Next boon from the creator of Bored Ape: selling land in an “open” metaverse

The startup behind Bored Ape Yacht Club, the digital art non-fungible token collection bought for millions by celebrities and crypto enthusiasts, has an ambitious new idea from which it has already made a fortune.

Miami-based Yuga Labs is creating a so-called metaverse – a vast virtual playground where 3D avatars can mingle. The concept has become the latest obsession of Big Tech companies such as Meta and Microsoft, Facebook’s parent company. Virtual lands in Yuga’s upcoming metaverse, which is called “Otherside”, were recently sold for a total of $300 million.

The company sees its vision as an “open” alternative to the platforms that Silicon Valley companies such as Apple and Meta have built. Yuga will allow owners of its monkeys and other NFT characters such as Cool Cats or World of Women to interact and play games together, allowing anyone to share the virtual space.

“We’ve seen how walled gardens and closed networks exploit people who spend time on services for the benefit of the few,” said Yuga Labs chief executive Nicole Muniz.

“By enabling ownership in an open network, we believe Otherside will attract creators and become a world that has something for everyone,” she added.

But Yuga’s first leap into the metaverse has already laid bare the limits of blockchain technology. When virtual land in the Other Side was sold last month as NFTs — tokens that verify ownership of digital assets using blockchain — the plots, known as “Otherdeeds,” sold in a record release for $300 million, priced to all but the wealthiest buyers.

The company came under fire after the Ethereum blockchain network through which Yuga plots were sold became overloaded, driving transaction fees up to thousands of dollars.

Bored Ape artwork originally cost around $250 each, but can now sell for millions of dollars each © Yuga Labs

Valued at up to $5 billion in a recent funding round led by venture capital group Andreessen Horowitz, Yuga is one of the most valuable start-ups to emerge from a year of frenzied speculation around NFT.

Bored Ape artwork can sell for millions of dollars each, having originally gone on sale for around $250 a year ago. Meanwhile, Otherdeeds is already among the most traded NFTs, at one point becoming the first collection to reach $1 billion in total value.

Yuga’s Otherside, which is developing in partnership with London start-up Improbable, aims to be a separate space from the tech companies that have come to monopolize many digital lives.

Avatars from non-Yuga NFT collections and items purchased from the in-game market will be transferable, Improbable General Manager Herman Narula said.

“You will be able to move, your avatar, your assets between these worlds and, in fact, between other worlds created by other companies,” he said. “It’s a really fundamental part of what we’ve agreed with Otherside.”

Instead of Apple or Google imposing a 30% fee, which companies do for items purchased from their app stores, brands can use blockchain to set their own fees for exchanging virtual items.

But the blockchain provided snags to this egalitarian structure, as demand for the 55,000 Otherside tokens, which cost around $6,000 in the Yuga-backed ApeCoin cryptocurrency, far exceeded supply.

This imbalance caused prices on the Ethereum network to skyrocket and thousands of transactions to fail. ApeCoin’s value has more than halved since its peak last month.

Line chart of $ by ApeCoin showing that ApeCoin's value fell after the Otherside selloff

While lucrative for Yuga, as well as existing Bored Ape holders who received the NFTs for free, those who managed to purchase Otherdeeds were bundled in with additional fees costing almost as much as the tokens themselves.

“It’s a place where the rich get richer while [others] are being left behind,” said Parth Jain, a 20-year-old medical student.

Jain put all of his savings into ApeCoin to participate in the sale, but did not set aside enough Ethereum (ETH) cryptocurrency to pay the “gas fee” the blockchain requires to complete the purchase.

Standard gas prices are set at the time of purchase and prices increase with the number of network users. Those wishing to skip the line can offer to pay higher fuel costs than requested.

Computers that verify transactions are more likely to approve the highest payments first, because anything above the base rate functions as a “hint” to maintain the blockchain. But if an NFT collection sells before a transaction is approved, the buyer is left without an NFT and loses gas fees as well.

Over 60,234 ETH ($150 million) was spent on gas fees during the Otherside sale, according to Hildobby on Dune Analytics. Around 14,000 transactions failed and 1,635 ETH ($4.7 million) was lost in these transactions, an analysis by SeaLaunch on Dune Analytics suggests.

Yuga promised to reimburse those who were charged gas fees but whose transactions did not go through before the sale of the Otherdeeds.

ApeCoin Logo
Yuga Labs said “ApeCoin will need to migrate to its own chain to scale properly” © Jakub Porzycki/NurPhoto/Getty Images

A Bored Ape investor who goes by the pseudonym Quit.pcc.eth spent 2 ETH (nearly $6,000) in gas fees to get two more deeds.

“The community feels left in the dark, we don’t know if the game is weeks, months or years away,” he said. “I see a lot of anger, frustration and disappointment around the sale. A good product will be enough to make everyone forget, but it’s up to us [Yuga] deliver.”

Yuga hasn’t said when Otherside will launch. Improbable, which is also backed by Andreessen Horowitz as well as SoftBank, said its metaverse technology is “ready now” and can support up to 15,000 concurrent players. However, Narula pointed out that the company had “just started [its] relationship with Yuga”, suggesting that completion may take some time.

Following the Otherside land sale, Yuga blamed Ethereum. “ApeCoin will need to migrate to its own chain in order to scale properly,” he said.

Creating a new reliable blockchain can take months or even years. Axie InfinitySky developer Mavis has built their own channel called Ronin to support Pokémon-style play. However, flaws in Ronin’s design left it vulnerable to a $600 million hack in March.

“They are still very winning,” said Fanny Lakoubay, crypto art and NFT advisor. “Yuga’s ability to create expectations on things that don’t yet exist is breathtaking.”

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