Magic Eden’s $5B Token Airdrop Raises Crypto Wallet Security Questions

Early merchants of NFT market Magic Eden’s new token ME had rather a lot to be pleased about — that’s, if they may entry their airdrops.

Within the first minutes of buying and selling on Tuesday, the token’s absolutely diluted valuation reached $15 billion. However as extra claimants managed to course of – and in some fortunate instances promote – their airdrops, that valuation started to say no. In the end, it got here to an FDV of about $5 billion.

ME’s rocky rollout was in stark distinction to different current token launches. Hyperliquid’s HYPE token instantly went parabolic after launching in late November. And Transfer’s age-old MOVE token had a way more secure rollout – and at occasions even skyrocketed.

Some observers noticed ME’s downward value motion as a reward for a crypto undertaking whose airdrop processing process was extremely atypical and, in response to three business insiders, threatened to violate safety finest practices.

Magic Eden didn’t reply to CoinDesk’s questions.

Merchants who managed to publicly declare ME for 1000’s of {dollars} avoided anybody who dangerous mouths their ‘free cash’. Others complained evidently emptying their wallets as they wade by way of the difficult technique of Magic Eden.

It was a combined day for Solana’s best-known NFT buying and selling platform, which has weathered the erosion of crypto’s digital collectible financial system partly by additionally supporting newer, flashier and better-traded NFTs on the Bitcoin blockchain.

Safety points

The identical pockets points that hampered ME’s launch may additionally threaten customers’ privateness, in response to an business supply who declined to be named.

Magic Eden has reserved ME tokens for NFT merchants as a reward for his or her previous actions. To get their airdrop, these retailers needed to both import the non-public keys of their eligible wallets into Magic Eden’s pockets app, or create a brand new pockets in Magic Eden’s app and hyperlink it to their outdated one. This newest motion doubtlessly creates a privacy-violating hyperlink between beforehand unconnected wallets.

More often than not, crypto apps are content material to let their customers declare airdrops inside their favourite wallets. In fact, most apps do not tie their token launch to an inner pockets. The method has undoubtedly pushed adoption of Magic Eden’s new pockets.

Nonetheless, CoinDesk found some atypical safety practices throughout the Magic Eden pockets. It retains a backup of customers’ restoration phrases and personal keys within the app, with no clear path to delete that data. Whereas this makes the service simpler to make use of, it additionally goes towards established requirements in pockets design and safety.

“It is a actually dangerous thought to retailer these items digitally wherever, whether or not regionally by yourself machine or – worse – remotely on an organization’s servers,” says Ogle, a pseudonymous crypto safety sleuth. It’s not clear precisely the place Magic Eden shops the pockets restoration data.

The method additionally opened up airdrop claimants to assaults by dangerous actors who may pose as Magic Eden.

Wallets created within the Magic Eden app can’t be simply transferred to different pockets purposes. CoinDesk tried to revive a Magic Eden-created pockets on Phantom utilizing the 12-word restoration phrase supplied by Magic Eden. This course of resulted within the verification of a totally totally different tackle.

An business supply stated this was resulting from Magic Eden’s reliance on a distinct technical setup than different main wallets. This may be overcome by importing the non-public key, which is nested deeper in Magic Eden’s app settings.

Not so savvy customers can strive transferring their Magic Eden pockets to a different app utilizing simply the 12-word restoration phrase.

“They will not discover any cash there,” stated the insider, predicting that such customers would panic and maybe wrongly assume their cash was gone for good.