Next Bored Ape Creator’s Boon: Selling Land In An “Open” Metaverse

The startup behind Bored Ape Yacht Club, the digital art non-fungible token collection bought for millions by celebrities and crypto enthusiasts, has an ambitious new idea that has already made it a fortune.

Miami-based Yuga Labs is creating what’s called a metaverse – a huge virtual playground where 3D avatars can mingle. The concept has become the latest obsession of big tech companies like Meta and Microsoft, the parent company of Facebook. Virtual lands in Yuga’s emerging metaverse dubbed “Otherside” were recently sold for a total of $300 million.

The company sees its vision as an “open” alternative to the platforms Silicon Valley companies like Apple and Meta have built. Yuga allows owners of its monkeys and other NFT characters like Cool Cats or World of Women to collaborate and play games so everyone can share the virtual space.

“We’ve seen walled gardens and closed networks exploit people who spend time on services for the benefit of the few,” said Yuga Labs CEO Nicole Muniz.

“By enabling open network ownership, we believe Otherside will attract creators and become a world that has something for everyone,” she added.

But Yuga’s first leap into the metaverse has already exposed the limits of blockchain technology. Last month, when virtual lands, on the other hand, were sold as NFTs — tokens that verify ownership of digital assets using blockchain — the plots, known as “Otherdeeds,” sold in a record release for $300 million, with all but the richest buyers were valued.

The company came under fire after the Ethereum blockchain network through which Yuga plots were sold became overloaded, driving transaction costs up to thousands of dollars.

Bored Ape artworks originally cost about $250 each, but can now sell for millions of dollars each © Yuga Labs

Valued at up to $5 billion in a recent round of funding led by venture capital group Andreessen Horowitz, Yuga is one of the most valuable start-ups to emerge from a year of frenzied speculation surrounding NFT.

Bored Ape artworks can sell for millions of dollars each as they originally retailed for about $250 a year ago. Meanwhile, Otherdeeds is already one of the most traded NFTs and at one point became the first collection to reach a total value of $1 billion.

Developed in collaboration with London-based start-up Improbable, Yuga’s Otherside aims to be a separate space from the tech companies that have come to monopolize many digital lives.

Avatars from non-Yuga NFT collections and items purchased from the in-game market will be transferable, said Improbable General Manager Herman Narula.

“You’ll be able to move your avatar, your assets, between these worlds and, in fact, between other worlds created by other companies,” he said. “It’s really a fundamental part of what we’ve agreed with Otherside.”

Instead of Apple or Google imposing a 30% fee, which companies do for items purchased from their app stores, brands can use blockchain to set their own fees for exchanging virtual items.

But the blockchain created bottlenecks in this egalitarian structure as demand for the 55,000 Otherside tokens, which cost about $6,000 in the Yuga-backed ApeCoin cryptocurrency, far outstripped supply.

This imbalance caused prices on the Ethereum network to skyrocket and thousands of transactions to fail. The value of ApeCoin has more than halved since its peak last month.

Line chart of $ by ApeCoin showing that the value of ApeCoin fell after the sell-off on the other side

While lucrative for Yuga, as well as existing Bored Ape holders who received the NFTs for free, those who managed to buy Otherdeeds came bundled with additional fees that cost almost as much as the tokens themselves.

“It’s a place where the rich get richer while [others] are left behind,” said Parth Jain, a 20-year-old medical student.

Jain put all of his savings into ApeCoin to participate in the sale, but did not set aside enough Ethereum (ETH) cryptocurrency to pay the “gas fee” required by the blockchain to complete the purchase.

Standard gas prices are determined at the time of purchase and the prices increase with the number of network users. Those who want to skip the queue can offer to pay a higher fuel cost than requested.

Computers that verify transactions are more likely to approve the highest payments, as anything above the base rate acts as a “tip” to preserve the blockchain. But if an NFT collection is sold before a transaction is approved, the buyer is without NFT and also loses the gas costs.

According to Hildobby on Dune Analytics, more than 60,234 ETH ($150 million) was spent on gas costs during the Otherside sale. About 14,000 trades failed and 1,635 ETH ($4.7 million) was lost in those trades, a SeaLaunch analysis on Dune Analytics suggests.

Yuga promised to refund those who were charged gas fees but whose transactions did not go through before the sale of the Otherdeeds.

ApeCoin Logo
Yuga Labs said: “ApeCoin will have to migrate to its own chain to scale properly” © Jakub Porzycki/NurPhoto/Getty Images

A Bored Ape investor going by the pseudonym Quit.pcc.eth spent 2 ETH (nearly $6,000) in gas fees to get two more deeds.

“The community feels left in the dark, we don’t know if the game is weeks, months or years away,” he said. “I see a lot of anger, frustration and disappointment around the sale. A good product is enough to make everyone forget, but it’s up to us [Yuga] to deliver.”

Yuga has not said when Otherside will launch. Improbable, which is also backed by Andreessen Horowitz and SoftBank, said its metaverse technology is “ready now” and can support up to 15,000 concurrent players. However, Narula pointed out that the company was “just getting started” [its] relationship with Yuga”, suggesting completion may take some time.

After the land sale to Otherside, Yuga blamed Ethereum. “ApeCoin will have to migrate to its own chain in order to scale properly,” he said.

Creating a new reliable blockchain can take months or even years. Axie InfinitySky developer Mavis has built his own channel called Ronin to support Pokémon-style play. However, flaws in Ronin’s design made it vulnerable to a $600 million hack in March.

“They are still very much winning,” said Fanny Lakoubay, crypto art and NFT advisor. “Yuga’s ability to create expectations about things that don’t exist yet is breathtaking.”

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