Yuga Labs’ entry into NFTs is seen as a major blow for ethereum, and the results could see a $2.5 billion gap in the world’s leading blockchain.
Bored Apes NFT and apecoin creator caused a massive spike in transaction fees called gas fees on the ethereum network when they launched the Otherside metaverse land sale on May 1.
In the sale, a total of 55,000 virtual metaverse lands were sold at a fixed price of 305 apecoin, a currency created by Yuga and valued at approximately $7,000 at the time of the event.
Demand for Yuga Lab’s latest NFT offering has choked the ethereum network and caused gas fees to soar that one person paid a $44,000 ether transaction fee to sell a single piece of virtual land worth around $7,000.
Read more: Blockchain and NFTs: How to understand crypto terminology?
Yuga Labs then issued a statement shortly after the sale, further exacerbating ethereum’s situation.
The company behind Bored Ape NFTs bought by celebrities like Jimmy Fallon and Paris Hilton has announced that they will be buying apecoin tokens from the Ethereum mainnet and onto its native chain in response to the transaction fee increase. Such removal of Apecoin could see $2.5 billion leave the Ethereum ecosystem.
They said Yuga Labs’ move was a direct response to their experience of high gas fees at the time of sale and the reason behind Yuga Lab’s move.
The Ethereum blockchain can only support around 30 transactions per second. So, when the scale of transactions increases, a bottleneck in outstanding payments occurs. Gas fees are additional fees that users pay to ethereum miners to prioritize their transactions.
Read more: Warren Buffett’s bitcoin attack drives crypto prices down
Thus, in a first-come, first-served buyout spree like the Yuga Labs Otherside metaverse sale, the amount of money paid to miners to drive sales skyrocketed.
The ethereum gas fee debacle that emerged on May 1 damaged the public’s perception of the world’s second largest cryptocurrency.
The unprecedented Yuga Labs NFT virtual land sale has caused gas fees on the ethereum (ETH-USD) blockchain to soar to ridiculous degrees.
There was also a on-chain effect felt by other users of the Ethereum network who were not involved in the NFT launch.
They also experienced excessive transaction fees as one user reported a gas fee of $1,700 to send $100 from one wallet to another.
Read more: Crypto live prices
The Otherside Metaverse land sale sold out within minutes and sold for over $200 million in virtual real estate, with each plot costing 305 Apecoins, roughly $2.7K at the time of writing.
Those who could afford the exorbitant gas fees and were able to print Otherside NFT fast enough were then quickly turning over $15,000 in virtual title deeds on the OpenSea NFT platform, making a profit of $10,000.
However, in line with the current downturn in the crypto market, many Otherside NFTs have now dropped below their original mint price.
The company described the event as “the largest NFT mints in history” and purchases were made in Apecoin, the Ethereum-based cryptocurrency Yuga Lab recently launched.
Crypto analysts are unanimous that the rise in transaction fees during last Tuesday’s NFT land sale is avoidable and speak to Yahoo Finance Will Paperper. Syndicate DAO He said he underscored the need to view the event as a learning curve that “other mint forms of mechanized design need to be developed.”
Read more: What does the Fed hike mean for bitcoin?
However, the decline from Yuga Labs activity was not limited to the award-winning BAYC NFT brand, as large sums of money spent on gas fees brought longstanding scalability issues with ethereum to the attention of the wider public. network.
The event received $170 million in gas fees from mostly small-scale retail investors operating in the cryptocurrency ecosystem, giving it directly to ethereum miners who validate every transaction. A fact that contradicts Ethereum’s ethos of being a decentralized, egalitarian and democratic ecosystem.
As a result, the costly process has brought to light some disturbing facts about the fundamental design of ethereum itself.
The inability of Ethereum to keep transaction fees at an appropriate level when experiencing large-scale usage contradicts what founder Vitalik Buterin once said: “Internet of money shouldn’t cost 5 cents for a transaction, that’s kind of ridiculous”.
Read more: ‘Crypto lobby groups dictate terms in Washington’
However, ethereum is trying to fix the persistent transaction fees issue with the Eth 2.0 upgrade, but that continues to be delayed.
Ethereum has decided to prioritize the transition from a proof-of-work consensus mechanism to a less energy-intensive proof-of-stake proof-of-stake at the expense of implementing sharding on the blockchain.
Fragmentation will significantly improve the scalability issues that the blockchain had noticeably experienced during the Yuga Labs NFT launch.
The gas fee debacle highlighted the benefits of competing and alternative blockchains such as solana and cardano.
Solana’s scalability ensures that all transactions stay under $0.01 and transaction speeds are as fast as 400 milliseconds per block. However, in line with the ‘blockchain triad’, it could be argued that Solana sacrificed security in favor of its success in scalability.
Currently, ethereum can only process 13 to 15 transactions per second, and the average transaction fee in April was $42.
Shortly after the disastrous NFT sale, another shootout took place in the ethereum broadcast when Yuga Labs announced that they would be buying apecoin tokens from the ethereum mainnet and onto its native chain in response to the transaction fee increase.
This removal of Apecoin could see $2.5 billion leave the ethereum ecosystem.
Yuga Labs, which also bought the CryptoPunks and Meebits NFT collections, apologized for the episode, but the tone of their response sounded bossy and disingenuous, causing the anger of the legion of retail investors who lost and felt too much in ethereum gas fees. hit from the rapid depreciation of apecoin after the event.
Investors had to buy apecoin to purchase virtual land at the NFT launch.
After the event, Yuga Labs said, “We apologize for temporarily turning off the lights on Ethereum.
“It seems very clear that ApeCoin will need to migrate to its own chain in order to scale appropriately.
“We want to encourage the DAO to start thinking in that direction.”
Citing speculation that Yuga Labs will create its own blockchain, former Wall Street banker Brian Rose spoke to Yahoo Finance and said it is only a matter of time before apecoin moves to its own chain to scale appropriately.
Read more: Blockchain and NFTs: How to understand crypto terminology?
The CEO of youtube channel London Real, who will soon be discussing crypto with ‘Real Wolf of Wall Street’ Jordan Belfort, added: “When the public sees these ridiculous gas fees for a simple NFT mint, then it forces ethereum to innovate faster.
“Furthermore, Solana is publicly emphasizing that other protocols such as AVAX and Tezos already offer much higher speeds and lower transaction costs. And that providing alternative solutions is big money and benefit. ”
It’s easy to take a cynical look at last Tuesday, when the privileged owners of the overpriced cartoon monkey pictures got free land in a virtual multiplayer game. However, the rest of this virtual land has been put up for sale to the public, causing a frenzied FOMO bottleneck from desperate buyers who are increasingly having to pay ethereum gas fees to speed up their transactions.
Watch: Steve Hanke: ‘Cryptocurrencies are fiat money on steroids’
Cynic would point to details of the NFT launch last Tuesday, which saw some people pay hefty transaction fees of up to $44,000 to purchase pixelated 3d images that cost $500, which is essentially a multiplayer computer game. This economic exchange will challenge everyday common sense.
One could easily conclude that Yuga Labs’ NFT land sale is a high-water mark in an era of mass hypnosis that will never last.
The Otherside NFT land sale could be the critical moment when the entire NFT card house begins to decline.
Or we can look back and see that the first buyers to Yuga Labs’ metaverse were ahead of the curve and invested in an ecosystem that we may all have to tap into at some point in the future.
Yahoo Finance has contacted Yuga Labs and Ethereum for a response to the gas fees issue and its plan to move apecoin to its own blockchain, but they have yet to respond to the request.
Watch: Steve Hanke on Crypto Lobbyists