Upstart’s Vampire Attack on OpenSea Fizzles After Technical Issues and Criticism
A vampire attack on OpenSea was largely thwarted by an unusual cause — the upstart's own technical failings.
By: Samuel Haig •DeFi News
OpenSea, the Leading NFT marketplace, is again under vampire attack, this time from new rival, x2y2. But the assault quickly stalled after a number of technical glitches halted an airdrop and triggered accusations that the project was manipulating the price of its token.
With its centralized structure and market dominance, OpenSea is a target for upstart marketplaces. x2y2 estimates that OpenSea represents 90% of all NFT transactions. OpenSea also takes a hefty 2.5% fee from all trades executed on its platform.
In a bid to break OpenSea’s “monopoly” over the NFT markets, x2y2 announced on Feb. 16 that it was planning to airdrop its newly launched X2Y2 token to all wallets that used OpenSea before 2022. Wallets must also list NFTs for sale on the x2y2 marketplace to be eligible for the airdrop.
The launch of the X2Y2 token has been anything but smooth. A slew of technical issues prompted its team to pause the airdrop within one day of its launch it plans to resume the handout within 48 hours.
But users have taken aim at x2y2’s decision to continue distributing staking rewards even though only meager 7% of eligible wallets have claimed their X2Y2 tokens so far.
Roughly three hours after launching its marketplace and beginning the airdrop, x2y2 tweeted that the platform was experiencing delays in registering and showing NFTs listed on its platform.
x2y2 also noted it had moved its admin role to a multisig account with Gnosis after security concerns were expressed by the community. Twitter user “YannickCrypto” urged the team to take action after tweeting that x2y2 would be able to drain all NFTs from collections that users approve to be accessed by the protocol.
But issues continued to mount for x2y2. The team announced it had paused the airdrop just a few hours later.
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The team noted that signature errors had resulted in the small number of users whitelisted for the airdrop being able to claim their tokens. They also confessed to failing to adequately scale their servers, asserting that such was causing many NFTs not to display properly on the platform. x2y2 claims its signature errors and server constraints have already been rectified.
They also expressed concerns regarding a high volume of low-quality NFT listings on the platform. The team conceded that the issue likely resulted from a lack of trust in the protocol, asserting that SECBIT Labs is expected to have completed its audit of x2y2 within the next two days.
x2y2 plans to distribute 12% of its token supply once the airdrop has been resumed.
“It’s not a good look to wait around for more people to buy in to increase the price before they get dumped on prior to resuming the claiming.”
The decision to pause the airdrop has attracted criticism from the protocol’s users, attracting accusations that the move was intended to alleviate downward pressure on the price X2Y2.
On Twitter, 0xDelt questioned why the drop hasn’t been resumed despite the team claiming to have rectified most of the problems encountered. “It’s not a good look to wait around for more people to buy in to increase the price before they get dumped on prior to resuming the claiming,” they commented.
Thirdmedium criticized x2y2’s decision not to pause its staking rewards alongside the airdrop, asserting that the airdrop’s design incentivizes users to “claim, dump, and move back to OpenSea.”
“If you look at the chart… everyone dumped,” they added.
Dom_0x chimed in, asking, “how are you expecting not nuking your launch while walling off users to be able to claim & stake while still printing 5 digit % APY on staking?” 3volve added: “Pause rewards or allow the airdrop. You can’t alienate the majority and expect success.”
X2Y2 has slumped 16.4% from its all-time high in 12 hours, last changing hands for $3.57 according to CoinGecko.
x2y2 is not the first NFT marketplace to launch a vampire attack targeting OpenSea. Last month, LooksRare launched its own campaign to siphon users away from OpenSea, with an airdrop to wallets that had traded at least three ETH worth of NFTs on the platform during the second half of 2021.
LooksRare’s 2% trading fee was also being redistributed to users in the form of its LOOKS governance token. Rewards were halved last week after LooksRare’s first 30 days of operating.
Although LooksRare was successful in attracting a dominant share of NFT volume away from OpenSea, critics have pointed to evidence of widespread wash-trading on LooksRare from opportunistic users seeking to game its incentive scheme. Volume on LooksRare has also crashed substantially since the rewards were halved. OpenSea reclaimed its lead in activity this past week.
After tagging a low of $1.54 during its Jan. 10 launch day, LOOKS gained 360% in 10 days to post a record high of $7.10. However, the token has since shed more than 73% of its value, last changing hands for $1.88 according to CoinGecko.
x2y2 sought to differentiate itself from LooksRare in its Litepaper. The team states that, unlike LooksRare, trading volume will not be rewarded with its governance token. Tokenholders can only earn rewards by staking X2Y2, with stakers receiving all revenues generated by the platform’s 2% transaction fee in WETH.
The project also opted against holding a private sale. Instead, an initial liquidity offering (ILO) was held to support its ETH pairing on Uniswap. The ILO distributed 1.5% of X2Y2’s supply at $0.25 each. In its litepaper, x2y2 emphasized that all LP tokens received will be burnt to permanently lock liquidity in the Uniswap pool.