Yuga Labs Historic Virtual Land Sale & ENS Goes Mainstream
Hartmann Capital Newsletter, Thursday May 5 2022
In this issue
Yuga Labs historic land sale
ENS goes mainstream
From the Metaverse - Hartmann Metaverse Ventures I Q1 Recap
Yuga Labs Historic Land Sale
Popular Bored Ape Yacht Club NFT collection creator, Yuga Labs, revealed on April 30, its Otherside metaverse digital land sale which raked roughly $310 million in Otherdeeds. Yuga made 55,000 NFTs available to pre-approved wallets by selling blocks of land in its Otherside virtual world making this the largest NFT mint to date. According to Cryptoslam, secondary sales had already surpassed $558 million on Tuesday. The demand was so high that most activities related to the event instigated heavy ripple effects across the entire Ethereum blockchain, resulting in disruptions and sending transaction fees soaring.
Each plot of land cost buyers around $5,800 per ApeCoin’s price of $19 as of the 30th, with the addition of transaction costs or ‘gas fees’ in Ether which increased rapidly after the sale went live at 9 p.m ET, as the land sell-off drew in heavy demand. According to data compiled on Dune Analytics, transaction costs to mint Otherdeed NFTs after the launch reached $165million, with every Otherdeed requiring about $7,000, or 2 Ether, in transaction fees to mint.
By most accounts, the sale was said to be disastrous as up to $4.4 million worth of ETH could not be recovered from over 15,000 failed transactions. The demand grossly outweighed the supply. Even as activities ran for less than four hours, the Otherdeeds contract burned more Ethereum than renowned applications like MetaMask’s swap router and Ethereum Name Service have since their creation. An additional cause of the high demand that clogged the network and made gas fees spike was unoptimized smart contracts governing the minting process.
The biggest NFT drop in history left numerous minters in the NFT community dazed. One minter reportedly paid $7,000 in gas fees and waited two and a half hours to find out that their transaction was canceled when the mint sold out. “A contract poorly conceived is a mint poorly executed. This was a total disaster from any perspective,” a Bored Ape NFT owner said.
The initial plan was for the sale to be held in a Dutch Auction format, in which the price of the Otherdeed NFT goes down over time for Ethereum to not get congested with high gas fees. But they took off this format in the long run and opted for another plan to cap the number of Otherdeeds that could be acquired per wallet in each wave of the sale. This new plan failed to ease the anticipated congestion. A former Coinbase engineer said that Yuga Labs did not erase the contract logic for using a Dutch auction even when they changed the mint to a flat fee sale. This unneeded logic in the code meant Otherdeeds cost more ETH and took up more block space than was necessary to mint.
With this, Yuga Labs took to Twitter in a six-part thread to apologize for the wild turn of events with Ethereum and suggested the possibility of building an ApeCoin blockchain where its metaverse will operate in the future. “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,” their last tweet reads.
To compensate for the outcome of its chaotic land sale, Yuga Labs have started giving refunds to everyone who could not mint an Otherdeed NFT. They spent about 90.57 ETH (about US$265,000) on roughly 640 refunds.
ENS goes mainstream
As the demand for Ethereum Name Service (ENS) domain names surges, the Blockchain-based protocol has now created one million names. It hit this mark on Monday, the 2nd of May. Out of all domain names, 35,444 were registered on the 1st and 2nd of May 2022. April witnessed an all-time high in the number of registered names as it reached a total of 162,978 names. This spike in registrations has resulted in ENS overtaking OpenSea to reach Ethereum’s top gas-burning protocol.
Over 1.08M ENS names have been created altogether. It is estimated to have brought in over $43.2M in revenue so far this year. On the 2nd of May, ENS also recorded a daily profit of $1.95M for the protocol, according to the project’s founder and lead developer, Nick Johnson. The growing demand for ENS domain names has strengthened the value of ENS which was initially airdropped to early adopters.
The rapid increase in registrations also corresponds to the rocketing floor prices for ENS names which comprise three or four characters. Presently, the current floor price for three-character names holds north of 2.45 ETH after a surge in volume. This is according to reports from FiveDigitClub. Primary sales for both three and four-character ENS domains have been sold out. A recently issued batch of numeric four-character names sold out in less than six hours for $200 each while five-character names have a floor price of 0.027 ETH and are yet to sell out.
Over the last 7 days ENS ranks in the top 10 by volume according to Opensea, overtaking the likes of CryptoPunks & Azuki.
From the Metaverse - Hartmann Metaverse Ventures I Q1 Recap
With the first 4 months of our brand new venture fund, Hartmann Metaverse Ventures I, in the books, we reflect on the first 7 deals we have funded to date with a Q1 return of 6.74% net of all fees.
Our first batch of portfolio companies has been added to our website, which you can actively track here: https://hartmanncapital.com/metaverse-portfolio
To give a glance behind the scenes, we are beginning to feature a number of our portfolio companies on our blog, sharing with you what attracted us to these startups. In March, Hartmann Capital's analyst JP Minetos covered SUBPAC, a company focused on audio-haptic feedback technologies.
JP explores how SUBPAC will add to the next layer of sensation and provide real-time translation of audio to physical stimuli, in the form of music, games, film or virtual worlds. As SUBPAC promises a native AI technology that converts sound information in real-time and creates an environment where there is no predefined coding, Hartmann Capital’s investment will help the company expand haptics usage in music production and enjoyment. SUBPAC also plans to be the de-facto immersion technology for the ever-expanding metaverse. Read more about SUBPAC here.
This week, Hartmann Capital metaverse analyst Daniel Derzic and CIO Felix Hartmann covered Redpill VR, a platform that enables the creation, distribution and monetization of AAA virtual music performances.
The piece gives insight into how Redpill taps into the rave of virtual musical concerts and presents the future of live performance by developing an immersive platform that enables artists to scale their performances in the metaverse. Hartmann Capital's investment will enable Redpill VR to accelerate its cloud streaming efforts, web3 strategy, and roll out a public beta. Read more about Redpill here.
Finally, Hartmann Metaverse Ventures joined Aexlab, a leading VR gaming studio, as an investor. In Episode 7 of The Felix Hartmann Show, Felix speaks with Jonathan Ovadia CEO of Aexlab on building the most anticipated VR game launching in the summer of 2022.
Hartmann Capital Weekly written by Communications Lead, Chidinma Divine Iwu, and edited by CIO Felix Hartmann
This is not an offering. This is not financial advice. Always do your own research.
Our discussion may include predictions, estimates or other information that might be considered forward-looking. While these forward-looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially. You are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this presentation. Please keep in mind that we are not obligating ourselves to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events.