On Saturday, Yuga Labs―the company behind the Bored Apes Yacht Club NFT collection― launched a sale for Otherdeeds, which are NFTs for digital land related to an upcoming “metaverse” gaming project called Otherside.
Within hours, the sale turned into a disaster that made the company nearly $300 million but bottlenecked the blockchain and burned nearly $200 million worth of Ethereum as prices and transaction fees skyrocketed.
The plan? Offer 55,000 NFTs for digital land in the metaverse each for 305 Ape Coin (APE)—a token ostensibly developed at arms-length by Yuga Labs that has already had its own tumultuous launch. Only wallets owned by people who registered their personal information before April 25 were eligible for Yuga Labs’ sale. APE was worth $19, so buyers were expected to fork over $5,800 per NFT, on top of fees. Tokens raised in the sale would then be taken out of circulation for a year.
The main problem for the Otherside mint was gas fees, which are aimed at covering the computational cost of verifying transactions within Ethereum’s proof-of-work protocol. In Ethereum’s current iteration, the “base fee” of a given transaction is burnt—or sent to a dead-end address—with any extra tip going to the miner to incentivize faster confirmation. These fees can skyrocket ahead of high-demand events where individuals want transactions completed faster. In such situations, “gas wars” can emerge where gas fees can climb as users pile in, raising transaction fees for everyone using Ethereum and bottlenecking the network due to the load.
Yuga Labs actually considered this outcome when they planned their Otherside mint, planning a “Dutch auction” approach before deciding that “Dutch auctions are bullshit.” To prevent bottlenecking Ethereum, the project instead opted for a flat price, limiting availability to KYC'd wallets, and "an enforced limit of 2 NFTs per wallet at the start of the sale" that would eventually increase.
"If a gas war still happens, it at least will not result in insane amounts of ETH lost to failed transactions, and hopefully the Otherdeed mint will be one of the most widely distributed in history,” Yuga Labs wrote.
And a gas war did begin, as soon as the 9 PM ET sale kicked off. 64,219 ETH was burned over the weekend on transaction fees according to Etherscan—that's over $180 million at today's prices, most of which is now gone forever due to Ethereum’s burn. On top of the huge sum of resources wasted because of this project, transaction fees all across the Ethereum network skyrocketed.
A Twitter thread by Molly White, creator of Web3 Is Going Great, documented how exorbitant fees affected people buying NFTs from different projects, often outstripping the underlying asset: a $3,500 fee for a $500 NFT, a $3,800 fee for a $270 NFT, a $3,950 transaction fee for a $260 NFT, and a $3,300 transaction fee for a $25 NFT were just some of the many ridiculous trades executed during the gas war caused by Otherdeed's NFT launch.
Besides high fees, the transaction load resulted in a bottleneck that resulted in failed transactions that people still had to pay fees for—now in the thousands of dollars for nothing in return, not even an NFT.
"It's especially a sour moment since Otherside has been a passion project for so long," Garga.eth wrote in a thread apologizing for the debacle. "I remember pacing around my backyard last July talking to Gordon, finishing each others sentences as we concocted this story around an acid-trip of a world filled with strange, hallucinatory creatures trying to communicate a message we couldn't decipher."
Otherdeed wasn't the only spectacular failure in the NFT space this weekend. The Solana blockchain also experienced a seven-hour outage thanks to a flood of bots trying to mint NFTs late Saturday. This is Solana's seventh outage this year. In a bid to try and deter botting Solana, the Metaplex protocol which had been targeted by automated programs announced "a 0.01 SOL penalty will be collected when a wallet attempts to complete an invalid transaction, which is typically done by bots that are blindly trying to mint."
Yuga Labs took a different tack in their response, saying APE needed its own blockchain outside of Ethereum. “We're sorry for turning off the lights on Ethereum for a while,” Yuga Labs tweeted on Monday. “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.”
At the very least, Yuga Labs has promised to refund gas fees for failed transactions. But then again, this has given room for phishing scams to take advantage of anger amongst its community and promise to do the same in a bid to steal crypto from unsuspecting users.
We’ve seen this story a million times before: Crypto project is launched. Something goes wrong. Founders, investors, whales, and some of the community make out like bandits. Most people are left out on the cold, only to be offered another, even greater opportunity with an upcoming token or project. Surely this time will be different.