After the controversy over permissions, how does X2Y2 challenge OpenSea?

Author: Kyle, Hive Tech

After LooksRare, another OpenSea challenger, X2Y2, has arrived. Last week, X2Y2 announced an airdrop of X2Y2 tokens to over 860,000 OpenSea trading users and launched a "listing mining" reward mechanism.

This early incentive activity attracted many users to participate. However, a risk warning from crypto community KOL Shen Yu made users anxious. On February 18, Shen Yu stated on social media that there is a theoretical risk that X2Y2 could transfer users' NFTs by upgrading the contract. The lack of a contract audit report on the X2Y2 official website further fueled controversy.

Under pressure from influencers and users, this authority issue ultimately concluded with X2Y2 upgrading to a multi-signature wallet and adding a time lock. Now, the new platform's capability to challenge OpenSea has become a new topic of discussion.

From the white paper, X2Y2 attempts to enhance its competitiveness through token incentives and product improvements. In terms of more notable product aspects, X2Y2's main improvements include support for bulk listing and purchasing of NFTs, real-time notifications, and NFT rarity integration. According to the roadmap, it will also gradually support features such as allowing users to hide NFTs, updating OpenSea prices on the page for comparison, collection publishing, and promotional functions. The long-term goal of this trading market is to provide an immersive interface experience using 3D/VR technology and achieve Layer 2 deployment.

From the planning perspective, X2Y2 aims to provide a better product experience. However, most of the planned features have not yet been launched, and users still need to pay attention to the follow-up implementation. Additionally, with a large user base already accumulated on OpenSea, whether X2Y2's related improvements are sufficient to entice users to migrate remains an unknown.

KOL Questions X2Y2's Authority Issue Sparks Controversy

Last week, the NFT market became much livelier due to X2Y2's entry. This new NFT trading market emerged as a competitor to OpenSea, and its initial launch method was similar to another competitor, LooksRare, which also airdropped tokens to OpenSea trading users to attract traffic.

On February 16, the NFT trading platform X2Y2 announced that it would distribute 12% of X2Y2 tokens (120 million tokens) to users with historical transactions on OpenSea. According to statistics, about 860,000 addresses are eligible for the airdrop, of which users with a trading volume of no less than 30 ETH on OpenSea can claim 1,000 X2Y2 tokens; users with a trading volume between 0-30 ETH can claim airdrop amounts proportional to their trading volume.

However, X2Y2 set conditions for claiming the airdrop. To increase liquidity for this new trading market, the platform requires users to list a certain number of NFTs on X2Y2 before they can claim the airdrop, and the listed NFT prices cannot exceed the prices set by users on OpenSea. Depending on the airdrop amount, there are different requirements for the types and quantities of NFTs users need to list. For example, users claiming 1,000 X2Y2 tokens need to list at least 5 different NFT series or 50 different NFTs.

Since the previous airdrop from LooksRare allowed many NFT traders to profit, this time X2Y2's airdrop activity attracted considerable attention. According to Dune Analytics, as of February 21, 3.96% of eligible addresses had claimed 18.52% of the airdrop, with 42.94% of addresses claiming 1,000 X2Y2 tokens.

For users who are not eligible for the airdrop, X2Y2 offers a "listing mining" reward method. According to the rules, the platform will distribute nearly 450 million X2Y2 tokens (45% of the total supply) over 720 days to reward users who list NFTs on the X2Y2 market.

The "listing mining" gameplay attracted many NFT players, quickly enhancing X2Y2's market liquidity. However, on February 18, Shen Yu, the founder of the Bitcoin mining pool Fish Pool and a crypto community KOL, revealed on social media that the smart contracts deployed by X2Y2 had issues with excessive administrator permissions.

Shen Yu stated that, after consulting with technical personnel, there is a theoretical possibility that X2Y2 could transfer users' NFTs by upgrading the contract after user authorization. In response to other users, Shen Yu clarified that this is not a "vulnerability," but rather a "privilege," stating, "If not pushed, no one is willing to give up privileges." Another user observed that the X2Y2 official website did not list a contract audit report, which deepened suspicions.

Following Shen Yu's revelation, concerns about asset security surged. Subsequently, X2Y2's official response stated that to reduce risks, the management permissions of the contract had been transferred to a Gnosis multi-signature wallet. Later, Shen Yu confirmed that the authorized contract had indeed been transferred to multi-signature and called for the project team to add a time lock.

Under the urging of Shen Yu and many users, on February 20, X2Y2 completed the multi-signature upgrade and added a time lock. Shen Yu then stated on social media, "You can mine with peace of mind now."

This controversy, sparked by the excessive authority of the official team, has temporarily come to a close. However, within less than a week of its official launch, X2Y2's market buzz has gradually cooled from the initial heated discussions. From the market performance of the tokens, X2Y2 peaked at $4.12 on February 18, but by February 21, it had dropped to $1.23, a decline of over 70% from its peak.

Is the Attraction of Rewards or the Competitiveness of NFT Trading Platforms?

Compared to the recent momentum of LooksRare, which once surpassed OpenSea in trading volume, X2Y2 has not shown impressive results in trading volume. According to data from DappRadar, X2Y2 is not listed in the NFT trading market rankings, and its official website does not display real-time trading volume performance.

It may still be too early to judge X2Y2's competitiveness. Its customer acquisition incentives and goals differ from those of LooksRare in the early stages.

LooksRare was able to surpass OpenSea in trading volume shortly after its launch due to its trading mining mechanism. According to the rules, any user trading on the LooksRare platform can proportionally earn platform tokens (LOOKS) as rewards, which led to a frenzy of user activity and created a certain degree of false prosperity. After LOOKS dropped from a peak of $7 to below $2, the platform's trading volume also significantly shrank due to reduced trading rewards.

X2Y2's approach leans more towards enhancing overall liquidity in the NFT market. Whether it is setting listing conditions for airdrop users or providing "listing mining" rewards, it shows its intention to rapidly increase liquidity. To facilitate users in listing NFTs more conveniently, it has launched a "import from OpenSea" feature, allowing users to bulk list their NFTs listed on OpenSea.

As of February 21, data shows that there are a total of 506,200 NFTs for sale on the X2Y2 platform, which is quite good for a newly launched NFT platform, but there is still a significant gap compared to OpenSea, which had over 28.06 million NFTs listed on the same day.

Whether it is LooksRare or X2Y2, early use of tokens as incentives can certainly attract attention in a short time, but based on past experience, the traffic effect brought by incentives tends to weaken over time. Especially during the incentive period, it is difficult for X2Y2's liquidity to be on the same level as OpenSea, which raises higher demands for its challenge against OpenSea.

From X2Y2's white paper, it is evident that it is well-prepared to challenge OpenSea, focusing on token rewards and product functionality to enhance its competitive level.

Similar to LooksRare, one of X2Y2's main selling points is still "decentralization." Unlike OpenSea, which aims for an IPO, X2Y2 plans to share 100% of market transaction fees with users who stake X2Y2 tokens. The difference is that LooksRare only airdrops tokens to users with trading volumes exceeding 3 ETH on OpenSea, while X2Y2 has no trading volume threshold, allowing all users with trading history on OpenSea to claim the airdrop.

Using airdrops and rewards to compete for OpenSea's traffic is no longer a new strategy. As one challenger after another has employed this tactic, its appeal is diminishing. More colloquially, offering rewards to platform contributors seems to have become a standard feature for new challengers and does not constitute a key factor in changing the competitive landscape.

From an external perspective, innovation in product functionality, upgrades in trading experience, and security are the more persuasive competitive highlights.

In this regard, X2Y2's main improvements shown in the white paper include support for bulk listing and purchasing of NFTs, allowing users to list multiple NFTs at once and purchase multiple NFTs at once. This functionality enhances convenience to some extent and saves users' gas fees. Additionally, the trading platform supports real-time notifications, reminding users of NFT price changes and instant trading information via email. Rarity integration is also one of the improvements, allowing users to browse NFT rarity characteristics without installing an extension, with plans for this feature to be launched soon.

Furthermore, X2Y2 has set multiple segmented goals based on short-term, medium-term, and long-term timelines. These include supporting users in hiding NFTs, updating NFT prices on the page for comparison, providing price and floor price analysis charts, ENS integration, offering additional features for X2Y2 official NFT holders, collection publishing, and promotional functions. The long-term goal of this trading platform is to provide an immersive interface experience using 3D/VR technology and achieve Layer 2 network deployment.

Overall, X2Y2 aims to enhance users' trading experience through functional expansion. It is important to note that currently, most of the planned features are still in the white paper stage, and users need to pay attention to the follow-up implementation.

Another competitive point worth noting is security. OpenSea, which has been online for many years, has experienced multiple security issues.

In October last year, OpenSea had a security vulnerability that allowed hackers to potentially send malicious NFTs to hijack users' OpenSea accounts and steal their assets. On February 20 of this year, during an upgrade of the smart contract, 32 users fell victim to phishing attacks that resulted in their NFTs being stolen.

Shortly after OpenSea users were attacked, X2Y2 announced the launch of an anti-phishing code feature, allowing users to set unique anti-phishing codes for identification in emails to avoid "phishing attacks."

From X2Y2's planning in terms of token incentives, product planning, and security, it attempts to address the shortcomings displayed by trading platforms like OpenSea or LooksRare. The question remains, with a large user base already established on OpenSea, are these improvements sufficient to win users' favor? Will its product plans be implemented on time? Various uncertainties may pose challenges to X2Y2's development.