Solana Community Divided on $ME Tokenomics Announcement - Why?

Magic Eden, a multi-chain NFT and token marketplace, has finally announced the tokenomics for its upcoming token, $ME.

Unsurprisingly, the Solana community expressed polarizing reactions to the announcement. Detractors came out in full force to critique $ME’s token distribution, arguing that Magic Eden is betraying the ecosystem that first brought the platform to relevance.

What are $ME tokenomics and why are the Solana faithful so upset?

At a Glance: $ME Tokenomics

$ME, Magic Eden’s governance and rewards token, will have a total supply of 1B tokens. Similar to Jupiter’s 50/50 Team/Community split, $ME has committed to distributing 49.8% to Magic Eden Contributors and Strategic Participants, with 50.2% going to the community and wider ecosystem.

Magic Eden’s TGE (Token Generation Event) will distribute 12.5% (125M tokens) of the total supply amongst the platform’s loyal users. This makes the Magic Eden airdrop one of the more generous airdrops in the ecosystem. Most Solana protocols, like Jupiter and Jito, distributed 10% of the token supply at launch, with Tensor being the most generous at 15%.

Outside the initial TGE, the remaining $ME tokens are subject to a 4-year emissions schedule. Contributors and Strategic Participant allocations will be locked for 12 months and 18 months respectively, before entering supply through linear vesting.

On paper, Magic Eden’s tokenomic distribution and allocations appear fair, perhaps even generous. Why is the Solana community pushing back?

Did Magic Eden Betray Solana OGs?

While $ME’s token distribution is consistent with industry standards, disgruntled OGs argue it’s a “slap in the face to Solana users”. Network participants believe that Magic Eden is disrespecting the network that originally supported its growth, in favor of chasing attention and capital on other networks.

Solana community members are concerned that the initial airdrop will disproportionately reward Bitcoin Ordinal and Bitcoin Runes traders, who allegedly make up the majority of Magic Eden’s user base.

Responding to these criticisms, Magic Eden ambassador ChartFu asserted that Bitcoin ecosystem traders paid a larger share of fees to the platform than Solana traders. 

Tiff, a fellow Magic Eden team member, promptly countered these arguments. Calling for peace on the timeline, Tiff highlighted that the controversial graphic represented Magic Eden’s trading volume by network and had nothing to do with airdrop allocations.

$ME Up 517% in Weekly Pre-Market Trading

With the token’s total supply now public knowledge, traders can better evaluate token prices to ascertain $ME’s valuation at launch.

Markets reacted positively to Magic Eden’s announcement, with $ME pre-market value rising over 517% on a weekly time frame. However, this new pricing should be taken with a grain of salt. Pre-market trading often suffers from low liquidity and trading volume, making it a poor indicator of value.

Based on pre-market prices, $ME would launch with a circulating market cap of $362.5M. Given Magic Eden’s position as a multichain ecosystem and crypto’s BitcoinFi hub, it’s difficult to compare this valuation to competitors. Magic Eden’s current valuation is dramatically higher than rival NFT marketplace Tensor, but this is a flawed comparison due to Magic Eden’s position in the Bitcoin ecosystem.

While Tiff has stipulated that $ME will launch in a few weeks, the Magic Eden Foundation is yet to announce a specific claim date.

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