ApeCoin to Integrate with Polygon After Causing Ethereum’s Largest Gas Spike with NFT Mint
After the botched launch of virtual land plots as NFTs, dubbed Otherdeeds, Yuga Labs is making amends. Just as Axie Infinity runs on its own sidechain Ronin, so will ApeCoin be hosted on Ethereum’s largest sidechain, Polygon (MATIC).
As a layer 2 scalability solution that offloads the traffic from Ethereum’s layer 1 highway, Polygon holds $4 billion worth of crypto assets. As such, Polygon’s gas fees are drastically lower compared to Ethereum’s mainchain, often by a factor of 1,500x less.
This is why OpenSea, the world’s largest NFT marketplace with over $20 billion in total trading volume, integrated Polygon as a “gas-free NFT marketplace“. If only the Yuga Labs team had the foresight to make this move prior to Otherdeed NFTs launch for their upcoming blockchain game Otherside.
What Happened with Yuga Labs’ Otherside NFT Mint?
Last week, Yuga Labs announced the minting of Otherside NFTs, called Otherdeeds. As their name implies, they are tokenized ownership of virtual lands. This has become common practice for blockchain games in which both playable creatures/characters and in-game assets are tradeable as NFTs.
For instance, last November, one of the rarer land NFTs for Axie Infinity, the Genesis Plot, sold for 550 ETH ($2.5 million at the time). Although Otherside is not yet released, Yuga Labs set the minting cost of their Otherdeeds at 305 APE ($6.7k at the time). This alone caused ApeCoin (APE), the metaverse’s main monetization crypto, to rally by 8%.
As expected, due to the massive hype in anticipation of selling Otherdeeds for potentially enormous profits, the sales went through the roof. As of today, OpenSea recorded 191.7k ETH trading volume ($541.7 million), or $630.4 million total secondary market volume. In the meantime, the average Otherdeed floor price reached 3.757 ETH ($10.6k).
Unfortunately, this historic NFT sale surge was too much for Ethereum, causing Etherscan, Ethereum’s transaction monitor, to temporarily crash.
Of course, anyone who has dealt with Ethereum before knows that the network’s surge in traffic also drastically elevates transaction fees. This is precisely what happened. It was not uncommon to see users pay between 2 – 5 ETH ($5.6k – $14.1k) for the NFT minting fee, which themselves had a 305 APE ($6.7k prior to the APE crash) launch price.
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Is Ethereum or Yuga Labs to Blame for High Fees?
To put things into perspective, a reputable brokerage like Interactive Brokers (IBKR) charges a 1% commission fee in the US. On the lower end with Otherdeed ETH gas fees, at a $5.6k fee for a $6.7k asset, this represents a ludicrous commission at 83%. As decentralized finance goes, this is not its finest moment.
According to Dune analytics data compiled by @hildoby, 60,234 ETH ($169.9 million) went into Otherdeed fees, including the secondary market. Suffice to say, this may be the most inefficient market in the history of markets, but who is to blame?
According to a former Coinbase software engineer, going by the moniker @0x_Beans on Twitter, the culprit is Yuga Labs’ unoptimized smart contract logic. Specifically, their omission to remove the canceled Dutch Auction logic. As reported previously, Yuga Labs canceled Otherdeed Dutch Auction, calling it “actually bullshit“.
Yet, its pricing logic remained in place, causing unnecessary gas waste.
As a consequence of poor planning, many users were left unhappy, to say the least. However, Yuga Labs assured them they will refund their gas woes. Predictably, the ill will generated amid the Otherdeed launch fiasco caused ApeCoin (APE) to drop by -33% since the Otherside virtual lands appeared on April 30th.
Moreover, even without the gas fee, it appears that it doesn’t take much to strain Ethereum’s network, despite its high decentralization and node count compared to Solana. In the aftermath of this lesson, layer 2 solutions are poised to become even more valuable than before.
Do you think Otherdeeds will outperform Axie Infinity’s land plots? Let us know in the comments below.