Yuga Labs, the company behind the “Bored Ape” series of NFTs has raised around $285 million worth of cryptocurrency by selling tokens which represent land in a virtual world game it says it is building.
Within hours, the sale turned into a disaster that made the company nearly $300 million but bottlenecked the blockchain and burned nearly $200 million worth of Ethereum as prices and transaction fees skyrocketed.
The plan was to offer 55,000 NFTs for digital land in the metaverse each for 305 Ape Coin (APE)—a token ostensibly developed at arms-length by Yuga Labs that has already had its own tumultuous launch. Only wallets owned by people who registered their personal information before April 25 were eligible for Yuga Labs’ sale. APE was worth $19, so buyers were expected to fork over $5,800 per NFT, on top of fees. Tokens raised in the sale would then be taken out of circulation for a year.
The main problem for the Otherside mint was gas fees, which are aimed at covering the computational cost of verifying transactions within Ethereum’s proof-of-work protocol. In Ethereum’s current iteration, the “base fee” of a given transaction is burnt—or sent to a dead-end address—with any extra tip going to the miner to incentivize faster confirmation. These fees can skyrocket ahead of high-demand events where individuals want transactions completed faster. In such situations, “gas wars” can emerge where gas fees can climb as users pile in, raising transaction fees for everyone using Ethereum and bottlenecking the network due to the load.
In an online sale on April 30, Yuga Labs sold NFTs called “Otherdeeds”, which it said could be exchanged as plots of virtual land in a future Bored Ape-themed online environment called “Otherside.” The “Otherdeeds” could only be bought using the project’s associated cryptocurrency, called ApeCoin, which launched in March.
There were 55,000 Otherdeeds for sale, priced at 305 ApeCoin each, and the company wrote on Twitter that these had sold out. This means the sale raked in 16,775,000 ApeCoin, worth around $285 million as of Sunday, based on the price of ApeCoin on cryptocurrency exchange Coinbase at 1210 GMT.
It was not clear how the funds would be distributed, although the company said the ApeCoin would be “locked up” for one year.
However, a gas war began , as soon as the 9 PM ET sale kicked off. 64,219 ETH was burned over the weekend on transaction fees according to Etherscan—that’s over $180 million at today’s prices, most of which is now gone forever due to Ethereum’s burn. On top of the huge sum of resources wasted because of this project, transaction fees all across the Ethereum network skyrocketed.
Besides high fees, the transaction load resulted in a bottleneck that resulted in failed transactions that people still had to pay fees for—now in the thousands of dollars for nothing in return, not even an NFT.
The sale indicates the continued high demand for speculative, high-risk crypto assets related to online virtual worlds. NFTs are largely unregulated, and reports of scams, fakes and market manipulation are common.
Yuga Labs declined to say how many people were working on building Otherside or when it would be launched.