Bitcoin enthusiast Danny unearthed a shrewd and unexpected tactic employed by one of the largest NFT trading markets, Magic Eden, sparking amusement in the community. As per Danny, Magic Eden has been cleverly shifting the cost burden of processing small output transactions onto Coinbase. Ideally, for every marketplace purchase on Magic Eden, there is a tiny output for the marketplace fee. These outputs, even though they are usually small—around 1,000 or 2,000 satoshis—can consolidate over time, making them cumbersome and costly.
By using the Coinbase account address to receive these tiny unspent transaction outputs [UTXOs], Bitcoin’s largest NFT trading market is effectively making the exchange responsible for paying the fees to consolidate them. Lauding the move, Danny explained that it is not only ingenious but also remarkably cost-effective for Magic Eden. By redirecting the burden of transaction fees to Coinbase, Magic Eden is saving on the consolidation costs that would otherwise accumulate with each small output.
What makes this even more amusing is that Coinbase is unaware of the scheme. According to Danny, being a large entity, Coinbase has so far not taken steps to consolidate these small outputs efficiently. As a result, they are inadvertently losing significant amounts of money on fees. The situation has sparked considerable chatter on social media, with crypto influencer Moon Overlord tweeting about Magic Eden’s crafty tactic. As the crypto community marvels at the effectiveness of Magic Eden’s approach, Danny even offered advice to Coinbase on ‘how to fix the issue.’
Bitcoin: Engineers’ Guide On Coinbase’s UTXO Issue
Dear Coinbase, the fix is pretty simple, you can send this to your engineers: 1) Exclude small utxos from your normal withdrawal coin selection. Just ignore anything under like 0.01 Bitcoin 2) Write a separate cron job that is responsible for consolidating your small utxos – it only looks at things under 0.01 Bitcoin and consolidates them at very low fee rates. Luckily you have a big balance sheet so you can afford to wait for low fee environments to consolidate these
This development highlights how large platforms like Coinbase can be outmaneuvered by smaller, more agile entities. Magic Eden’s tactic not only underscores the creative strategies employed by crypto businesses but also raises questions about the efficiency and oversight of larger platforms like Coinbase. Whether Coinbase will catch on and address this oversight remains to be seen, but for now, Magic Eden’s clever move stands as one of the most amusing and cost-effective tactics in recent crypto history.