Magic Eden’s Coinbase Account Used to Bear “Significant” Dust Fees

Key Points:

• The platform shifted small transaction fees to Magic Eden’s Coinbase account, making Coinbase handle the consolidation costs.
• Coinbase integrated 92,400 small inputs a day from Magic Eden, resulting in significant fees and losses.

In a recent revelation, Danny, the founder of Deezy, highlighted on social media platform X, that NFT marketplace Magic Eden executed a clever maneuver against Coinbase. Danny described this move as one of the “most hilarious finesse moves” he had seen.

Magic Eden’s Coinbase Account Leads to Exchange Losses

Magic Eden‘s strategy involved attaching tiny outputs for marketplace fees to each transaction. These small outputs, ranging from 1,000 to 2,000 satoshis, are inexpensive to create but costly to consolidate later. This clever tactic shifts the burden of managing these outputs onto Coinbase rather than Magic Eden itself.

Instead of using its own address to collect these small unspent transaction outputs (UTXOs), the platform directed them to Magic Eden’s Coinbase account. Consequently, these numerous small deposits went into Magic Eden’s Coinbase account, making the exchange responsible for the integration and consolidation fees.

Controversial Tactics in Crypto Transaction Management

Supporting this, Mempool founder @mononautical noted that in the past 24 blocks, Coinbase Prime had to integrate 92,400 small transaction inputs from Magic Eden’s address. These were spread over 308 transactions, incurring fees at a rate of approximately 7 satoshis per virtual byte (sats/vB). The total cost amounted to roughly 0.59 BTC in fees to recover about 1.75 BTC.

This scheme resulted in significant losses for Coinbase, attributed to its large scale and slow response. Danny commented that Coinbase, due to its size and operational sluggishness, failed to recognize and efficiently manage the consolidation of these transactions, leading to substantial financial losses.