What to know:
- Magic Eden, an NFT marketplace, airdropped a token to loyal users.
- The process of claiming aidrops was convoluted.
- It also created security and privacy risks to users, experts told CoinDesk.
- The token initially soared but quickly tanked.
As a seasoned analyst with over two decades of experience in the tech and finance industries, I’ve seen my fair share of launches – some smooth, others not so much. Magic Eden’s ME token launch falls squarely into the latter category.
Traders on the new NFT marketplace, Magic Eden, who received the ME token were indeed fortunate, but only if they managed to claim their airdrop.
Initially, on Tuesday’s trading, the token’s total valuation reached approximately $15 billion. However, as more people successfully claimed and even sold their airdrops, the valuation significantly decreased. Eventually, it stabilized to roughly $5 billion in fully diluted value.
The initial release of ME’s platform was marked by challenges, which was noticeably different from other recent token releases. On the other hand, Hyperliquid’s HYPE token skyrocketed following its launch in late November. Meanwhile, Move’s newly-launched MOVE token had a more balanced introduction – experiencing spikes at certain points too.
Some viewers interpreted my price movement as a form of retribution for a cryptocurrency project whose unusual airdrop process reportedly flouted standard security protocols, as suggested by three industry experts.
The $ME airdrop serves as an illustration of the pitfalls associated with juggling multiple tasks simultaneously.
— Alex (@AlexOnchain) December 10, 2024
Magic Eden did not respond to CoinDesk’s questions.
Users who successfully obtained a substantial amount of Mystic Ethereum (ME) openly scorned those criticizing their “easy money.” Meanwhile, some expressed disappointment and felt swindled as they navigated Magic Eden’s complicated procedures, believing it had emptied their digital wallets.
The well-known NFT trading platform of Solana had a varied day, managing to navigate the shrinking crypto market for digital collectibles by also offering support for new, eye-catching, and frequently traded NFTs on the Bitcoin blockchain as well.
Security concerns
A similar problem with wallet functionality, which caused complications during my launch, may potentially jeopardize user privacy, suggests an unnamed source within the industry.
Magic Eden designated ME tokens for NFT traders as a recognition for their previous transactions. To claim this reward, these traders were required to either move the private keys from their eligible wallets into Magic Eden’s wallet platform or establish a new wallet on Magic Eden’s app and connect it with their existing ones. This process could unintentionally forge connections between previously independent wallets, potentially compromising privacy.
As a cryptocurrency investor, I typically find that crypto apps allow users to collect airdrops within the wallet they prefer. However, what sets some apps apart is when they pair their token launch with an in-house wallet. This strategy undeniably sparks increased adoption of such platforms, like Magic Eden’s new wallet.
Despite CoinDesk’s discovery, the Magic Eden wallet exhibits some unconventional security measures. It retains users’ recovery phrases and private keys within the app without a straightforward method to erase this data. Although this simplifies the service for users, it contradicts standard practices in wallet design and security.
According to Ogle, a cybersecurity expert known by the alias “crypto-security sleuth,” it’s highly unwise to keep this data anywhere digitally, whether it’s on your personal device or on a company’s servers. The specific location where Magic Eden is keeping the wallet recovery information remains uncertain.
As a researcher, I found that this process unveiled an opportunity for malicious entities to impersonate Magic Eden and target legitimate airdrop recipients.
Magic Eden’s app-generated wallets aren’t straightforward to move to other digital wallet platforms. CoinDesk tried to regain access to a wallet made by Magic Eden on Phantom using the 12-word recovery phrase provided by Magic Eden, but ended up controlling an entirely different account instead.
According to a trusted resource, the issue lies in Magic Eden using a distinct technological infrastructure compared to top digital wallets. This challenge can potentially be resolved by accessing and importing the private key, which is located more deeply within the settings of Magic Eden’s application.
Inexperienced users could potentially transfer their Magic Eden wallets to another application solely by utilizing the 12-word recovery phrase.
As a researcher, I’d like to share my prediction based on the information I’ve gathered: “I don’t expect to discover any funds in there.” This revelation might cause some users to worry unnecessarily, potentially leading them to mistakenly believe that their money is irretrievably lost.
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2024-12-11 01:49