A multi-billion dollar cryptocurrency company has apologised to users after its sale of “metaverse land” sparked a frenzy that temporarily overwhelmed the Ethereum cryptocurrency.
Yuga Labs, the company behind the Bored Ape NFTs beloved of Jimmy Fallon and Paris Hilton, announced the sale of its latest tokens – representing plots of land in a forthcoming multiplayer game called Otherside – on Sunday. A total of 55,000 plots were sold, at a flat price of 305 ApeCoin (a currency created by Yuga), which is worth about £4,500 at current exchange rates.
Demand for the plots was so high that it overwhelmed the Ethereum blockchain, one of the layers of infrastructure that all cryptocurrency projects rely on to operate. As users raced to be one of the lucky few able to secure an “Otherdeed”, transaction fees on the network rose higher and higher, until an individual NFT purchase cost more than £2,500 in fees alone. One user, who successfully secured two Otherdeeds, paid a transaction fee of over 5 ETH (£11,000) on top of the £9,000 to buy the land itself. Others lost thousands of pounds failing to secure the tokens at all: if a user runs out of money while paying the transaction fees, the transaction fails, but the fees aren’t refunded.
For most of those who secured Yuga’s latest token, the eye-watering fees have paid off, at least in the short term: tokens that sold for £4,500 are already reselling for more than £9,000. But people who were unlucky enough to be trying to carry out other cryptocurrency business at the same time have racked up hefty losses. Molly White, a cryptocurrency expert who runs a site chronicling the sector, tracked multiple examples over the day of NFT sales worth less than £500 being hit with transaction fees of more than £2,000.
$3,300 transaction fee for a $25 NFT
— Molly White (@molly0xFFF) May 1, 2022
(not a typo—they paid a transaction fee that was more than 100x as much as the NFT) pic.twitter.com/mzNGMpAcGa
“Gas fees, which increase based on network congestion, spiked to shocking levels,” White wrote. While most sales on OpenSea, the most popular marketplace for NFTs, were for Otherside deeds, “some people oddly continued to buy and sell cheaper NFTs”, she added.
In total, more than $100m was spent on transaction fees to buy Otherside NFTs, while Yuga Labs took another $300m in payments. When the sale was over, the company apologised for the chaos it had caused. “We know that the Otherdeed mint was unprecedented in its size as a high-demand NFT collection, and that would bring with it unique challenges.
“This has been the largest NFT mint in history by several multiples, and yet the gas used during the mint shows that demand far exceeded anyone’s wildest expectations. The scale of this mint was so large that Etherscan crashed,” Yuga added, referring to a cryptocurrency analytics website. “We’re sorry for turning off the lights on Ethereum for a while.”
The company had already faced one crisis thanks to the Otherdeed sale: a fake post on its hacked Instagram page, announcing free metaverse land, led to a phishing campaign that stole $3m worth of NFTs.
Some argued that the ramifications of such a comparatively small sale was evidence that the cryptocurrency sector would struggle to scale to provide services to the mainstream. “There’s much talk about the promise of web3. But at this rate, any non-web3 sales mechanism works with ~100x less wasted fees,” wrote Gergely Orosz, a prominent technology commentator. “If it’s too expensive to use, or it’s unreliable: this is something alpha at best, not ready for mainstream use.”