Magic Eden Rivals Say NFTs on Solana’s Biggest Marketplace Are at Risk

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Decrypt
18w ago2022-08-01

In brief

  • Leading Solana NFT marketplace Magic Eden has faced growing criticism about recent platform changes and its escrow-based trading model.
  • Magic Eden defended its API changes in comments to Decrypt and said that it plans to switch to a non-escrow system in the future.

There’s no bigger player than Magic Eden in the Solana NFT space. Launched last fall, the marketplace routinely commands 90% or more of all trading volume on Solana and has turned that dominance into a $1.6 billion valuation as of its latest VC funding round in June.

But as Magic Eden’s star rises, members of the Solana NFT community—both builders and collectors alike—are increasingly sharing concern that the platform has become much too “centralized” on its way up. They point to recent changes that limit access from third-party aggregators and tools, as well as the way Magic Eden manages its custody of users’ NFTs—which could leave users’ assets vulnerable to attack.

“People should be 100% aware that a hacker could get the keys to Magic Eden and ‘rug’ everyone of their NFTs,” Marty, pseudonymous founder of Zion Labs, which makes Solana NFT tools, told Decrypt. “This wouldn’t happen if it was decentralized and if their code was open-source.”

In comments sent to Decrypt, Magic Eden didn’t specifically address the perceived risks of its escrow-based trading model, but said that it believes the alternative is currently less safe for users. The marketplace plans to embrace an escrow-less system in the future, but doesn’t believe that the tech is secure enough yet.

Escrow or no?

Discussion over Magic Eden’s policy of holding users’ listed NFT assets in an escrow wallet isn’t new, but the debate is picking up steam. Magic Eden takes custody of all listed assets rather than allowing them to remain in users’ own wallets, and user NFTs are held in an escrow wallet via the marketplace smart contract.

That practice was common in the early days of the Solana NFT market, but more recent entrants to the Solana ecosystem—like OpenSea and Hyperspace—do not take that approach. When you list a Solana NFT for sale on those marketplaces, it remains in your wallet.