Yuga Labs, the Web3 company behind the infamous Bored Ape Yacht Club NFT project, recently took to Twitter to propose that the ApeCoin DAO start thinking about building its own chain.
This announcement comes at the heels of the company’s highly-anticipated Otherside Metaverse event clogging the Ethereum blockchain and propelling the network’s gas fee so high that the entire network remained essentially unusable for several hours on Saturday, May 1st.
If you aren’t already aware of it – Yuga Labs’ Otherside Metaverse event was probably the biggest NFT sale event in Ethereum’s history. Leveraging the success (and popularity) of the Bored Ape NFTs and the recently launched ApeCoin (APE), the Yuga Labs team netted over $400 million in sales from this highly-subscribed event.
Owing to the surge in the number of large volume transactions, the average gas fee of the Ethereum network started to skyrocket. According to the latest data, by the time the NFTs were sold out, users had shelled out nearly $123 million in gas fees alone, paying anything between 2.6 ETH to 5 ETH – more than the cost of the NFT itself. In some cases, users even paid twice the cost of the NFT in gas fees. There were even reports that many users had to settle with failed transactions (meaning they didn’t receive their NFTs) even after paying the exorbitant gas fee.
These events have drawn sharp criticism from the community, with many pointing out that it was Yuga Labs’ fault and some even calling it a calculated move by the Yuga team. Meanwhile, others have pointed out that a sudden surge in gas fees is quite common in the Ethereum network, citing examples of similar incidents like the 2017 Crypto Kitties NFT event.
…And The Blame Game Starts
Shortly after the disastrous event, Yuga Labs issued an apology and long-term plan via its Twitter account. The six-part tweet pointed out that the mint had unprecedentedly high demand, which brought unique challenges. Yuga Labs also confirmed that it is aware that many transactions failed and that those individuals affected would soon receive the refunds of the gas fee they had paid.
However, what stands out from this six-part tweet was Yuga Labs’ hint of breaking out of the Ethereum ecosystem to develop its own chain, helping the organization scale properly to meet metaverse NFT demand. The tweet reads, “We’re sorry for turning off the lights on Ethereum for a while. It seems abundantly clear that ApeCoin will need to migrate to its own chain in order to scale properly. We’d like to encourage the DAO to start thinking in this direction.”
That said, the crypto community seems to be divided in its opinions. While some attribute this attitude to Ethereum’s limitations, others point out that the event primarily unfolded because of poor planning. Others still say that it was all because of a deliberate scheming by the Yuga Labs team to make way for their own chain.
Several users jumped in on this conversation, presenting their opinions. For instance, Will Papper, the Co-founder of SyndicateDAO, posted a series of tweets, one of which read, “ Nearly $100M has been spent on gas for the BAYC land sale in one hour. This is money that could have gone to Yuga or stayed in the user’s pockets. The contract had nearly zero gas optimizations. I’ll explain a few gas optimization tricks that could have saved many millions below”
Ethereum co-founder Vitalik Buterin also weighed in, explaining how the gas fee works on the Ethereum network. His tweet says, “Don’t think optimizing the contract would help. Regardless of contract details, tx fee goes up until list price + tx fee = market price. If gas usage per purchase decreased 2x, the equilibrium gas price would have just been >12000 gwei instead of 6000.”
On top of failing to properly optimize its smart contracts (as pointed out by Will Papper), it also seems that the Yuga team didn’t implement proper safeguards to prevent the mint from clogging up the Ethereum network. Based on the popularity and demand for ApeCoin and Bored Ape NFTs, it is clear that Yuga Labs seemed aware that the Otherside mint would attract sizable traffic.
Yuga Labs restricted mining abilities to an extent by implementing gating techniques like on-chain KYC and a max mint of 2 per KYC’d wallet. Still, at the same time, it also played a key role in pushing the congestion by ditching its promised “Dutch Auction” format at the last minute. While Yuga claims that ditching the format was the only possible way to make things more equitable, we can’t deny that it also turned the event into a mad race where everyone was trying to mint at the same time.
Meanwhile, speculation also started to make its way onto Twitter, with many pointing out that the Yuga Labs team intentionally clogged up the Ethereum network so they could justify their move away from the network.
The Road Ahead?
All in all, there are many takeaways from this event. There is no denying that Yuga Labs did mess up severely, although it is quite preposterous to assume that all of it was premeditated. A less cynical explanation may be that of Will Papper’s regarding poorly optimized contracts. However, we can’t overlook that Ethereum’s shortcomings, especially when it comes to high-demand projects, are becoming a recurring problem.
In this context, bitsCrunch CEO and Founder Vijay Pravin notes, “A blockchain network must be scalable enough to compete with legacy payment systems – capable of handling an exponentially increasing volume of transactions, users, and data. A blockchain network can only succeed if scalability is appropriately incorporated into its structure. Layer-1 solutions make native blockchains more productive by improving their performance. Solutions at Layer-2 increase transactional throughput by integrating with an underlying Layer-1 blockchain. Simply, a third-party protocol.”
He adds, “Both Layer-1 and Layer-2 scaling solutions serve the same goal. The objective of these two solutions is intended to make blockchain networks more user-friendly and faster. Neither of these approaches is equally prevalent, though. While Layer 2 is fragmented, certain solutions are gaining traction. A Layer 2 solution provides decentralization, security, transparency, and reduced carbon emissions, making it more viable than Ethereum. Although no single Layer-2 solution meets every requirement, it still strives to meet the current issue – heavy gas fees. Also, many blockchain networks are experimenting with an amalgamation of Layer-1 and Layer-2 to achieve greater scalability without shedding decentralization or adequate security.”
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice
