Transactions stalled for hours, and people paid thousands in fees whether their purchase succeeded or not.
When Bored Ape Yacht Club creators Yuga Labs announced its Otherside NFT collection would launch on April 30, it was predicted by many to be the biggest NFT launch ever. Otherside is an upcoming Bored Ape Yacht Club metaverse game, and the NFTs in question were deeds for land in that virtual world. Buoyed by the BAYC's success -- it costs about $300,000 to buy into the Club -- the sale of 55,000 land plots netted Yuga Labs around $320 million in three hours.
It also broke Ethereum for three hours.
Users paid thousands of dollars in transaction fees, regardless of whether those transactions succeeded. Because the launch put load on the entire blockchain, crypto traders were unable to buy, sell or send coins for hours. The sale highlights the growing profitability of the NFT market but also the uncertainty around whether blockchains are robust enough to handle the attention.
Otherside is Yuga Labs' take on the metaverse, a large virtual word inhabited by thousands of people. Metaverses have existed for decades -- Second Life, Fortnite and World of Warcraft are all examples -- but newfound buzz around the term relates to blockchain proponents' belief that cryptocurrencies and NFTs will revolutionize the model.
The argument is that NFTs allow for true ownership of digital assets and cryptocurrencies the means to facilitate a digital economy. Metaverses like Sandbox, currently in beta, allow players to create in-game items and own plots of land, on top of which they can do what they fancy: Build a house, become a merchant, use it for advertisements or run a virtual business. The idea is that if these worlds come to be inhabited by millions, a la Fornite or World of Warcraft, that land becomes exponentially more valuable. Boosters say this will lead to more organic user-created worlds, while critics say profit seeking will take the fun out of gaming.
Otherside will consist of 200,000 plots of land, distributed in two waves: 100,000 beginning with sale on April 30 and another 100,000 rewarded to those "who contribute to the development of Otherside" over the coming months. The sale on April 30 consisted of 55,000 plots, with the rest airdropped to holders of Bored Ape Yacht Club and Mutant Ape Yacht Club NFTs for free.
Each plot of land cost $5,846 (or 305 ape coin, a cryptocurrency Yuga created for its metaverse, which was valued at $19.17 per coin at the time of the sale). Otherside land deeds sold out immediately, netting Yuga about $320 million. Virtual land speculators hoping to flip a profit were grinning: Secondary market sales on OpenSea, the biggest NFT marketplace, fluctuated between $20,000 and $30,000.
It was a huge success for Yuga Labs' bottom line, but not necessarily for its reputation, or for blockchain technology in general. The NFT launch was riddled with issues that highlight all the inefficiencies entailed by cryptocurrency trading.
The big one is gas fees. To transact on Ethereum, you need to pay for "gas" -- essentially a transaction fee, the expense of which is determined by how much activity is occurring on the blockchain. In a situation where demand outpaces supply, such as the launch of a new BAYC collection, punters can pay more gas to get to the front of the transaction queue. Gas fees between $10 and $100 are typical. But because of the massive demand, and crypto-rich investors eagerness to secure their land, people minting Otherside land NFTs were dropping up to $7,000 in gas fees (2.6 ether).
One person spent $44,000 on gas to buy two plots of land, four times the amount spent on the NFTs themselves. Again, they could then immediatelly sell each plot of land for up to $30,000 immediately after minting, so would remain in the green. Yet, it points to how inaccessible crypto and NFT trading can be for newcomers.
Because the Otherside mint impacts the whole Ethereum blockchain, people doing completely unrelated things like selling ether or trading altcoins would also have to pay huge fees and wait hours for their transactions to clear. Someone tweeted a picture of them trying to send $100 in crypto from one wallet to another, showing it required $1,700 in gas fees.
Worse are those whose Otherside transactions failed. Because the amount of people trying to buy was greater than the supply of Otherside NFTs, not every attempt was successful. (Thus, people forking out thousands for gas to ensure their transaction went to the front of the queue.) Typically, failed transactions cost around $30, painful enough. Because gas was so insanely high, these failed transactions ended up costing some people up to $4,500 (1.6 ether).
Over $175 million was spent on gas alone. Ethereum's blockchain has a deflationary protocol that burns most ether spent on gas -- so much of that $175 million is now simply gone.
Yuga Labs said in a Twitter statement that it would refund those failed transaction fees and that it may develop a whole new blockchain to run its metaverse activities. Ethereum is a notoriously inefficient blockchain, with others like Solana and Tezos being much cheaper and less environmentally damaging. Others argued that the fault isn't with ethereum, but with the way Yuga Labs set up the sale and the inefficiency of its smart contract.
"Needless to say tonight didn't go how anyone wanted it to," tweeted Greg Solano, one of Bored Ape Yacht Club's founders. "I want to say sorry to the apes, and to everyone else who eagerly looked to join into the project."
Despite the painful launch, and many angry tweeters, don't expect Otherside to fail. At the time of writing, over $557 million in Otherside land deeds have been sold on OpenSea, making it the fifth biggest collection of all time. Coupled with the $320 million spent during the public sale, that means Otherside is nearing $1 billion in volume.