Yuga Labs: Success and Chaos of an NFT Sale in the Metaverse – May 11, 2022 – Le Journal des Arts

In the short history of NFTs, this is a red letter day. The American start-up Yuga Labs hits hard: on April 30 it is “forge” (according to the set deadline) and a set of 55,000 baptized NFTs for sale “Other deeds” bringing him nearly $303 million, the largest non-fungible token issuance ever. In less than 24 hours, these then generated a trading volume of more than 230 million euros on the secondary market, or almost half a billion euros in total transactions. Figures that make you dizzy, especially when you know that these NFTs do not correspond to digital works but to pieces of land in “other side”the metaverse (or virtual world) that Yuga Labs is developing.

The fledgling company, valued today at more than 4 billion dollars (3.8 billion euros), distinguished itself in 2021 with the launch of its series Bored Ape Yacht Club, 1,000 NFTs matching effigies of hugely successful cartoon monkeys. Since December, these are the most expensive tokens on the market, collected by celebrities like Neymar or Madonna, with a total value of about 1 billion euros. Enough to crown Yuga Labs as the undisputed leader in the crypto art sector.

From crypto art to metaverse

“other side”as presented by the start-up, the Bored Ape universe should expand in the form of a massively multiplayer online role-playing game: we can therefore, if we “Other deeds”claim ownership of a piece of land there and even bring your monkey to life as a playable character, if you have the NFT of a Bored Ape.

The exact functioning of this virtual world is not yet known, but its near existence already gives the start-up the means to establish itself as one of the pillars of the “Web 3.0”an internet no longer ruled by large multinational corporations (Google, Facebook) but by the decentralized technology of blockchain† As a reminder, this acts as a kind of registry that contains the list of transactions between users and guarantees their security: this has allowed the development of NFTs, the various metaverses and of course cryptocurrencies. † Yuga Labs has also launched its own, the “MonkeyCoin”last march: it is with her, and her alone, that you . can buy “Other deeds”

A completely overcrowded platform

But every coin has its downside and Yuga Labs fell victim to its own success. The April 30 sale certainly broke all records, it will also go down in history as a moment of great chaos in the world of NFTs: that day the transactions were so numerous that the monetary ecosystem in which NFT exchanges take place has been overloaded and the blockchain has become unusable for several hours; a record amount of cryptocurrency has been permanently destroyed; The price of ApeCoin crashed late in the day and users had to spend thousands of dollars in fees for transactions, some of which ultimately failed.

The demand was indeed so great that the “gas costs”, the fees paid for each NFT transaction have skyrocketed for all users, reaching prices between 6,000 and 13,000 euros: double the initial cost of an NFT “Different”launched in the morning at 5,500 euros. “I just paid $14,000 in fees to fake 4 Otherdeeds for Otherside. I’m going to throw up now” “Hustler,” a collector, testified on Twitter. Bloomberg calculated that on April 30 alone, more than $116 million was spent in transaction costs during the day.

“More crowded” can still count themselves lucky. Many buyers have fallen into debt for such charges without being able to get their money back “Other deeds”where transactions fail due to a saturated exchange ecosystem. “This was by far the largest NFT issuance in history and yet the transaction costs incurred show that demand far exceeded even the wildest forecasts,” explains Yuga Labs in a statement of apology.

The startup has promised to refund transaction fees to anyone who has not received its tokens. “We are aware that some users have seen their transactions fail due to unbelievable demand, Yuga Labs tweeted the same day. For those affected, know that we appreciate your willingness to be part of our journey – we are with you and will reimburse your expenses. †

However, the consequences go far beyond the mere sale of “Other deeds” : On April 30, many buyers of NFTs unrelated to Yuga Labs products also saw their transaction fees rise and struggled to complete their exchanges. Molly White, a cryptocurrency expert, saw several examples of NFT sales worth less than $500 that brought in fees of more than $2,000. “Transaction costs, which increase with network congestion, have reached shocking levels”she notes.

Many people in the community “crypto”, criticized the way the sale was conducted. “Oxfoobar,” a programmer working for Alchemix, a cryptocurrency lender, says rising transaction costs and their devastating effects on the ecosystem blockchain could have been prevented: “The real cause of this price war is ‘over-registration’. † That is, Yuga Labs would have deliberately squeezed more buyers into the sale than the sale could handle.

Others saw this sale as proof that the cryptocurrency industry was not yet ready to offer services on a large scale: “We talk a lot about the promise of Web 3.0. But at these rates, any other sales mechanism generates 100 times lower costssays sector specialist Gergely Orosz. If it’s too expensive to run and unreliable, it’s not ready for wider use. †

In the UK, NFT is recognized as private property

Justice. The United Kingdom’s High Court of Justice ruled in a ruling at the end of April that NFTs should be regarded as private property: in practice this means that victims of theft can seek the freezing of their lost NFTs through legal proceedings if spotted in another person’s crypto wallet. The decision comes amid repeated thefts in recent months as hackers have developed increasingly sophisticated schemes to illegally seize highly valuable NFTs. Just before the sale on April 30, Yuga Labs saw itself raking in nearly $3 million (€2.8 million) from NFTs, including four “Bored Ape,” after its Instagram account was hacked. Until now, victims of theft had little recourse, given the decentralized and unregulated nature of the NFT market. So that should change, at least in the UK. Which is not necessarily to the taste of all members of the “cypto” community attached to the deregulation: “This law goes against the principle of decentralizationsays Laura Dorman, a programmer who has been investing in cryptocurrencies since 2014. You may think it is your responsibility to learn how to protect your NFTs. †

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