Magic Eden, the leading NFT marketplace on Solana, is facing a wave of criticism from the community and claims to be changing the way user assets are managed.
Magic Eden is currently the largest NFT exchange on the Solana blockchain. However, recently, the exchange has been facing resistance from the member community to developers and collectors concerned that Magic Eden is becoming too “centralized.”
Recent changes to the exchange that have restricted access from third-party tools and aggregators and the way the exchange manages user assets pose a significant threat.
Magic Eden’s policy of keeping users’ NFT assets in escrow wallets is not new, but the debate has only 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 standard 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.
Last Wednesday, OpenSea tweeted its objections but did not specify which exchange:
Magic Eden later responded to the above argument with a link reiterating the OpenSea incident sued by NFT owner Bored Ape for having NFT stolen due to an interface vulnerability.
In his team’s view, Magic Eden co-founder and Chief Technical Officer Sidney Zhang said that the marketplace plans to transition to a custody-free model at some point—but current solutions aren’t adequately secure.
“We are actively exploring escrowless models and plan to move to an escrowless model, but we believe the current smart contracts to implement escrowless mode that other marketplaces use are unsafe,” he wrote. “There are many security implications of this transition, and we want to do it carefully to ensure that our users do not get their assets inadvertently lost through stale listings.”
Aside from concerns about the escrow model, Magic Eden also faces scrutiny in how the exchange operates and how third-party applications and protocols collaborate with the exchange.
The discussion became more engaging last week thanks to a viral Twitter thread from a user named Pland:
According to some developers, the contract change caused Magic Eden to sign every platform transaction, which was impossible 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 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 was rolled out so that we can maintain core site reliability and reduce botting that would jeopardize our users’ listings and trades. We very much welcome the ecosystem to take part in our 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. A representative from hyperspace commented:
“We were surprised to learn they were doing this, because it’s completely centralized with no plausible benefit to end users. It’s in fact detrimental to users, as it increases reliance on their servers and consequently leads to an increased failure rate of transactions.”
Another source said that Magic Eden contacted Hyperspace before the policy change, “threatening to shut down if we don’t change our platform to bring them full benefits/services.”
Soon after, Magic Eden denied this allegation:
“We categorically deny threatening them in these discussions. We encourage our partners to integrate with Magic Eden as deeply as possible in order to provide the fullest technical and operational support possible. Unfortunately, Hyperspace was not interested in such a partnership and has been antagonistic since.”
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 NFTs — was criticized for being very similar to Blocksmith Labs’ Mercury tool.
Magic Eden argues that the company implements additional features based on user requests and dismisses the centralization argument.
Criticisms of Magic Eden are still growing, but it remains to be seen whether many NFT projects will retire from the floor and choose to relocate to another site and whether notable collectors will choose to withdraw from the exchange or not.
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