More than 2,000 people were crammed into a Brooklyn warehouse for the occasion. Shielded from a cold November night, partygoers indulged in an open bar lit up by the blue, green and red strobe lights pulsing through the makeshift club. Following appearances by Beck, Chris Rock and Aziz Ansari, the main event of the evening was a performance by The Strokes. Wylie Aronow was swaying with his girlfriend as they listened to the live set, when she turned to him and uttered three surreal words: "You did this."
Just a year prior, Aronow was living "bed to bathroom" with colitis, a disease that can cause chronic inflammation along the digestive tract. The illness forced him to drop out of college and caused him to languish for much of his 20s. Now Aronow is better known as Gordon Goner, one of the creators of the Bored Ape Yacht Club NFT phenomenon.
Along with the three other founders -- Gargamel (Greg Solano), Emperor Tomato Ketchup (Kerem Atalay) and No Sass (Zeshan Ali) -- he'd organized the show everyone was watching. They'd also gotten help from Guy Oseary, the famed manager of Madonna and U2, who signed a deal to represent BAYC the month prior. It was Nov. 4, 2021. The Bored Ape Yacht Club was scarcely seven months old.
The concert concluded the final day of Ape Fest, a string of activities taking place in New York, tailored for holders of Bored Ape Yacht Club NFTs, which are crypto tokens that prove ownership of a digital item. Earlier events included a yacht party and an art gallery featuring NFTs from the collection. For many, that week signaled the Bored Ape Yacht Club's transformation from an online curiosity to a tangible subculture.
"It's only in those moments of taking a break that you see how much your life has changed," Aronow said in an interview. "It just hit me so hard."
The Bored Ape Yacht Club has grown bigger than anyone could have possibly predicted. Aronow says he initially envisioned BAYC as a Web3 version of the streetwear brand Supreme. It's grown into something drastically more ambitious, mixing apparel, live events and an upcoming video game. Yuga Labs, the company the four founders formed to launch the Bored Ape Yacht Club, now has over 100 employees, and is valued at $4 billion.
Blockchain technologies like crypto and NFTs form the basis of Web3, the supposed next generation of the internet that seeks to take control of the internet away from major platforms like Amazon, Meta and Google. But detractors say that Web3 and all of its components, NFTs and crypto chief among them, are merely Ponzi schemes, that the battered valuations of bitcoin and ether represent years of hype finally making contact with reality.
In an area where scams and fraudsters are ubiquitous — see the recent collapse of the FTX exchange and its disgraced founder, Sam Bankman-Fried — Yuga Labs aims to prove that Web3 can not only be legitimate, but is in fact the future.
"There's a Satoshi Nakamoto quote, 'If you don't believe me or don't get it, I don't have time to try to convince you,'" said Yuga Labs co-founder Greg Solano, aka Gargamel, referencing bitcoin's pseudonymous founder. "I think that's the wrong attitude. I understand that people don't understand it. We want to build the roads, the infrastructure, that makes this inherently fun."
In the past 20 months, the Bored Ape Yacht Club has become the poster child of NFTs. Though far from their all-time high, the cheapest BAYC NFT on sale costs around $88,000, making it a hard club for newcomers to easily join. Even Yuga's secondary NFT collection designed to be more accessible, Mutant Ape Yacht Club, has a base price of just under $19,000. To create a more achievable entry point, Yuga Labs is looking to the metaverse, building a crypto-integrated game it hopes will help usher in the next generation of Web3 adopters.
It won't be easy.
It's a bad time to be in crypto right now. Really bad. 2022 saw bitcoin and ether, the two biggest cryptocurrencies, plunge precipitously from their November 2021 all-time highs. Ether, the cryptocurrency on which much of the NFT world relies, is down more than 70% from its peak.
The pain inflicted by the so-called crypto winter is felt far beyond the blood-red color that dominates year-over-year price graphs. The implosion of the Terra stablecoin in May wiped billions from the market, causing some ordinary people to lose extraordinary amounts of money. Things have only gotten worse since then.
November saw the bankruptcy of FTX, a crypto exchange once worth over $26 billion which earlier this year participated in Yuga Labs' latest funding round. The job of an exchange like FTX is to buy and hold cryptocurrencies ordered by its customers. How that mandate resulted in $8 billion of debt exemplifies many of the worst parts about cryptocurrency: limited accountability taken advantage of by shady founders, leading to spectacular crashes.
In October, Bankman-Fried, better known as SBF, was one of crypto's most trusted faces. His fall from grace has inflicted enormous harm on crypto's already beleaguered reputation. Calls for regulation have been amplified, most notably by Democratic Sen. Elizabeth Warren, who warned that an unfettered crypto industry could tank the economy.
"There's extraordinary regulatory scrutiny right now, and it's only going to get worse," said John Reed Stark, former chief of the Office of Internet Enforcement at the Securities and Exchange Commission and current president of John Reed Stark Consulting. "I don't think any company that I've ever seen [in crypto] has the maturity or the wherewithal to be capable of handling that kind of regulation."
Yuga Labs is one of many companies the SEC looking at as it investigates the wider industry. Its challenge is not only to make Web3 accessible, but to do so at a time when both scrutiny and skepticism in all things crypto are greater than ever before.
"Yuga isn't impacted by anything that's happened directly, but what's happened is horrible and I think hurts the entire industry," Aronow said of FTX's collapse. "This was something that a large portion of the space trusted, thought was a good guy, and now we're seeing behind that mask, and it's ugly."
All Yuga Labs can do now, he said, is focus on its priorities. Its next key project is Otherside, Yuga's concept of the metaverse. While Meta, the company formerly known as Facebook, sees the metaverse as a big virtual-reality world, Yuga Labs is going in the opposite direction. To bring in the largest group of people possible, Otherside is being designed to work on web browsers — both PC and mobile.
Like World of Warcraft, a game Aronow and Solano have sunk countless hours into, Otherside will be a large fantasy world with quests and a storyline. But it'll also double as a platform, like Roblox and Minecraft, where players often spend time building, roaming and just hanging out.
In both Minecraft and Roblox, a large part of the virtual locales players spend time in is built by players and companies, like Nikeland in Roblox, not the game's developers themselves. The difference between these established games and Otherside is the concept of digital ownership. Items you buy or make, unlike in Roblox or games like Fortnite, are treated like digital property — you can sell them, swap them or gift them once you're done.
Gamers have thus far proven to be an unexpectedly tough sell on Web3. Though gaming is an obvious next step for NFT technology, gamers have reacted with fury at various studios' attempts to integrate NFTs into their wares. That can be chalked up to both a suspicion of NFTs as well as a history of predatory microtransaction tactics by established gaming companies. Ubisoft, Square Enix and EA have all faced the wrath of disapproving gamers, but Yuga Labs is betting that people will come around once they experience actual digital ownership.
"People spend $120 billion each year on digital assets and games on their phone, and those are sunk-cost systems," Solano said. Once that money goes in, it can't come out. A proposed purpose of Web3 technology is to change that.
Yuga's proposition is that Otherside can use crypto and NFTs to form an in-game economy that would otherwise be impossible. Items created in the game can be owned as NFTs. Selling those NFTs, or creating in-game services people use, can earn you crypto. The idea isn't to create a playground for get-rich-quick schemes, but to develop a platform where people have the same financial incentives to create a digital item as a physical item.
"There's a base idea here, which is you want to incentivize creators," Solano said. "The best things that have come out of gaming in the past 20 years or so, much of it is mods and user-generated content and stuff that they can't monetize directly on their own, [so creators are] forced away to go to Patreon."
Solano is referring to games like Skyrim, which have enthusiastic modding communities that are over a decade old, and Dota, a full game that's actually a mod of Warcraft III. One of the most critically acclaimed games of 2021 was Forgotten City, a mod of Skyrim.
Aronow and Solano couldn't give a firm release date for Otherside, insisting rather that the platform will open up incrementally. Adopting the decentralized ethos of cryptocurrency, it'll be built alongside its community, with regular "Voyager Trips" — closed betas — informing how it's built.
Crucially, despite it being a Web3 game, you won't need crypto or NFTs to play it.
"Otherside is very much an open platform and an open world," said Yuga Labs CEO Nicole Muniz, "because we're looking at the entire ecosystem, and we want to onboard the next 100 million users onto Web3."
Otherside is ambitious, and its success is far from assured. But Yuga's efforts are worth paying attention to. The speculative bubble that has enveloped the NFT space for much of the past two years has aroused fierce debate over whether there's any actual, mainstream use to the technology. Whichever way it goes, Yuga's metaverse bet will prove someone right.
NFTs have been linked to gaming almost since their very inception. In November 2017, amid the mania of bitcoin approaching $20,000 for the first time, a firm called Axiom Zen launched an app called CryptoKitties on ethereum. It was billed as the world's first ethereum game.
CryptoKitties allowed people to own cartoon cats as tokens on the blockchain. Among the first notable NFT collections, it posed the question: If currency can be owned as tokens on a blockchain, why not digital assets?
CryptoKitties was a proof-of-concept experiment, but calling it a "game" is a stretch. Axiom Zen allowed around 35,000 CryptoKitties to be minted in the year following the app's launch. If you bought two, you could breed them to create a third CryptoKitty. What a kitty looked like depended on the traits of its parents. Some traits were rarer than others, making some CryptoKitties more valuable than others.
At its height, CryptoKitties was popular enough to crash the ethereum blockchain, which wasn't efficient enough to deal with the transaction demand. But interest died off after a few months.
"I bought a couple [CryptoKitties] back in 2017, but it was kind of this blip," said Solano. "It captured crypto Twitter for a moment, everyone was talking about it when it came out, then the model just wasn't there. … I kind of just forgot about it."
Solano had only been into crypto for a few months when CryptoKitties launched, having invested a few hundred dollars in ethereum alongside his brother-in-law on a whim in autumn 2017. Curious about cryptocurrency, Solano joked that he "put the hook in" Aronow, knowing that Aronow, once sufficiently titillated by a new idea, would tirelessly research the topic and "crush you with all the stuff he dug up about it."
Aronow's propensity for falling down rabbit holes, for immersing himself in various virtual worlds, is in large degree related to his battle with colitis. He dropped out of college due to the disease, and said he spent much of the next decade stuck at home.
"There were periods of peaks and valleys, times where I was more than capable of going outside," he explained. "But for the vast majority of that, I was bed to bathroom."
It was only in early 2021 that Aronow's condition abated, which he chalks up to a combination of Western medicine, alternative medicine and diet. It was almost exactly three months after he started feeling better, Aronow said, when he got a text message from Solano: "Hey, wanna make an NFT?"
CryptoKitties aroused a huge amount of attention for a few months, but the longterm NFT success story of 2017 was CryptoPunks.
Launched for free by Larva Labs in 2017, it's a collection of 10,000 pixelated avatars that's considered the first profile-picture (PFP) collection. It's famous for encoding traits into the tokens — different hairstyles, accessories and clothing — making some more valuable than others. In many ways it wrote the playbook followed by NFT creators four years later. Most NFT volume comes from such PFP collections, and most of those collections feature around 10,000 pieces.
Aronow and Solano were inspired by CryptoPunks, and followed many of its cues. But in creating the Bored Ape Yacht Club, they ended up writing the NFT playbook's second edition.
BAYC boasted a few key differences from other early 2021 projects. For instance, every Bored Ape Yacht Club NFT costs 0.08 ether, about $230. At the time, so-called "bonding curves" were in fashion, where the price of minting an NFT went up as more were sold. In one egregious example, the first NFTs cost 0.1 ether to mint, while the last cost 100 ether.
The Bored Ape Yacht Club also came with a roadmap. While CryptoPunks began and ended with art, BAYC promised prolonged benefits to owning the NFT: merch drops, access to games and more.
Last and perhaps most crucially, buying a Bored Ape Yacht Club NFT also meant buying the IP for that ape. The most famous example is actor Seth Green, who's working on a sitcom featuring his ape. One BAYC owner used their simian as a mascot for a burger restaurant (Bored and Hungry), while a pair of friends bought an ape and, creating a backstory for it, turned it into an author, writing a whole book (Bored and Dangerous) in character. Just this month Adidas used its ape, who it named Indigo Herz, in its World Cup advertisement.
Holders of Bored Ape NFTs are incentivized to use their ape to expand the brand. The more that image is spread, the more valuable, in theory, the NFTs become. That's good for holders and for Yuga Labs, which takes a 2.5% cut from every BAYC NFT sold. Whether this works in the long term is anyone's guess, but it's a type of crowdsourced marketing that only exists in NFTs right now.
What didn't take off, however, was the feature that Aronow and Solano actually built the Bored Ape Yacht Club around.
When they agreed to "do an NFT," among the duo's first ideas was an NFT that would grant access to a shared canvas. The hope was that a community could form around an artwork everyone contributed a piece to — an idea Muniz, a longtime friend of Aronow who at the time was advising the pair, called "special" and "a little pretentious."
Muniz sensibly guessed that the first thing anyone would do is draw a dick on the canvas, and encouraged Solano and Aronow to work backward from that presumption.
The shared canvas eventually became the bathroom wall of a dive bar. That dive bar eventually became part of a yacht club. That yacht club eventually became located in an Everglades swamp, in homage to the pair's Miami upbringing. The yacht club would be populated by apes, cartoonishly embodying the crypto slang "ape," an affectionate term for investing money without doing any due diligence first: "I just aped into this coin. I have no idea what it does."
The "bored" part was inspired by crypto Twitter. The pair became fascinated by crypto traders they knew to be worth millions who would spend all their time shitposting on the platform.
"There was something deeply fascinating about someone who would post all day about cryptocurrency, and just have like a cat profile picture or whatever, who you could cryptographically verify was worth millions and millions of dollars, and late at night they would be like, 'Who wants to play League of Legends with me? I'm bored,'" Aronow said.
Solano and Aronow paid five artists to design the ape traits. These would be fed into an algorithm, which then generated the 10,000 cartoon primate avatars the world has come to know and love/hate. Two friends, Zeshan Ali and Kerem Atalay, were brought on to write smart contracts and handle the tech side of things. Ali and Atalay are Yuga Labs' other two founders.
The upfront cost of the Bored Ape Yacht Club NFT launch was about $40,000. Months later, after it had become an unexpected success, each of the five artists got paid an additional $1 million for their work. (Seneca, the lead designer, contends her payment was "not ideal.")
Buying an ape would come with the ultimate enticement: the ability to add a pixel to the club's dive-bar bathroom wall every 15 minutes.
"As absurd as it is," Solano said, "that was our way of pushing the space forward at the time."
The bathroom wall collage never took off — but the collection sold out in under 24 hours, generating $2.3 million for Yuga Labs.
Josh Ong bought a Bored Ape during the collection's opening sale, paying $235 plus a $15 transaction fee. He still holds it — as I look on OpenSea now, there's an offer on Ong's ape for $85,000. Ong, who's known for wearing the same Hawaiian shirt that his ape dons, said he was curious about the idea of crypto tokens granting access to online communities, and liked the BAYC art enough to drop 0.08 ether on it.
The Bored Ape Yacht Club collection did well in the months following launch. Its floor price, which is measured by the cheapest any owner has their NFT listed for, fluctuated between $3,000 and $15,000 until July. But, Ong recalls, it really got going that August when Steph Curry bought an ape for $150,000. Not only did the NBA star use his NFT as a profile picture on Twitter, where he has 17 million followers, he joined and chatted with other holders in the group's Discord, the messaging platform on which most NFT activity occurs.
Many more celebrities would buy into the Bored Ape Yacht Club and use their NFTs as a profile picture, including Justin Bieber, Timbaland and Gwyneth Paltrow. Not all of the attention celebrities drummed up for the BAYC brand was positive. A January segment on the Tonight Show featured host Jimmy Fallon comparing his Bored Ape with Paris Hilton's. The interaction was mocked online, and some like Stark criticized it as an example of market manipulation.
Still, the higher the Bored Ape Yacht Club's floor price rose, the more celebrities flaunted their apes on social media, the more owning an NFT came to resemble an actual elite club pass.
The day after Curry bought his ape, Yuga dropped the Mutant Ape Yacht Club. All BAYC holders were gifted a vial of mutant serum. That serum could be saved or could be used on their existing Bored Ape to create a new Mutant Ape Yacht Club NFT.
The Mutant Ape Yacht Club was designed to both reward holders and to make the brand more accessible. By that time, the Bored Ape floor had risen to a level that made it prohibitively expensive even for those deeply convinced of the future of NFTs. The MAYC collection consisted of 20,000 NFTs: 10,000 from vials airdropped to BAYC holders, and 10,000 that were sold to the public.
The public sale was a Dutch auction starting at 3 ether, or about $9,000. It sold out almost immediately, netting Yuga Labs another $96 million.
Around that time, Ong held one of the first offline Bored Ape Yacht Club meetups. It was a small affair: A few friends he'd met in the group's Discord were going to be in New York for an NBA game. They thought about ways to market the Bored Ape Yacht Club, ways to bring the disparate community together. Ong organized two more meetups before thinking big: an actual yacht party.
Ong got the founders on a Zoom call. "We had this crazy idea to throw an actual yacht party at NFT.NYC [in November]," he told them. "And if Yuga wants to be involved, if you wanna put up some money…"
"They looked at each other, they'd just finished the Mutant mint, and said, 'I think we can cover the bill.'"
The idea turned into Ape Fest, a party that for the past two years has taken place concurrently with the NFT.NYC convention. In 2021, Ape Fest consisted of a yacht party, an open gallery featuring artwork from the Bored and Mutant Ape collections, and the Strokes-headlined Brooklyn warehouse party to cap it all off.
The founders were unsure about how much demand there would be, how possible it would be to transfer energy from Discord to real life. When they arrived at the gallery space where Ape Fest wristbands were being given out on day one, they found a line wrapped around four city blocks. Solano helped give out wristbands. Because the founders were still pseudonymous, most people assumed he was venue staff — someone even asked if he was a Yuga intern.
Later, Ong recalls, when artworks were being set up in the gallery, Aronow entered the room to help, but was blocked by security.
"He got bounced from his own event," Ong chuckled.
Aronow and Solano made the decision to remain pseudonymous at Ape Fest 2021, not making their real identities as BAYC founders known. Looking back, they now say they were "overthinking it."
For better or worse, pseudonymity is a foundational feature of Web3 culture. The Bored Ape founders originally "doxxed" themselves after discovering that a BuzzFeed reporter who'd uncovered Aronow's and Solano's identities intended to publish a story about them.
Bad actors frequently use the pseudonymity that's accepted in Web3 for ill ends. Sketchy founders are able to create a project, be it a cryptocurrency or an NFT collection, make money, vanish before fulfilling whatever utility they promised, and then repeat the process. I asked Muniz, Yuga's CEO, if pseudonymity becomes a liability for a company with the size and mainstream ambition of Yuga.
"We really think of Yuga as an experiment on Web3 values," Muniz said. Web3 isn't just about owning your digital assets, she said, but owning your identity too. It's a principle applied to both the products Yuga makes and the way the company itself runs.
"We have people on staff that are fully pseudonymous, I don't know their real name. I could, as CEO, go to HR and say, 'I wanna know this person's name,' but I would never do that. … The 'real identity' thing, I can't speak to what other people are doing, but I do think people should have that choice. You should be able to own your identity."
Aronow and Solano rejected the suggestion that there was anything untoward about their pseudonymity.
"Number one, three months before we ever launched the collection, we were an LLC registered in Delaware and the state of Virginia," Solano said. "We were never hiding, we were just pseudonymous. We were just interacting in a way that frankly is very natural in the space and very natural to what a lot of people of our generation that have grown up playing MMORPGs, or living on AIM."
The issue of pseudonymity is polarizing even within the NFT space. The wisdom of the accepting the practice was questioned in May when the founder of a popular collection, Azuki, was discovered to have started and abandoned two previous NFT projects. "I wouldn't trust anyone who's not doxxed," a former Pixar designer-turned-NFT creator told me at NFT.NYC in June.
The Bored Ape founders were doxxed for four months by the time of NFT.NYC 2022, and would no longer be confused as interns. Yuga's founders spent Ape Fest 2022 in June being crowded by community members eager for selfies and autographs.
Their personal space wasn't the only thing more crowded that year. Ape Fest was another example of the NFT industry at large following Yuga's path. At NFT.NYC 2022, NFT brands competed with one another to host the biggest party with the most famous guests. Madonna performed at World of Women's NFT.NYC party, while Doodles' show featured an announcement that Pharrell Williams was coming on as chief brand officer, which preceded a performance by The Chainsmokers.
Meanwhile, Ape Fest 2022 turned into an actual music festival, with four days of performances by the likes of Lil' Wayne, LCD Soundystem and The Roots. It was headlined by Eminem and Snoop Dogg debuting a music video in which they transform into their Bored Apes.
When Aronow and I first spoke, I asked him what he thought about the wave of NFTs making promises they were never actually going to keep. Various collections have claimed improbable goals of disrupting fashion, fitness and gaming. In response, he told me about DentaCoin.
In the 2017 crypto bull run, while he and Solano were on crypto Twitter every day, Aronow encountered a cryptocurrency called DentaCoin. It claimed it would forever change the dental industry through blockchain wizardry. It may have sounded plausible to the uninitiated but, to people in crypto, it was an obvious and absurd marketing tactic.
"There's a lot of feasibility for the future use cases of NFTs, but with every bull run comes the DentaCoin," Aronow said. "There's always the people who are going to try and take advantage of a situation, and it may not be easy for the public to suss out what's legitimate and what's not."
There were dozens of NFT collections being pumped out each day in the months following Bored Ape Yacht Club's success. Few register on anyone's radar. I asked the Bored Ape founders how much of their success could be chalked up to being at the right place at the right time. There was a brief moment of silence.
"We didn't sleep at all afterwards," Solano said of the period following the April 2021 BAYC launch. "We spent that whole summer, and eight months later, working 14 hours a day." It was nearly 8 p.m ET and the sound of Slack notifications popping off was easily audible in Solano's background.
Aronow added: "Within a few months of selling out, we were in Garga's mom's backyard in the middle of the summer heat, packaging up hats and T-shirts, figuring out how to fulfill merch orders, in the middle of COVID.
"And then, shortly after that, throwing a giant festival on a yacht and a giant Brooklyn warehouse. I hadn't worked in a decade, Greg was a book publisher, Zeshan and Tomato were software engineers, and we were figuring out how to throw major concerts months after selling out the collection," Aronow said.
"You make your own luck."
Despite helming the most lucrative NFT collections, Aronow and Solano insist the grind of building a company — of working 14 hours a day, every day — means not much has changed. It's only during the occasional break, like watching The Strokes play at a gig you organized, that it hits you.
"It's probably been much more surreal for my wife than it has been for myself," Solano said. "She'll overhear a conference call and be like, 'Was that so-and-so? That's crazy, you're talking to these people,' and I'm just like, 'I don't know, I gotta get to the next meeting.'"
If anything in life has changed, Solano says, "it's just a shitload more Uber Eats."
Yuga Labs has conquered the NFT world. The Bored Ape Yacht Club is the second biggest NFT collection of all time, and Mutant Apes the third. The only collection to surpass BAYC is CryptoPunks, buoyed by its historical significance as the first notable NFT set.
And in March of this year Yuga Labs bought CryptoPunks, the ranked No. 1 in trading volume of any NFT collection ever, off Larva Labs, along with another popular collection in Meebits, ranked No. 11.
"I like to use the analog of Web3 Disney," said Muniz, who was appointed Yuga Labs CEO in February. BAYC is Yuga Labs' Mickey Mouse, Muniz explained, while CryptoPunks and Meebits are the company's equivalent of the Star Wars and Marvel acquisitions. Otherside, the metaverse platform Yuga is building, is like its Disney World.
I asked if there's any contradiction in a Web3 company owning a set of collections that are responsible for between 30% and 40% of the market volume.
"This is where we're not like Disney," Muniz answered. "We might own 30% to 40% of the market, but also our holders own 30% to 40% of the market, and I mean that in an IP sense. Our collections are some of the only collections that truly give away IP rights. … You have exclusive commercial IP rights, and that also means, by the way, Yuga does not."
She brought up the example of the art galleries at Ape Fest, which showcase various Bored and Mutant Apes. In each case, Muniz said, they had to ask for the holder's permission to use the ape. When Adidas put its ape, Indigo Herz, in its World Cup ad, Solano said, they didn't need to ask Yuga Labs first.
"The biggest condition for us doing that deal is that we would be able to decentralize the intellectual property," Solano added. Prior to Yuga's acquisition, Larva Labs retained IP rights to CryptoPunks. "That was the thing that was most important to us. That was the thing that underpinned our reasoning for all of this."
This success, as lucrative as it's thus far proven to be, is limited by its concentration on NFT circles. To grow from here, Yuga needs to onboard more people to NFT space — or make a product that appeals to people who would never buy an NFT. Otherside is designed to be the solution to both problems.
The Bored Ape Yacht Club rang in its first birthday in a big way: by breaking ethereum. On April 30, 2022, Yuga hosted its biggest public sale yet when it launched its Otherdeed collection. Unlike the Bored and Mutant Ape collections, these NFTs aren't designed to be used as profile pictures. They're deeds for virtual land in Otherside.
Buying an Otherdeed NFT comes with two benefits. First, holders are able to participate in Otherside's beta tests, give feedback and inform how the game is ultimately made. Second, once Otherside is live, the plot of land depicted in a holder's Otherdeed NFT will become theirs in the game.
Yuga is still in the first of three development phases for Otherside, so can't confirm the precise parameters of land ownership. Other Web3 metaverses, like Sandbox, allow players to use their land to set up shops, farm resources, build accommodation, rent spaces out for events and host advertisements.
In total, 55,000 Otherdeeds were sold, raising about $320 million for Yuga Labs. But ethereum proved unable to handle the load, and was inaccessible for about three hours. Many people paid $1,500 in fees for transactions that failed — meaning they were unable to mint their NFT — showcasing a glaring weakness of blockchain technology.
"It's incredibly challenging," Solano said. "We knew the right thing to do would be to reimburse people for lost gas fees, so that was a huge priority for us." Yuga Labs paid $265,000 in refunds for people who paid ether for failed transactions.
"It's the insane level of demand we've experienced at different points, the same way when we had lines four ways around the block," Solano added. "It's like, 'Wow, amazing, people want to come see this,' but also 'Fuck, we have lines four ways around the block.'"
Otherdeed holders — of which there are just under 34,000 — are sure to be excited about Yuga's metaverse. Overcoming the wider public's uncertainty, suspicion and resentment of NFTs will be the true test.
Stark, the former SEC enforcer, questions whether the NFT space can untether itself from rampant speculation. "Once you turn it into a marketplace it's no longer a place where people play the game, it's a place where everybody's trying to get cool stuff so they can sell it for more money," he said.
"If you want to flex with some really cool-looking cartoon character, that's your world, have at it. I think that's not the reality. … What everybody is selling is this notion that you're gonna get rich."
Yet in other areas where NFTs have historically been criticized, substantial progress has been made. A common, justifiable objection to the adoption of NFTs has been the enormous carbon footprint of ethereum, the blockchain on which most NFTs are built. But in September the blockchain adopted a proof-of-stake consensus mechanism, changing the way new cryptocurrency is "mined," lowering its carbon output by over 99%.
"If that was truly where the reticence lied, that's now been solved," Solano said. "Have feelings changed as drastically as the facts? Not yet."
Muniz is confident that the technology will eventually win people over, that we're still at the "56k modem" stage of Web3. Aronow is aware of the baggage that terms like "NFT" and "metaverse" come with, and says the names might eventually be changed to be more palatable to mainstream audiences. But regardless of the name, Aronow says that eventually people will see the inherent value of owning their digital goods.
"It's only a matter of time before a company, hopefully ours, is going to demonstrate that value through a really fun game," he said. "That's going to open the flood gates. There's no going back from that moment."