This past weekend, the crypto media business Yuga Labs organized what was very definitely the largest non-fungible token (NFT) launch in Ethereum blockchain history: a sale of virtual land in a planned metaverse area named Otherside.
The company made roughly $300 million in income by selling tokens attached to 55,000 individual plots of land for around $6,500 apiece. (The NFTs were priced entirely in ApeCoin, Yuga Labs’ official cryptocurrency, whose volatility makes a precise figure difficult to determine.)
The transaction also served as an unofficial investment round for the firm, which had already secured $450 in blue-chip venture capital.
For the uninformed, Yuga Labs is the firm behind the Bored Ape Yacht Club, the crypto ecosystem’s world ’s most valuable NFT collection. In promoting the Otherside property sale, the corporation didn’t even have to specify what it planned to do with the money; the fact that it was close to the Bored Apes was more than enough cause for investors to buy in.
Despite a succession of system-breaking failures, they bought in.
Ethereum is a famously shaky network with a fee scheme meant to enhance payouts for miners as the blockchain becomes more active. (Because each block on the chain can only hold a fixed number of authenticated transactions, traders can choose to pay extra in fees in exchange for the benefit of being at the front of the queue.) Fees were high during Saturday night’s Otherside auction, as was activity: dealers paid almost $100 million in fees alone.
Because all outstanding payments on Ethereum are queued up in one big list, what clogs a single NFT project can choke the entire network. Even basic cryptocurrency transactions cost thousands of dollars in fees at times.
As a result, the $6,500 buy-in was effectively increased — only investors with liquid crypto could participate in the land rush. And Bored Ape owners got to bypass the whole thing, claiming free Otherside NFTs whenever they wanted as petrol costs fell to normal levels. Jimmy McNelis, a notable Ape investor, talked about paying only.88 ETH in fees to claim 144 Otherside property holdings.
As a result, Otherside consists of a pre class of landed elites. It was significantly simpler for a Bored Ape owner to stake a claim in Yuga Labs’ metaverse than for any other type of NFT whale; for traders lacking hundreds of millions of dollars already committed in this realm, it was practically impossible. (On the secondary market, a single Otherside NFT now costs around $11,000.)
If, as proponents of the metaverse such as Mark Zuckerberg anticipate, the creative economy moves into virtual online places like these, we’ll all be working on Ape-owned property – virtually a spin on manorialism, the Medieval economic system, with Apes as rulers.
Here’s Yuga Labs’ response
“We’re sorry for turning off the lights on Ethereum for a while,” reads a statement from the company’s Twitter account. “It seems abundantly clear that ApeCoin will need to migrate to its own chain in order to properly scale. We’d like to encourage the DAO to start thinking in this direction.”
Yuga Labs has been seeking for months to separate itself from ApeCoin and its principal governing body, the ApeCoin DAO, ostensibly for regulatory concerns. According to the theory, if ApeCoin originates from Yuga Labs, it is a type of securities offering and should be regulated as such. However, if it emanates from this nebulous, headless DAO, it should theoretically fall outside the purview of the SEC.
On Twitter, some NFT investors speculated that Yuga Labs may have purposefully knocked down the blockchain in order to get authorization for a completely new network.
Axie Infinity, the most visible example of a blockchain-backed “play-to-earn” (P2E) video game, already functions on a specialized chain named Ronin. Whereas Ethereum utilizes a proof-of-work consensus process to add new transactions to the blockchain, Ronin employs a different technique known as delegated proof-of-stake. It is typically seen as a more centralized system; validators with the most staked crypto will always have the most influence over the network.
A specialized ApeCoin blockchain would confine the Ape economy to a single network. This covers not just the original Bored Apes, but also spin-off collections (Mutant Apes, Bored Ape Kennel Club) and any other non-Ape assets held by Yuga Labs, such as CryptoPunks and Meebits.
Even though Yuga Labs does not formally “own” the hypothetical ApeCoin blockchain, the corporation will nonetheless effectively run the DAO. Why not just build a private cloud server at that point?
It’s no surprise that traders are irritated with the Otherside fiasco. The affluent become richer, ostensibly decentralized systems continue to consolidate, and the venture capital companies behind Yuga Labs are ready to further increase their hegemony in the field.