People across the ether went ape this past weekend after Yuga Labs, creator of Bored Ape Yacht Club (BAYC), launched its highly publicized metaverse, the Otherside, which dropped at 9:00 PM ET, on Saturday, April 30. Yuga went so far as to proclaim that it was "the largest NFT mint in history by several multiples." But for many eager investors, system crashes and high gas fees made it anything but smooth sailing to the Otherside.
What is the Otherside?
The Otherside metaverse is an usual, diverse and colorful landscape. It consists of 200,000 plots of "land" that are available through the purchase, or minting, of so-called "Otherdeeds" -- NFTs that act as title deeds for the plots of virtual land. Getting in on this much-anticipated metaverse to mint Otherdeeds requires the purchase of ApeCoin ($APE), the governance and utility token for the entire Ape ecosystem, and the legal tender in this new, exclusive metaverse. The cost of minting one Otherdeed was set -- just hours before the 9:00 PM start time -- at a flat 305 $APE, or about $5,847, based on $APE's per-share price of $19.17 at the start of the sale.
While crypto markets were in the red over the week leading up to the Otherside launch, the price of $APE was going green in anticipation of BAYC's metaverse (true to the saying that the grass is always greener on the other side). Consider the market performance of the top 25 coins over that past week:
On the Thursday before launch, the price of $APE was $27.44, up 150% since April 18, when rumors first spread on social media that owners of NFTs from BAYC and Mutant Ape Yacht Club (MAYC) collections could get virtual land on the Otherside (the price retreated to $23.68 by 9:00 AM on April 30, 12 hours before the starting time). Those eager to stake a claim in this new metaverse have realized that it takes more than just buying ApeCoins to rome about in this magical metaverse…a lot more.
What you need to know before going $APE
Launched in April 2021, the Bored Ape Yacht Club is one of the most popular -- and arguably highly coveted -- NFT collections available, consisting of 10,000 unique Bored Ape NFTs; unique digital collectibles that reside on the Ethereum blockchain. A single Bored Ape, for example, has a floor price of 107.8 Ethereum coins, or ETH (roughly $300,500), as of mid-Tuesday, May 3 (it was 152.4 ETH, or roughly $431,000 hours before opening night).
Over the past year, the craze (or hype) of Bored Ape has intensified throughout the NFT community as celebrities such as Colin Kaepernick, Shaquille O' Neal and Snoop Dogg, and companies including Adidas, Google and Samsung, have added a quality of exclusivity akin to a swanky LA night club. And speaking of clubs, ownership of a Bored Ape doubles as a membership card to the Bored Ape Yacht Club and gives you access to "members-only benefits", many of which are undisclosed but include access to a private discord server, NFT collectibles that are airdropped and exclusive games. Community strength, celebrity endorsement and exclusive utility are the three pillars that have made BAYC one of the strongest crypto cliques in the ether. The only thing missing is its own metaverse…until now.
"Investing in Ape Coin could be a diamond in the rough," says Steven Warren, contributing writer and ZDNet's Crypto Coach, who's also an avid collector of NFTs. "But keep in mind that it's a speculative asset -- with wild price fluctuations -- and you should invest only with money that you can afford to lose."
Over the past couple of months, there seems to have been an acute breakout of FOMO throughout the crypto universe among those eager to break on through to the Otherside, mainly from people who missed the April 1 deadline to be cleared under KYC. Know Your Customer, or KYC as it's known, is a standard validation process in the crypto community used to verify the identity of a customer, their risk and financial profiles. It verifies that you are who you say you are. The first Otherside homesteaders to mint Saturday night, for example, were KYC-cleared. But KYC is one of four criteria required for minting. The other three are use of $APE for minting, wallet pre-approval and having Ethereum crypto coins, known as ETH, available for purchasing "gas" -- the cost the network charges for processing a transaction.
The mint was originally to be in the form of a Dutch auction, whereby the price of $APE would drop over time. But before the powers-that-be could tweet a starting price for the auction, they determined that Dutch auctions are bull and abandoned that approach in favor of making Otherdeeds a price of 305 ApeCoins. In addition, given demand from the NFT community, BAYC allotted more time for users to set pre-approval for ApeCoin, which started 12 hours earlier, at 9:00 AM ET Saturday morning.
Much preparation and thought went into the construction of this deal. To illustrate, Ape coin holders were given several guidelines to adhere to for opening day. According to Otherside's official Twitter page @OthersideMeta, the guidelines included the following:
- You must be KYCed. "Only those who are KYC-approved can mint in the auction," as stated in the official Twitter thread.
- In addition to APE, you'll need some Ethereum coins (ETH) "for gas". "You'll want both in the wallet you used for the KYC."
- BAYC and MAYC holders will be able to claim an NFT for 21 days after the sale. You don't need to be KYC-approved to claim, but you do need to be KYC-approved to mint in Saturday's sale.
- The amount of ApeCoin earned from this sale will be locked up for one year. "That means no voting with it in the ApeCoin DAO either."
- "On Saturday morning, you'll be able to pre-approve your KYCed wallet on https://otherside.xyz." This will allow the smart contract to use your ApeCoin to mint during the sale. BAYC and MAYC holders don't need to approve their wallets to claim -- only to mint during the sale."
- You don't have to pre-approve early -- you can approve your wallet after the launch at noon eastern time, "but doing it a few hours earlier will save you time and gas fees."
To prevent the risk of being hacked, Otherside's official Twitter page encouraged these safety tips:
- Announcements will be on the following official Twitter accounts only: @OthersideMeta, @boredapeyc, @yugalabs and @animocabrands, as well as on discord at http://discord.gg/bayc and http://discord.gg/the-otherside.
- "Nothing will be announced or cross-posted anywhere else. NO ONE involved in Otherside will be posting on Instagram." There will be no contests or giveaways and no surprise/early drops. "Everything will happen on 4/30, and only on http://otherside.xyz," according to the Twitter page.
- "Don't reply to or click on anything from any other accounts, tags, DMs, or emails. Animoca, Otherside, BAYC, Yuga Labs, founders, and mods will not tag nor DM you first. Never share or type your seed phrase."
- "Again, only trust information posted here first."
Yet as soon as doors opened, it was anything but a smooth, orderly experience. On Saturday night, 100,000 Otherdeeds were made available, but only 55,000 were available for purchase to those with KYC-cleared wallets. Within mere minutes, more than $200 million in virtual land was sold. That sudden blast of trading activity essentially strained the Ethereum blockchain, resulting in outlandish gas fees of upwards of $5,000 per transaction. According to Yuga Labs, "The scale of this mint was so large that Etherscan crashed."
Suffice it to say, anxious investors went bananas.
As a result of the chaos, word on the street (er, discord) among users centered around the frustration of high gas fees. (That's ironic given the fact that not only is inflation affecting American consumers at their local gas stations, but inflationary gas prices are being felt on the Otherside.) Reddit users expressed similar frustration, some placing blame for Saturday's crash on Otherside's contract, which caused failed transactions. Others blamed Yuga Labs for lack of effectively utilizing basic gas optimizations, which could've saved users up to $80 million in gas fees.
The chaos prompted Yuga Labs to make the formal apology:
"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 properly scale. We'd like to encourage the DAO to start thinking in this direction. We are aware that some users had failed transactions due to the incredible demand being forced through Ethereum's bottleneck. For those of you affected, we appreciate your willingness to build alongside us - know that we've got your back and will be refunding your gas."
Despite the opening day disruption, the Otherside is up and running, with an updated map and detailed descriptions of the land.
How to purchase ApeCoin
At $19.17 a coin, you can't buy $APE for peanuts, but you can still buy it (you just can't use it to mint Otherdeeds). "No problem," says Warren, "you can still buy into the Ape metaverse on the secondary market."
To do so, go to the Otherdeeds page on OpenSea, the official marketplace for NFTs, which provides the market data you need to decide on making purchases. Just three days after the launch, the volume trading activity for Otherdeeds is 196,200 trades.
For those who are interested in buying $APE, you can do it in five steps. To illustrate, we'll use Crypto Coach Warren's following example, in which he purchased ApeCoin using the Coinbase app on his mobile phone. Upon logging in the Coinbase App:
- Tap "Buy"
- Type "ApeCoin"
- Enter the amount you'd like to purchase ($25, or 1.25 APE)
- Tap "Preview Buy"
- Tap "Buy Now"
Once you've got your coins in your account, you have the option to either store them in a hot wallet (in this example, online in a Coinbase wallet) or move it to a cold wallet (a separate, physical storage device that's offline where online hackers can't get to it).
Because $APE is an ERC-20 coin -- a technical standard that enables interoperability between Ethereum-based coins -- it's possible to transfer it to another Ethereum address for storage. In Warren's example, he's able to take his $APE and transfer it to his cold wallet and store the funds. To do so, simply type "send" and enter the amount to send. Warren says to make sure to add a bit more for gas fees.
The $APE has been stored successfully in the hardware wallet. This is how the transaction looks from a tax perspective:
Gas fees do eat into a portion of the purchase, as was brutally evident during Otherside's opening night; that is why it's important to send a larger amount, or wait until gas fees are cheaper when moving funds from Coinbase to your hardware wallet, Warren notes. Warren's example, is just that, an example. In all practicality, nobody would ever accept 61% in gas fees. "I ate the gas fees for the post. In reality if they are too high you should wait for gas fees to come down," he says.