This content is for educational purposes only and should not be considered financial advice or an inducement to buy, sell, or trade cryptoassets.
To ensure smooth trading and prioritize the safety of your Ordinals during transfers, it's important to prepare your wallet by creating a UTXO (Unspent Transaction Output). This guide will walk you through the process and help you understand why it's essential for your transactions on our platform.
What is a UTXO and why is it important?
A UTXO is a payment UTXO that we create in your wallet. It remains in your wallet and is used for fulfilling transactions on the Magic Eden platform. This UTXO serves as a safety measure, protecting your trades from being spent as miner fees, for example. It ensures fully decentralized transactions, giving you peace of mind while trading on our platform.
Preparing your wallet:
Click on the "Prepare Wallet" button: The "Prepare Wallet" option will appear when making a transaction for the first time on our platform. This action will create the necessary payment UTXOs in your wallet.
As a seller on Magic Eden, listing NFTs is entirely free of charge. The process of listing NFTs occurs off-chain, meaning there are no transaction fees associated with it.
Important information
UTXOs and wallet preparation
On Magic Eden, UTXOs play a crucial role in fulfilling transactions. During the prepare wallet step, UTXOs are created in the buyer's wallet. These UTXOs are utilized to construct Partially Signed Bitcoin Transactions (PSBTs) when purchasing NFT Ordinals from a seller.
Dummy UTXOs and their function
To facilitate the swap transaction process, "dummy UTXOs" are generated in the buyer's wallet during the prepare wallet step. These dummy UTXOs are essentially placeholders and serve a specific purpose in constructing swap transactions. However, it's important to note that these dummy UTXOs are immediately consumed and recreated within the buyer's wallet during the swap transaction. As a result, they never leave the buyer's wallet.
Wallet preparation and trading capacity
When buyers prepare their wallets on Magic Eden, they need to pay a transaction fee. This transaction fee covers the cost of preparing the wallet and increasing its trading capacity. The payment made during wallet preparation is a one-time fee that goes to the miners and cannot be recovered.
Dealing with excess dummy UTXOs
Sometimes users may encounter difficulties spending funds from their wallets on Magic Eden due to an accumulation of dummy UTXOs. These dummy UTXOs, while essential for facilitating transactions on our platform, can sometimes accumulate and users may find themselves unable to spend their funds.
Understanding dummy UTXOs
Dummy UTXOs are generated in users' wallets during the wallet preparation process and are used in constructing Partially Signed Bitcoin Transactions (PSBTs). Initially, users will likely have 2-3 of these dummy UTXOs to ensure smooth transactions. However, users may find themselves with a surplus of dummy UTXOs, particularly if they have conducted multiple sweeps of Ordinals collections.
Consolidating dummy UTXOs
While it may be tempting to consolidate these excess dummy UTXOs to streamline wallet management, it's important to note that the cost of consolidation may outweigh the benefits. Consolidating dummy UTXOs would likely incur higher costs than the value of the dummies themselves. Additionally, if users wish to conduct further sweeps or transactions in the future, they would need to go through the wallet preparation process again, potentially creating more dummy UTXOs.
Wallet re-preparation
There are two scenarios where wallet re-preparation may be required on Magic Eden:
Trading on other marketplaces: If a buyer engages in trading on other Ordinals or BRC20 marketplaces, the dummy UTXOs can be consumed. This may necessitate re-preparing the wallet to obtain new dummy UTXOs.
Concurrent buys: If a buyer intends to make multiple concurrent purchases and the number of UTXOs in their wallet is insufficient, re-preparation may be necessary to increase the trading capacity of the wallet.
Confirming a purchase
When you click on the "Buy Now" button and confirm the prompt for a specific item, your transaction is sent to the mempool. This locks one of your payment UTXOs in the mempool, ensuring its availability for the current purchase.
Waiting between purchases
If you wait before making additional purchases without any pending transactions on the Magic Eden platform, you will not need to prepare your wallet again. Each successful buy transaction automatically prepares your wallet for one extra purchase in the future.
Remember, the payment UTXOs are created per wallet. If you switch wallets or create a new one, you will need to go through the preparation process again to generate the necessary UTXOs for safe and secure transactions.