The Bored Ape Yacht Club is once again emerging as a prime example of the volatility and frustrations inherent to the NFT and crypto landscape despite, and likely because of, its prominence in the public eye.
The latest development centers on BAYC owner Yuga Labs’ Otherside, a metaverse project that will also include a play-to-earn MMORPG that brings together all NFT brands owned by Yuga with plans to add other non-Yuga NFT collections down the line. The company’s description of the project is markedly broad and vague, but that didn’t stop Yuga Labs from selling virtual Otherside land parcels via its Otherdeed NFT collection. The company launched the sale despite Otherside missing its April 2022 launch window and offering no updates on when it may go live.
The Otherdeed drop netted Yuga Labs roughly $320 million from the sale of 55,000 virtual plots, but it also cratered the value of its nascent cryptocurrency ApeCoin, sank the value of BAYC NFTs and clogged the entire Ethereum blockchain.
Otherdeed went live on April 30, selling individual plots for a flat fee of 305 ApeCoin (about $5,800), which was valued at around $26 per coin ahead of the Otherdeed launch. What Yuga Labs described as “the largest NFT mint in history” quickly overwhelmed the Ethereum blockchain causing gas fees (the cost of completing a transaction on the blockchain) to skyrocket for those buying Otherdeeds. Some buyers reported spending anywhere from $6,500 to $14,000 in gas fees alone. Others were charged for gas fees despite their Otherdeed transactions failing, leaving them with nothing to show for spending thousands of dollars. According to Bloomberg, a total of roughly $123 million dollars was spent on gas fees alone by the time the drop sold out.
The influx of transactions caused Etherscan, which tracks Ethereum transactions, to crash while other services using Ethereum to slow drastically.
Yuga Labs apologized and announced that it would refund the gas fees of those who were unable to complete their transactions in an April 30 tweet. It later stated that it had refunded all affected users on May 4. But a quick scan of the replies to its May 4 tweet shows multiple people claiming that they have not received a refund. Even worse, many of those trying to communicate with Yuga Labs’ Twitter account received replies from phishing accounts posing as the official Otherside Twitter account promising to process refund requests. According to crypto watchdog ZachXBT, the phishing accounts made off with $5.2 million in digital assets, including five BAYC NFTs, from users.
A previous flood of phishing accounts that appeared during the Otherdeed NFT drop skirted off with $6.2 million in digital assets, bringing the total loss via scammers to $11.4 million. This comes shortly after a hack of the official BAYC Instagram account resulted in BAYC NFT holders losing $3 million in assets. Yikes.
ApeCoin’s value collapsed following the Otherdeed drop, falling nearly $10 overnight and losing 50% of its value by May 5. The coin’s value continued to drop in the days since, currently sitting just above $9 per coin on Monday. The floor price of BAYC NFTs also dropped drastically during that time from $400,000 to just under $214,000 on Monday.
Many criticisms of Yuga Labs’ practices in conducting the Otherdeed sale have surfaced from users, but some of the most pointed were aimed at how the buying spree reinforced issues of financial inequality in the crypto space. The push to widen the scope and adaptation of decentralized Web3 financial markets has been in full force since multiple crypto exchanges shelled out millions for Super Bowl commercials in February, but adopters already in the marketplace highlighted how those with large financial holdings were possibly able to skirt restrictions put in place by Yuga Labs to manage the sale of Otherdeeds.
According to Yuga Labs, it implemented “Know Your Consumer” or KYC measures meant to vet buyers and limited approved wallets to two mints. That along with the “significant clearing price” of 305 ApeCoin was supposed to, in the company’s mind, prevent gas fee hikes and impacts on the Ethereum blockchain. But multiple people pointed to how these measures would favor those with large Ethereum holdings as gas fees had to be paid in Ethereum. Internet entrepreneur Jason Shellin echoed similar concerns. “Even if you understand these words, these people aren’t looking to solve wealth inequality … for everyday people,” Shellen tweeted.
There were also accusations that some buyers circumvented the two mint restriction, including self-described crypto enthusiast and eCommerce entrepreneur Steve Tan who noted his purchase of 306 Otherdeeds plots in a now-deleted tweet. When criticized for doing so, Tan said buyers that weren’t able to mint “aren’t willing to pay for gas” rather than those with smaller Ethereum holdings not being able to afford the seismic rise in gas fees caused by the stresses to the blockchain.
“Yuga deserves better class people to be in their community. Not selfish ponsy (sic) brats,” wrote one Twitter user. “They fucking want the next 100K airdropped to them alone. Yuga, just see what pathetic selfish shitholes of people who call themselves elite in your community.”
When the most popular and financially successful company in the NFT space still runs headlong into these kinds of issues without proper mitigation processes in place, it says a lot about how far the space as a whole still has to go in terms of consumer protections and management. And it isn’t anything good.