Yuga Labs launched a land sale for its upcoming metaverse project Otherside Saturday night, which quickly morphed into a gas war — and broke Ethereum.
As part of their psychedelic-fueled business plans, Yuga Labs offered 55,000 NFTs called “Otherdeeds” for 305 APE each ($5,800, at the time). Apecoin was the only crypto accepted for the minting.
The sale, which started on April 30, at 9 p.m ET, immediately became a land grab for the rich. People paid between 1.3 ETH to 1.9 ETH ($3,500 to $5,500), on average, just to get their transactions to go through. Some even paid 5 ETH ($13,500) and higher — double the cost of the land itself.
The high fees lasted several hours, making Ethereum virtually unusable for any other projects. [Reddit]
By the time the sale was over, Yuga Labs netted 16.7 million APE ($310 million), helping to recentralize a coin they can then claim is decentralized. All of the APE acquired in the sale are locked up for one year.
Ethereum — a “world computer” — ambles along at 15 transactions per second. You have to pay a fee, called “gas,” to Ethereum miners to process transactions.
When transaction volumes are high, miners get to selectively process only transactions paying the highest gas fees. The higher the gas fee you are willing to pay, the better your chance of having a miner include your transaction in the next block on the blockchain.
If you happen to pay too low a gas fee, your transaction will fail, and you lose your gas money. The Otherdeed mint saw lots of failed transactions. [Dune]
Originally, Yuga Labs were going to do a Dutch auction.
In a Dutch auction, also known as a descending price auction, you determine the price of something after you collect all of the bids. Bidders indicate how much they are willing to pay for an item and the number of items they want to purchase at that price. If there are insufficient bids to sell all of the items, you lower the price until you find a price that works for everyone.
The phrase dates back to the 17th century when Dutch auctions were used to sell fresh flowers in Amsterdam.
However, Yuga Labs decided to scratch that plan at the last minute because — “Dutch auctions are bullshit.” [Otherside blog post]
Instead, they opted to sell the land to pre-approved KYC’d wallets for a flat price of 305 APE.
There were concerns from the beginning about a gas war erupting. Yuga Labs assured everyone that everything would be fine, because they were going to do the sale in waves, initially limiting the number of mints to two per wallet “to ensure as broad a distribution as possible and dramatically soften the potential for a massive gas war.”
The plan failed, and the mint consumed over $177 million in gas fees. Only those with enough ETH on hand got the land. So much for wide distribution. [Etherscan]
Demand for NFTs was so high that even Etherscan crashed, said Yuga Labs. [Tweet]
Yuga Lab’s smart contract had no gas optimizations at all. They waited until the last minute, and then uploaded poorly written crap to the Ethereum blockchain.
Yuga Labs say they’re sorry for the whole mess, and they promise to do better next time. [Twitter]
They also said that they will refund any failed transaction fees. [Tweet]
Yuga Labs’ business acumen consists of finding a reliable pool of suckers who they squeeze regularly for more money. Their business acumen does not extend to any form of technical competence or even how to run an auction. But it does exactly the job it is supposed to do: it gets them their money. In that sense, the land mint was a success.
In collectors’ hurry to mint the metaverse land NFTs, some inevitably fell victim to phishing sites. Crypto sleuth Zachxbt found scammer wallets that netted $6.2 million in stolen NFTs. [Twitter]
Otherside, a massively multiplayer online (MMO) game that Yuga Labs is working on with partner Animoca Brands, doesn’t even exist yet. At this point, they just have a website with a trailer with The Doors’ “Break on Through” playing in the background.
Yuga Labs is now talking about developing their own blockchain to alleviate network congestion problems in the future.
Ethereum doesn’t work for the job it’s intended to do, even though a16z, Yuga Lab’s backer, keeps talking up Web3 as the future of the internet.
As a result, blockchain game developers often resort to creating their own blockchains. Dapper Labs eventually moved CryptoKitties over to a new blockchain called Flow, after the game caused Ethereum to slow to a crawl in 2017.
Axie Infinity, another popular game, created a new blockchain called Ronin. However, they had to create a bridge so that Ethereum tokens, in the form of WETH, could be used on Ronin. The result was a $600 million hack. Bridges are a risky proposition. David Gerard calls them smart contract Pinatas.
In addition to the 55,000 Otherdeeds it sold on Saturday, Yuga Labs plans to airdrop another 45,000 land parcel NFTs to Bored Ape and Mutant Ape holders, as well as Yuga Labs and other project developers. Another 100,000 parcels are expected to be awarded later to certain Otherdeed NFT holders, according to the Otherside website. [Otherside FAQ]
If you missed out on buying an Otherdeed NFT on Saturday, several are currently being flipped on OpenSea for a floor price of 6.5 ETH ($17,000).
APE, which was trading as high as $26 before the land sale, has tumbled to $17.
(Update: In an earlier version of this story, I said Yuga would refund gas fees for Otherdeed purchases. They will only refund failed transaction fees.)
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