A virtual land sale by Yuga Labs Inc. on Saturday evening raised about $320 million through the sale of virtual land but also caused the processing costs of Ethereum to spike at the same time.
Yuga, the creators of the Bored Ape Yacht Club nonfungible tokens representing digital artwork, sold 55,000 blocks of land in its “Otherside” virtual world, which has yet to launch. Ownership of virtual land, issued as NFTs known as “Otherdeeds,” were sold directly by Yuga for a flat price of 305 ApeCoin, valued at about $5,800.
The problem with Ethereum following the sale was that ApeCoin both resides on the Ethereum blockchain and then sells the Otherdeeds on secondary markets such as OpenSea. As a result of the Otherside activity, the “gas price” or transaction processing cost of Ethereum shot up to about 2.6 ETH or $7,000 per transaction.
The gas price in Ethereum refers to the fee charged for processing a transaction on the Ethereum blockchain. The higher the bid, the quicker the transaction is processed. The problem with the Otherverse NFT drop is that suddenly tens of thousands of additional people were on the Ethereum blockchain, bidding to have their transactions go through.
The spike in the gas fee resulted in some arguably bizarre situations. The Verge reports that some purchases of Otherdeeds paid between 2.6 ETH to 5 ETH ($14,000) in gas fees alone — more than the cost of the NFT– and that by the time the virtual land deeds sold out, buyers had paid a total of about $123 million just to execute their transactions on the Ethereum blockchain.
The spike in Ethereum gas fees resulted in Yuga offering an apology while noting that ApeCoin may need to move to its own blockchain.
We’re sorry for turning off the lights on Ethereum for a while. 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 (@yugalabs) May 1, 2022
The rush to buy virtual land on Otherverse is indicative of the rampant speculation in the NFT market and related markets. Several other companies such as Decentraland and Sandbox have also found success in selling virtual land in their respective metaverses.
Yuga Labs was last in the news in March when it raised $450 million in new funding on a $4 billion valuation from Andreessen Horowitz’s a16z crypto, Animoca Brands, The Sandbox, LionTree, Sound Ventures, Thrive Capital, FTX and MoonPay.