any centralization and states the issue is not centralization vs decentralization and never has been, others in the web3 space would fiercely debate that. Many are not happy with the way Magic Eden is handling everything but for the time being ME remains the primary destination for Solana NFTs , merchants of those NFTs, and collectors of those NFTs. There is growing discontent with ME as many are planning to move their projects to other marketplaces due to growing unhappiness with the platform.
Though Magic Eden may be the primary destination for Solana NFTs there is growing sentiment that may not always be the case.