The next windfall for bored Ape creators: selling land in an "open" virtual world
Yuga Labs made $300 million from virtual land deeds, but the sale exposed problems with its egalitarian vision of "Otherside."
The startup behind bored ape yacht club, an irreplaceable collection of digital art tokens snapped up for millions of dollars by celebrities and crypto enthusiasts, has an ambitious new idea and has made a fortune from it.
Miami-based Yuga Labs is creating what it calls a metaverse — a vast virtual playground where 3D avatars can merge. The concept has become the latest obsession with big tech companies like Facebook's parent company Meta and Microsoft. Yuga's upcoming virtual land called "Otherside" was recently sold for a total of $300 million.
The company believes its vision is to provide an "open" alternative to platforms built by Silicon Valley companies like Apple and Meta. Yuga will allow its Apes and owners of other NFT characters, such as Cool Cats or World of Women, to interact and play games, allowing anyone to share virtual space.
Nicole Muniz, CEO of Yuga Labs, said: "We've seen how walled gardens and closed networks can take advantage of those who spend their time on services for the benefit of the few. ”
"By taking ownership in an open network, we think Otherside will appeal to creators and become a world for everyone," she added.
But Yuuga's first leap into the metaverse has exposed the limitations of blockchain technology. Last month, when The Otherside's virtual land was sold in the form of NFTs (tokens that use blockchain to verify ownership of digital assets), the plots, known as "Otherdeeds," sold for a record $300 million, overpricing all but the wealthiest buyers.
The company came under fire after Yuga's Ethereum blockchain network of selling plots was overloaded, causing transaction fees to soar to thousands of dollars.
Bored Ape artworks originally cost about $250 per piece, but can now sell for millions of dollars © each for Yuga Labs
In the latest round of funding led by venture capital group Andreessen Horowitz, Yuga, valued at as much as $5 billion, is one of the most valuable startups that have stood out from a year of wild speculation around NFTs.
Bored Ape artwork can sell for millions of dollars each, compared to about $250 a year ago. Meanwhile, Otherdeeds has become one of the most traded NFTs, once becoming the first collection with a total value of $1 billion.
Yuga's Otherside, which is being developed in partnership with London-based startup Improbable, hopes to become a space unlike tech companies that monopolize many digital lives.
Herman Narula, CEO of Improbable, said avatars from non-Yuga NFT collections and items purchased on the game marketplace are transferable.
"You're going to be able to move yourself, your avatars, your assets, and, in fact, between other worlds made by other companies," he said. "This is a very basic part of our agreement with Otherside."
Unlike Apple or Google, which charges a 30% fee for purchases from their app store, brands can use blockchain to set their own virtual goods transaction fees.
But blockchain creates obstacles to this egalitarian structure, as the demand for 55,000 Otherside tokens, which cost around $6,000 in the Yuga-backed ApeCoin cryptocurrency, has far exceeded supply.
This imbalance caused the ethereum network's price to soar, with thousands of transactions failing. Since peaking last month, the value of ApeCoin has fallen by more than half.
While it's lucrative for Yuga and existing Bored Ape holders who get NFTs for free, those who manage to buy Otherdeeds pay almost as much extra as the token itself.
Parth Jain, a 20-year-old medical student, said: "This is a place where the rich are getting richer and richer and [others] are left behind. ”
Jain deposited all of his savings into ApeCoin to participate in the sale, but did not set aside enough Ethereum cryptocurrency (ETH) to pay for the "gas bill" required by the blockchain to complete the purchase.
The standard Gas rate is set at the time of purchase and the price increases based on the number of people using the network. Those looking to cut in line can offer a higher petrol bill than demands.
Computers that validate transactions are more likely to approve higher fee payments first, as anything above the base rate can serve as a "tip" to maintain the blockchain. However, if the NFT collection sells out before the transaction is approved, the buyer will have no NFT and will also lose gas fees.
According to Hildobby's data on Dune Analytics, more than 60,234 ETH ($150 million) of gas was spent on Otherside sales. SeaLaunch's analysis of Dune Analytics shows that about 14,000 transactions failed, losing 1,635 ETH ($4.7 million) in those transactions.
Yuga has promised to refund those who were charged gas but the deal was not completed before the Otherdeeds sold out.
A Bored Ape investor, alias Quint.pcc.eth, spent 2 ETH (nearly $6,000) on gasoline to get two Otherdeeds.
"The community felt like it was in the dark and we didn't know if the game was weeks, months or years later," he said. "I see a lot of people feeling angry, frustrated and disappointed about this deal. A good product is enough for everyone to forget, but [Yuga] has a responsibility to deliver. ”
Yuga didn't say when Elseside will launch. Improbable, backed by Andreessen Horowitz and SoftBank, says its metaversymic technology is "now ready" to support up to 15,000 players simultaneously. However, Narula stressed that the company's "relationship with Yuga is just beginning," suggesting that it may take some time to complete.
After the sale of the Otherside land, Yuga blamed Ethereum. "ApeCoin needs to migrate to its own chain to scale properly," it said.
Creating a reliable new blockchain can take months or even years. Sky Mavis, the developer of Axie Infinity, built its own chain, Ronin, to support Pokemon-style games. However, Ronin's design flaws made it vulnerable to a $600 million hack in March.
"They're still very successful," said Fanny Lakoubay, an advisor on crypto art and NFT. "Yuga's ability to create expectations for things that don't actually exist is amazing."