Otherside and the Future of NFT Consolidation
The firm sold tokens tied to 55,000 distinct parcels of land at around $6,500 each, and generated something like $300 million in revenue. (The NFTs were priced exclusively in ApeCoin, Yuga Labs’ official cryptocurrency, the volatility of which makes it tough to settle on an exact number.)
Ethereum is a notoriously rickety network, with a fee system designed to increase rewards for miners when there’s more activity on the blockchain. (Each block on the chain can only fit a certain number of validated transactions – traders can opt to spend more on fees for the privilege of cutting to the front of the line.) Activity was high during Saturday night’s Otherside sale, and fees were too: traders shelled out over $100 million in fees alone.
And because all pending transactions on Ethereum are queued up in one giant list, what clogs a single NFT project can end up clogging the entire network. At certain moments on Saturday and early Sunday, even simple crypto transfers demanded several thousand dollars in fees.
The result is that Otherside effectively comes with a baked-in class of landed elites. Staking a claim in Yuga Labs’ metaverse was far easier for a Bored Ape owner than for any other variety of NFT whale; for traders without hundreds of thousands of dollars already invested in this space, it was nearly impossible. (A single Otherside NFT currently costs about $11,000 on the secondary market.)
If, as metaverse boosters like Mark Zuckerberg predict, the creator economy really does move into virtual online spaces like these, we’ll all be working on Ape-owned land – almost a riff on manorialism, the Medieval economic system, with Apes as lords.
“We’re sorry for turning off the lights on Ethereum for a while,” reads a statement from the company’s Twitter account. “It seems abundantly clear that ApeCoin will need to migrate to its own chain in order to properly scale. We’d like to encourage the DAO to start thinking in this direction.”
It’s ironic for a few reasons, the first of which has to do with the idea that Yuga Labs would “like to encourage” the ApeCoin DAO to start thinking about working on its own blockchain, as opposed to building its own blockchain outright.
Yuga Labs has spent months trying to distance itself from ApeCoin and its primary governing body, the ApeCoin DAO, presumably for regulatory reasons. The thinking is that if ApeCoin comes from Yuga Labs, it’s a kind of securities offering, and should be regulated as such. If it comes from this amorphous, headless DAO, though, it should technically be outside the scope of the SEC (more on that here).
Axie Infinity, now the splashiest example of a “play-to-earn” (P2E) blockchain-backed video game, already operates on a dedicated chain called Ronin. Where Ethereum adds new transactions to the blockchain with something called a proof-of-work consensus mechanism, Ronin uses an alternate mechanism known as delegated proof-of-stake. It’s generally considered a more centralized system; validators with the most staked crypto will always exert the greatest control over the network.
This content was originally published here.