Reasons Behind the High Demand for Yuga Labs NFTs

Yuga Labs’ nonfungible tokens (NFTs) have gained significant popularity, with some selling for hundreds of thousands of dollars. The Bored Ape NFTs are among the most well-known, attracting celebrity owners like Jimmy Fallon, Paris Hilton, and Madonna. Just two months ago, Yuga Labs raised $450 million in a funding round led by Andreessen Horowitz, setting its sights on the metaverse with one of the largest NFT launches in history.

Yuga Labs’ online sale, called Otherdeeds, offered 55,000 virtual plots of land. These NFTs could be exchanged for plots in the anticipated Bored Ape-themed metaverse environment, named Otherside. The sale was conducted using the project’s cryptocurrency, ApeCoin. Each NFT was priced at a fixed 305 ApeCoin, roughly equivalent to $5,800. Initially, Yuga Labs did not provide specific details about how the coin would be distributed, only noting that ApeCoin would be locked for a year.

The Ethereum Network Crash Explained

The overwhelming demand for virtual plots overloaded the Ethereum blockchain, which serves as a crucial infrastructure layer for many cryptocurrency projects. As users scrambled to secure their Otherdeed tokens, gas fees on the Ethereum network skyrocketed. These fees increased due to network congestion, as each transaction required more tokens. The cost of transactions surged, reaching around $2,500 in fees alone.

One user successfully secured two Otherdeeds but incurred transaction fees amounting to 5 ETH, which is over $14,000. This was on top of the $11,000 spent on purchasing the land plots. Other users reported losing thousands of dollars in failed attempts to secure their tokens. The Ethereum network operates in such a way that if a user lacks sufficient funds to complete a transaction, it will fail without a refund for the fees. Bloomberg reported that the total gas fees from minting Otherdeeds reached $123 million post-launch, with some users having to spend two ETH, which was far more than the cost of the land deed.

Users who were able to complete their transactions with the high fees did see a return on their investment as the value of Yuga Labs’ new token increased. In the short term, NFTs initially priced at $5,500 are now reselling for more than $11,000.

Unfortunately, other users on the network who were attempting to complete separate cryptocurrency transactions simultaneously faced significant losses. CryptoChipy tracked NFT transactions that involved sales for under $600, yet users still paid excessive fees of over $2,500. Some users paid transaction fees that were 100 times the value of their NFTs. In total, more than $100 million was spent on transaction fees during the purchase of Otherside NFTs. If you’re interested in purchasing virtual land in Otherside, you might want to try Coinbase, one of the best crypto platforms available.

Yuga Labs Issues Apology to Ethereum Users

Yuga Labs took responsibility for the Ethereum crash and issued an apology. The company acknowledged that it had orchestrated the largest NFT mint in history, and the unprecedented demand resulted in an unexpected strain on the network. To facilitate significant growth, ApeCoin may need to migrate to its own blockchain. Yuga Labs has encouraged the ApeCoin DAO to explore this possibility. The company also promised to refund gas fees for users whose transactions failed due to the overwhelming demand. Initially, Yuga Labs had planned to sell the land deeds through a Dutch auction, gradually lowering the price to alleviate congestion on the Ethereum network. However, the plan was scrapped, and the number of deeds per wallet was limited instead.

Additionally, the company faced another crisis during the NFT sale when a phishing attack on its Instagram page led to the theft of $3 million worth of NFTs. The hack involved a fraudulent announcement of free metaverse land related to the Otherside sale.

The Ethereum network crash raised doubts about the feasibility of Web 3.0 becoming mainstream. Critics argue that even a relatively small-scale sale experienced such issues, which may suggest that the cryptocurrency industry could struggle to scale effectively for broader adoption.