Yuga Labs raises $320M in virtual land sales, causes Ethereum gas price spike

Yuga Labs raises $320M in virtual land sales, causes Ethereum gas price spike

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A virtual land sale by Yuga Labs Inc. on Saturday evening raised approximately $320 million through the sale of virtual land but also resulted in the processing costs of Ethereum spiking at the same time.

Yuga, the creators of the Bored Ape Yacht Club non-fungible tokens, sold 55,000 blocks of land in its “Otherside” virtual world which is 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 around $5,800.

The problem with Ethereum following the sale was due to both ApeCoin residing on the Ethereum blockchain and then sales of the Otherdeeds on secondary markets such as OpenSea. As a result of the Otherside activity, the “gas price” of Ethereum shot up to around 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 figure bid, the quicker the transaction is processed. The problem with the Otherverse NFT drop is suddenly tens of thousands of additional people were on the Ethereum blockchain, biding 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.

The rush to buy virtual land on Otherverse is indicative of the rampant speculation in the NFT market and related spaces. Several other companies such as Dentraland 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 a16z crypto, Animoca Brands, The Sandbox, LionTree, Sound Ventures, Thrive Capital, FTX and MoonPay.

Image: Yuga Labs

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