NFT news: BAYC breaks Ethereum, OpenSea accepts APE, NFTs are like Papyrus

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Yuga Labs had their massive land NFT sale for their Otherside MMO, which doesn’t even exist yet. The sale, on April 30, was a mess for anyone trying to buy, but a complete success for Yuga, which netted $320 million in APE. Ethereum became unusable for other projects during the sale. [Amy Castor]

Yuga Labs say they have refunded everyone for failed transactions — but those who paid ridiculous gas fees for transactions that did go through are stuck with the cost. [Tweet]

In total, Yuga spent 90.57 ETH ($265,000) on roughly 640 refunds. The largest individual refund was 2.6 ETH ($7,500). [Etherscan]

On Reddit, u/Atariconcarne has the perfect analogy: “It is like paying for your cheeseburger combo with a credit card and the guy with the paper hat at the register saying ‘Your 5 bucks transaction fee wasn’t enough. Want to try again for 10?’” [Reddit]

Ethereum doesn’t work, sure, but this is also what happens when you change plans at the last moment and upload crap to the blockchain. Yuga Labs’ smart contract had no optimizations for gas fees. [Tweet

If Yuga Labs can’t pull off a land auction without putting buyers through hell, how are they going to create an MMO? I expect Otherside to work at least as well as Axie-Infinity, which netted the DPRK $600 million. Bridges are the smart contract pinata!  

Burn it with fire!

Speaking of Axie, the Ronin hackers are laundering their funds through Tornado Cash. Nicholas Weaver argues that Tornado Cash needs to be sanctioned to prevent the DPRK from profiting from the theft. Let’s hope someone from OFAC reads his post and takes action. [Lawfare]

$450 million of WETH in users’ Ronin wallets is still unbacked. After VCs put in $150 million to stabilize the situation, we haven’t heard anything from Sky Mavis on how they are going to fix this yet. In March, they promised all users would be refunded.  

Axie-Infinity resembles a multi-level-marketing scheme. u/ale23arg on Reddit talks about how he earns income as a scholar: “im a manager in the US as well i peaked at about 22 scholars and now im holding around 12….” [Reddit]

Bored and empty

Bored & Hungry, the Bored Ape-themed burger pop-up in Long Beach, Calif., was only planning on being open for 90 days. Now, much to the horror of their neighbors, they have officially announced: “We are here to stay.” [Amy Castor, Instagram

The Chronicle’s Cesar Hernandez visited Bored & Hungry for a bite. “What’s most infuriating to me is that this restaurant model inspires the same hollow dread as some ghost kitchens. It’s a soulless attempt to capture the zeitgeist, combining pop culture with food trends.”

Whilst there, he asked one of the cashiers what he knew about NFTs: “He looked at me with a puzzled expression. ‘Not much, I just got hired to work here.'” [Chronicle]

While the pop-up opened with long lines, that’s apparently no longer the case. “I drive by this every day, and it’s almost completely empty,” Michael Narciso, who lives in the area, tweeted.

The NFT market is flatlining!

The Wall Street Journal’s Paul Vigna reports that “the NFT market is collapsing,” with daily average sales down 92% from a peak in September, according to data from NonFungible. [WSJ]

Believe me, I wish the NFT market would collapse, but it’s important to take these reports with a grain of salt — VCs are still pumping huge money into the space. They have investments to cash out on! 

To prove his point, Vigna pointed to a Snoop Dogg curated NFT that sold in April for $32,000 in ETH. It’s now up for $25.5 million ETH, and the highest current bid is for $210, he said.

This isn’t a great example, said Molly White. The original $32,000 sale was WAY higher than most resales of NFTs from this collection. Weird, but “less weird if we assume the original minter is wash trading.” [Twitter thread]

Enuff with celebs promoting NFTs

Last month, Tonight Show Host Jimmy Fallon, who also owns a Bored Ape NFT, tweeted about Moonbirds. He also changed his Twitter profile photo to a Moonbird owl — previously, it was a Bored Ape. Nobody will say if Fallon received a free Moonbird or not. [Buzzfeed]

Fallon isn’t alone. There is a long list of celebs mysteriously acquiring high-value NFTs and giving fans the (false) impression that they purchased these as an investment. A more likely scenario: they received the NFTs as gifts in exchange for promoting the projects. This is wrong and bad on many levels.

“Withholding such material information is illegal, and both the company and the influencer are on the hook for such deception,” Bonnie Patten, the executive director of consumer advocacy group Truth In Advertising, told BuzzFeed.

How are dozens of celebs acquiring Bored Ape NFTs? Are they getting them as gifts, without saying they are getting them as gifts? Because if that’s what’s happening, it’s a real sleazeball way of promoting the project. [Amy Castor]

Other stuff

Reddit co-founder Alex Ohanian, who owns a pile of APE and sits on the APE DAO foundation, compares NFTs to papyrus and the Gutenberg Bible. We only need to wait a few thousand years for NFTs to reach their full potential. The quote tweets on this are just fantastic. [Tweet]

OpenSea has started accepting APE. Why? Because the NFT marketplace is backed by a people (Coinbase, Creative Artists Agency, a16z, Ashton Kutcher) who stand to make a lot of money on APE. No surprise here. [Decrypt]

A few weeks ago, David Gerard wrote a popular story on how VCs cash out on the securities-fraud-as-a-business model. Everyone should read this — and then read it again. [David Gerard]

Apecoin shoots up 19% after Elon Musk provides a practical demonstration of how stupid NFTs are. (Hint: he changes his twitter profile pic to a collage of Bored Apes.) [CNBC] 

Asked on Reddit what the difference is between Zuck’s Metaverse and the old Second Life, u/AnimalFarmKeeper responds: “Second Life was as the name suggests an adjunct to the real lives of people. The Metaverse is largely touted as a place for those with no life.” [Reddit]

Last month, Zackxbt posted a leaked list of NFT and crypto shills. Vice reached out to the shills to learn more. Some get paid pretty well! Ashley Duncan is “earning more than she’s ever made in her life, pulling in more in two months than she used to make in an entire year by creating NFT projects, performing occasional consulting work, and pumping crypto.” [Vice]

Policy expert Elizabeth Renieris went on nonprofit ACT-IAC’s The Buzz podcast to dispel myths about Web3 for the government technology community. [The Buzz]

Coinbase opened up its NFT marketplace beta to the public, but so far, it’s hardly seeing the mad rush of users that was expected after bragging about all those early signups. [Bloomberg]

Kraken also wants to get in on the gold rush. It’s launching an NFT marketplace with zero gas fees. [Decrypt]

Me in the news 

I wrote a story for Artnet News on DAOs and the art market. Art dealers are seriously concerned about selling work to DAOs — their biggest fear is that the project will destroy the work and turn it into an NFT, so it only lives in the virtual world. [Artnet News, paywalled]

In another story for Artnet News, I spoke with several lawyers to get their feedback on a UK judge reportedly announcing that NFTs are property. Hint: Yes, NFTs are property. But there is nothing here that says if you own a token, you also own the thing the token points to. [Artnet News, paywalled]

Yuga Lab’s Otherside land sale turns into a giant gas war

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. 

Gas fees

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]

What happened?

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]

What’s next? 

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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