INERTIA Advisory - Weekly Newsletter - 03/05/2022
Welcome to INERTIA Advisory’s weekly newsletter, where you will receive updates on the most remarkable things happening in the cryptocurrency space.
Enjoy!
“A company that is famous for selling JPEGs of Bored Apes on the internet raised US $350 million this weekend by selling 55,000 parcels of virtual land in their metaverse & people paid with a currency called ApeCoin”
If you guys read this take a couple of years ago, you would have thought that I was crazy… Well… Welcome to The Otherside.
The Otherside
Yuga Labs, the team behind the creation of BAYC (The Bored Ape Yacht Club) is, once again, trending in the cryptocurrency space. The company launched its own “open Metaverse” in a partnership with Animoca Brands, a Hong Kong-based gaming software company, called The Otherside.
This virtual world is specifically prepared to allow players to build, collect resources, create and play on it. Unlike in Meta’s (formerly Facebook) digital world, the creator economy will be able to produce not just characters but also outfits, tools, structures, and even games. All BAYC, MAYC, BAKC, and CryptoPunks holders will be provided with Otherside-ready 3D models of their NFTs when the game releases, available as playable characters. Every other NFT collection will be allowed to import and create its own characters via SDK.
The hype around this virtual world was insanely high. Looking at the success that Yuga Labs had with the Bored Ape Yacht Club and its secondary collections, it was a no-brainer that the collection would be sold out as fast as possible.
Previous to the release of the Otherside land, the floor price (Lowest listed price) of a Bored Ape was standing at 152 ETH (US $434,000). This was a new all-time high in both ETH and USD. The NFT collection was launched a year ago for 0.08 ETH (around US $200) each. The Return On Investment for this investment was a “mere” 216,900%.
This new Metaverse is composed of 200,000 plots of land.
Bored Ape NFT holders: 5% of the total supply
Mutant Ape NFT holders: 10% of the total supply
Yuga and other project developers helping to create The Otherside: 7.5% of the total supply
Public Sale in ApeCoin: 27.5% of the total supply
The other 50% will be distributed later on between Otherside NFT holders and contributors.
As mentioned, the hype amid the public sale of the 55,000 plots was insane. It was probably the biggest and most expected drop in the history of NFTs… and it surely did not disappoint.
Only previously KYCd wallet addresses were eligibles to mint this collection. And well… The primary sale of the Otherdeed (land of the Otherside) NFTs surged to more than US $358 million worth of ETH. Moreover, the traded volume in the secondary sale went up to US $553 million in just two days. At the time of writing the smart-contract, the company set a royalty of 5% in perpetuity for each secondary sale that NFTs had, thus, Yuga Labs has generated an additional US $26.65 million in just two days. To put these numbers into perspective, The Sandbox, one of the largest decentralized metaverses, has generated a traded volume of US $427 million since inception, 870 days ago!
However, everything that shines ain’t always gold. The mint ended up producing the highest gas surge in the history of Ethereum, going from 25 Gwei up to 79k Gwei in the same day. Only in network fees, crypto degens spent almost US $100 million.
For those of you that haven’t transact in crypto at all on Ethereum, a fee must be paid to the miner to introduce a transaction into the block, and thus, record that transaction in the blockchain. Therefore, due to the high demand of minting these NFTs, people were paying between 2-3 ETH (around US $6k-$9k). As a matter of fact, over 10,000 unsuccessful transactions and over US $4 million in failed transaction fees were incurred by users who attempted to mint with a low gas price. This is literally insane.
Another interesting (and positive) metric is the Ethereum amount that got burned that day, almost 190 ETH, which is the equivalent to a more than 20% reduction in the Ethereum’s total supply if these numbers were annualized.
Many people state that Yuga Labs created this congestion in the network in puporse so they had an excuse to create their own blockchain. I cannot tell if this is true or not but they surely took advantage of the situation! They publicly stated that the ApeCoin DAO should explore other chains or even create their own chain to keep working on their ecosystem and make it sustainable in the long run.
To be fair, I personally do not think that this craziness was their fault at all. If people are willing to pay thousands of US Dollars in fees to mint some virtual land, who am I no say anything against it, at the end of the day we live in a free market.
However, the community had a completely different point of view and many people felt disappointed with Yuga Labs.
Many of the critics that the community had were directed to the contract. As the space evolves, there have been created more efficient contracts for minting NFTs. What people are really pissed about is that the developers could not supposedly write a good contract, but they are thinking on creating their own chain, which is way more complicated.
Even Vitalik Buterin, co-Founder of Ethereum, made a public statement in Twitter saying that optimizing the contract would not help at all.
To finish with this topic, we need to consider that an NFT drop of this caliber was unseen until the moment. However, it is clear that a Ethereum needs to create a solution towards scalability because a drop of 55,000 NFT cannot collapse the fee structure of a blockchain that seeks to disrupt the internet and the financial system as we know it today.
Many people think that this solution cannot be found and a mass migration to chains like Solana should be made. But the truth is that no chain has ever seen the block demand that Ethereum sees everyday, and if you think otherwise just wait for the next news.
BREAKING: Solana
The Solana’s Mainnet Beta cluster suffered a 7 hour outage caused by stalled consensus in April 30th.
This issue is becoming recurrent in Solana. The problem apparently happened after many bots started sending an enormous number of inbound transactions which made the network to clog up. So… Ethereum may be slow and expensive, but the networks is resilient and doesn't face outages.
In January, the “Ethereum Killer” suffered as many as six outages, creating some concern between the cryptocurrency community towards the smart-contract platform that was destined to dethrone Ethereum.
Apparently Solana developers currently building a more interoperable protocol to adapt and optimize data ingestion while making transactions more effective. They are also building a more robust stake-weighted Quality of Service which will give priority to users who have more staked value, ending the current practice of indiscriminately accepting transactions on a first-come-first-served basis… Not a huge fan of this to be honest.
Meta
Meta released its Q1 2022 reporting that its Reality Labs unit, the team focused on the company’s metavers posted a loss of US $2.9 billion.
Reality Labs is focused on virtual reality and augmented reality products and services that users can use to socialize, work, and play. In 2021, the unit reported a total loss of US $10 billion, however, CEO Mark Zuckerberg reported that despite the loss of 2021 and the projected loss of 2022 there is still a strong projected confidence about the metaverse business long term.
One of the first steps that the company will be taking is indeed in the real world. Meta is planning to open a physical store to sell hardware products for the metaverse. This sounds more of a marketing play by letting clients use the technology and feel the experience to be inside Meta’s digital world.
TradFi
Fidelity
Fidelity Investments, a US $4,200,000,000 Asset Management Giant, will allow participants of its company-sponsored retirements account (401k) to put a portion of their savings into Bitcoin.
Fidelity will reportedly charge an account fee of between 0.75% and 0.90% on top of a trading fee. The Bitcoin offering will be limited to 20% of the 401 (k) account balances and salary contributions, according to the company’s strategy.
The Labour Department stated that this movement poses a danger to the financial security of Americans.
In the meanwhile, Christine Sandler, former executive at the crypto division of asset manager Fidelity, has left the firm for a new position as general partner at crypto asset investment firm Walden Bridge Capital.
BlackRock
BlackRock launched a Blockchain ETF with major holdings Coinbase and Marathon Digital. This product will serve to provide access indirectly to its clients to the blockchain industry.
VanEck
VanEck, a New York-based investment management firm behind a bitcoin futures exchange-traded fund (ETF) launched last year, plans to release a collection of 1,000 NFTs.
The collection will include three tiers: 750 “common,” 230 “rare” and 20 “legendary" NFTs. Each level will afford the owner more special access to VanEck events, digital asset research and other exclusive benefits. An airdrop to people who sign up for the project will occur the first week of May in 2022.
Delubac & Cie
The French bank Delubac & Cie becomes the first french bank to offer Bicoin trading and custody services to its clients.
M&A and VC
OpenSea
Opensea, the largest NFT marketplace by traded volume, has acquired NFT aggregator, Gem, to provide better services for pro users. This purchase will “better facilitate” the platform’s vision and roadmap.
Dragonfly
Dragonfly Capital has launched its third crypto venture fund with $650 million in commitments, earmarking the capital infusion to back later-stage startups as the crypto industry matures.
Dragonfly intends to “double down” on its backing of the next breakthroughs in crypto infrastructure, DeFi and smart contract scaling, as well as consumer products, such as NFTs, crypto games and DAOs.
DCA.