One of the top non-fungible token (NFT) lines sold off 55,000 NFTs for a record-setting $317 million.
The transaction fees for those sales? $4,000 to $10,000. Each.
Total cost? $200 million for 55,000 transactions. Welcome to Ethereum, the little blockchain that can’t.
Actually, Ethereum is by far the largest blockchain, with the vast majority of crypto platforms and decentralized apps built on its 12 to 15 transaction per second (TPS) backbone. That includes decentralized finance (DeFi) projects as well as the hot new metaverses and NFTs like the outrageously priced Bored Ape Yacht Club avatars, which can sell for six and even seven figures.
See also: PYMNTS Blockchain Series: What Is Ethereum? The Blockchain That Moved Crypto Beyond Currency
This has happened to Ethereum before, albeit on a far lower scale, beginning with another hot NFT project — the first and most famous being when the CryptoKitties NFT-based game launched in October 2017.
CryptoKitties was the first real NFT craze, and by December, transactions were up 600%. While CryptoKitties were selling for six figures, the blockchain was badly clogged and all transactions were badly delayed. It was so bad that many heavyweight developers scrambled for a short-term fix to avoid having the entire project collapse.
Read more: PYMNTS NFT Series: What Are NFTs and Why Are They Crypto’s Newest ‘Next Big Thing?’
It also made it clear that Ethereum — as well as Bitcoin, which has about one-third the transaction speed — was simply not capable of becoming a real alternative payments rail.
That kickstarted the need for a longer-term solution in the form of the much-delayed Ethereum 2.0 project, which developers promise will scale to 100,000 TPS and beyond.
Related: Ethereum 2.0 Will Not Be Any Faster, Vitalik Buterin Said. But It Will Still Scale Massively
Ethereum transactions already run $5 to $15 or more on a regular basis at peak times and have spiked into the hundreds of dollars, which makes it far from useful for payments of a day-to-day scale.
It’s why a number of Ethereum competitor blockchains like Algorand, Avalanche, Cardano, Polkadot and Solana — so-called “Ethereum killers” — have thrived. They offer far better scalability alongside the environmentally-friendly consensus mechanism called proof-of-stake (PoS), which Ethereum 2.0 will eventually use.
Nor would traditional payments channels get clogged by a 55,000-person sale — Visa’s networks can handle 65,000 TPS — and even if it did, there wouldn’t be a bidding war for transaction order that would drive fees to five figures.
Beating Their Chest
Bored Ape Yacht Club (BAYC) was responsible for the latest, and by far the greatest, Ethereum debacle that began at 9 p.m. on April 30.
Read more: Planet of the Bored Apes
Even better, the stampede wasn’t actually for a new line of bored apes. The NFTs sold for 305 of BAYC developer Yuga Labs’ ApeCoin tokens — about $5,800 — bringing in $317 million.
No, the NFTs in question allow the owner to buy one of 100,000 plots of NFT “land” in a metaverse project called Otherside, which is entirely vaporware as this point as it was just announced in March, following a $450 million funding round.
Related: Bored Ape Yacht Club Preps $300M Metaverse Land Sale
So, the buyers who flooded the sale were buying permission to buy an NFT at a later time.
The problem is that like many tokens, ApeCoin is built on an Ethereum technical standard, ERC-20, that allows it to be used for transactions on the Ethereum blockchain, just like ether tokens. The Bored Ape avatars themselves are ERC-721 tokens, like most NFTs, which also run on Ethereum.
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