The Yuga Labs digital land sale this weekend, a mass mint of new NFTs that temporarily clogged the Ethereum blockchain, is not just making money for the company behind the new set of images that may figure in a future digital service. Other parties are also doing rather well from the effort.
News coverage from the “Otherdeeds” mint points to massive volumes. Decrypt wrote that “OpenSea set a new one-day record for Ethereum NFT trading on Sunday with $476 million,” with the publication adding that “much” of the sum came from Otherdeed activity.
The rush of activity to collect what many hope will be incredibly valuable pieces of digital land — cartoon images of land, in effect, with slight variations — was immensely profitable for Yuga Labs, which took in an estimated $320 million from the event. The overall pace of activity driven by the mint was in fact so large that it led to a simply massive amount of ether, the token associated with the Ethereum blockchain, being burned.
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Amid all the large numbers, you might think that it’s bullish times for the NFT market. After all, so much activity was driven by a single collection’s expansion project — the Bored Ape crew has managed to turn a hit NFT set into several collections, huge venture checks and now a license to print money thanks to speculators snapping up its newly offered digital assets.
But I wonder. Parsing the top collection list on OpenSea, we can see that the Yuga Labs world represents a large portion of the aggregate NFT market as we understand it. Is there a bit too much centralization in the NFT market?
Yuga Labs would likely argue against the point.
But OpenSea is sitting pretty in the middle of the Yuga Labs mint, the ensuing controversy concerning blockchain clogging, and the massive fees paid by crypto traders who wanted to stay active but were stymied by a stampede of NFT hunters.
Recall that OpenSea has a brilliantly simple business model, taking a 2.5% cut of all transactions on its platform. This means that we can quickly run a little bit of math on the Yuga Labs NFT-trading volume surge. And then things get somewhat silly. But roll with me for a minute through the math, cool?
The NFT business
Thanks to the ever-useful @rchen8 dashboards on Dune, we can easily sort out how much Ethereum-based activity OpenSea has seen in recent days. Data clearly indicates that the rush of activity brought on by Otherdeeds landed on the OpenSea market this Sunday, May 1.
That’s useful because it allows us to use May trading data on OpenSea as something of a stand-in for aggregate Yuga-derived NFT trading activity.
Per the Dune dataset, OpenSea has seen May volume worth $854,568,925 thus far. Taking a simple 2.5% of that volume figure yields $21.4 million in revenue for the crypto marketplace. Not bad. (If you want more on why OpenSea is a very valuable company, I have more notes here.)
In essence, Yuga Labs’ NFT work is driving huge trading volume on OpenSea. This is good news for the latter. But as both share a backer, well, the real picture is a bit more complicated. Andreessen Horowitz, the former venture capital firm turned registered investment adviser, has bets all over this particular bit of action.
Andreessen Horowitz has invested in OpenSea itself, leading the company’s Series A and Series B rounds of funding. The investing group has also invested in Yuga Labs. In effect, a16z is betting on both the NFT marketplace and its supply. But there’s more to the matter.
The same investing collective invested in Coinbase, a crypto trading service. Marc Andreessen of a16z fame is on the company’s board. Coinbase also has a venture capital arm that has invested in OpenSea. So if we wanted to argue that the Yuga Labs mint and the associated OpenSea volume spike are helping crypto on-ramps like Coinbase, well, it’s really just the same set of folks that are doing well from the effort.
The Yuga Labs’ massive mint and its ensuing economic impacts are not evidence of a functioning fully decentralized economy. Instead, it’s evidence that the centralizing effect of venture ownership is as pertinent in the web3 world as it is outside of the blockchain domain.
The future is here, and the same people are getting richer.