In a market where investors are looking to get into the virtual real estate game Yuga Labs, the creator of the popular Bored Apes Yacht Club collection of non-fungible tokens (NFTs), launched a sale Saturday to sell virtual land related to its highly anticipated metaverse project, raising about $320 million worth of cryptocurrency in the largest token pre-sale of its kind.
“Yuga Labs’ virtual land sale has triggered one of the highest spikes in transaction fees on Ethereum,” said Jason Wu, founder of decentralized lending protocol DeFiner. “I have seen other NFT launches causing high gas fees, but this is definitely one of the highest.”
For those unfamiliar with NFTs and how they relate to cryptocurrency, here’s a quick primer: an NFT represents ownership over something in a blockchain-based game or ecosystem.
The name “nonfungible” is derived from the word “fungible,” which is an object or item that can be easily replaced with one of its kind — for example, if you have 20 apples and someone eats one, you still have 19 more apples. In contrast, non-fungible items are unique and can’t be replaced; for example, your home is a non-fungible asset because there’s only one of it and it can’t be replicated.
In the physical world, ownership of a piece of property — like your house — is recorded in a database controlled by your local government. A blockchain-based system (or “crypto” ) works similarly, except that instead of relying on your local government to keep track of who owns what, it relies on a network of computers scattered around the world. When you buy an NFT, the computer network keeps track of who owns it (and when).
The value of an NFT depends on many factors, but one important one is how rare it is. For example, if there are only 10 copies ever made and you own one of them, then you could probably get more money from selling it than if there were 100 or 1,000 copies.
NFTs are like “real” items that can be bought, sold, traded, held onto, or even destroyed. They’re often used to represent ownership over digital items like artwork or collectables (e.g., a baseball card), but they can also represent ownership over more practical items like land in certain virtual worlds.
I know, I digressed. Still writing about the Board Ape Metaverse $320 million raise that crashed Ethereum.
When holders of ApeCoin verified their identities, they were able to buy deeds for 55, 000 parcels of virtual land on a proposed metaverse game called Otherside. The Bored Ape franchise is a series of games and projects including the forthcoming Otherside.
The Bored Ape Yacht Club’s NFTs sold out in 12 hours. Less than a day. The company’s unique model attracted an eager audience of collectors, who overwhelmed the site by buying the NFTs.
Anticipation that investors would be interested in purchasing blockchain-based non-fungible tokens called Otherdeeds had pushed up the price of ApeCoin last week prior to a live auction of the tokens.
The plot’s cost to a buyer depends on the price of ApeCoin, $19 as of Saturday, plus transaction costs. Transaction fees surged after the sale went live at 9 p.m. New York time, reaching $123 million as the land grab attracted heavy demand. The price of minting an Otherdeed NFT after the launch equalled about $6,000 in transaction fees or 2 Ether.
If you want to make a token or make a transaction on the Ethereum network, you must pay a fee in ether.
The fees are paid in ethers and are called gas prices. Gas is the cryptocurrency used to fuel the Ethereum blockchain, similar to how gasoline fuels automobiles. Think of gas as a unit that measures the amount of computational work required to execute an operation in Ethereum. The greater the gas requirement, the greater the cost and vice versa.
Imagine you want to go to the movies. You arrive at the theatre and see a long line at the ticket counter. You know it’s going to be expensive because of how busy it is, but you really want to see this movie.
You get in line anyway, but then you notice another line for those who want to pay in cash. There are only three people in that line and they’re moving much faster than the people who are using credit cards or other forms of cashless payment to buy tickets.
You decide that you’re willing to pay a little more than usual for your ticket, so you opt for the cash line and soon enough, you’ve got your ticket and are settling into your seat with a popcorn bucket of buttery goodness in your lap.
That’s exactly what happens when someone tries to use Ethereum when it’s congested! If you want to get a token minted or make a transaction on Ethereum, you need to pay a fee to those who order transactions on that network. But if there’s a lot of activity on Ethereum (like there was at the movie theatre), then fees increase significantly, since more money is needed just to prioritize your transaction over all the other transactions taking place at any given time.
The Otherdeed NFT was originally planned to be sold using a Dutch Auction format, where the price of the NFT is expected to go down over time to stop Ethereum from congestion with very high transaction fees. The plan was halted, and they decided to puta cap on the number of Otherdees that can be bought per wallet in each wave of the sale. But this failed to curb the congestion.
Yuga went on Twitter to apologize for “turning off the light on Ethereum,” and suggested they might establish an ApeCoin blockchain.
Otherside said it sold 55,000 Otherdeeds. Another 45,000 tokens are going to people who hold Bored Ape Yacht Club or Mutant Ape NFTs. Another 100,000 tokens will be granted in due course to some lucky Otherdeed holders.
ApeCoin wants to become a digital token used in a broad range of applications, including web3 apps and digital goods on the Ethereum blockchain. ApeCoin’s tokens will be used to buy merchandise, access events and play games. The idea is for token owners to have a say in the ApeCoin DAO, whose board includes Reddit Co-founder Alexis Ohanian, FTX’s Amy Wu and Animoca’s Siu. Before the sale Saturday evening, OpenSea announced it would accept ApeCoins.