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ApeCoin Drops After Ethereum-Crashing Record Virtual Land Sale

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Yuga Labs, The creator of the popular Bored Apes Yacht Club collection of NFTs is requesting that bidders who were unsuccessful in its weekend sale of virtual land tied to its metaverse project be reimbursed transaction fees.

The record sale brought in roughly $320 million, but it also generated about $180 million in Ether transaction fees. The excitement prompted Ethereum’s blockchain to become congested, with so-called gas prices so high that not only miners, but also other Ethereum-based app users, were unable to execute various tasks such as trading or minting. Because of the restricted capacity of the Ethereum blockchain, additional fees are required to complete a transaction on the network.

Yuga Labs did not respond to a request for more information beyond its tweet, including the value of the refund and the number of affected minters.

The saga is the most recent instance of a popular Ethereum-based NFT launch creating Ethereum congestion and high fees. While the network is about to go through one of its most important technical improvements this year, it ignores scalability concerns and prices. Developers have been working on a number of scaling solutions, including so-called layer 2 projects and sharding, which alter the way data is distributed, but the same congestion difficulties have persisted.

Winning bidders on the virtual land appear to have rushed to the secondary NFT marketplace OpenSea to quickly sell the assets for a profit. According to data from Dune Analytics, OpenSea’s daily sales on May 1 were more than four times greater than the day before.

Holders of the ApeCoin token who proved their identities competed to purchase deeds for 55,000 virtual land plots in Otherside, the project’s upcoming metaverse game and the next installment of the Bored Ape franchise. The price of ApeCoin had risen last week ahead of the sale due to expectations that interest in the plots — Ethereum-based NFTs termed Otherdeeds — would be high. According to CoinMarketCap data, the price has dropped roughly 16 percent to $14.64 in the previous 24 hours.

Based on ApeCoin’s price of $19 at the time of the auction, plus gas fees, each plot cost a buyer about $5,800.

Token makers or traders must pay a fee to people who order transactions on the Ethereum network when they mint a token or make a transaction. When the network becomes congested, transaction fees rise because more fees are required to prioritize a transaction. This could have an impact on Uniswap’s Ethereum-based company, effectively slowing transactions on other platforms.

Yuga Labs apologized for “shut off the light on Ethereum” on Twitter, and urged the creation of an ApeCoin blockchain.

According to Otherside’s Twitter account, the ApeCoins raised in the sale will be locked up for one year, meaning they won’t be able to be sold, lowering the number of coins in circulation.

According to the Otherside website, in addition to the 55,000 Otherdeeds sold on Saturday, another 45,000 were allocated to holders of Bored Ape Yacht Club and Mutant Ape NFTs, as well as Yuga Labs and other project developers, with another 100,000 expected to be awarded to certain Otherdeed holders later.

ApeCoin aims to be extensively used in a range of “web3” apps that employ digital money and blockchains. Owners will be able to participate in a variety of events, services, items, and games. It’s also the ApeCoin DAO’s governance token, with Reddit Co-Founder Alexis Ohanian and FTX’s Amy Wu on the board.

ApeCoin was launched as a “airdrop,” in which select groups of crypto holders automatically received 1 billion tokens as a reward. Venture capital investors who contributed with ApeCoin’s March debut, including Andreessen Horowitz and Animoca, were among the biggest recipients of ApeCoin. They earned 14 percent of the tokens, or 140 million tokens, together with other launch partners.

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