NFT Fans Lose Millions Selling Video Game Real Estate
Why is it important: The creator of the most recognizable NFTs available is back in the news for the wrong reasons. Yuga Labs, creator of the Bored Ape Yacht Club, recently made its Otherdeed collection available for purchase. He touted the NFT as a way for users to get land in his upcoming cryptocurrency-based MMORPG. Unfortunately, many fans instead walked away with only disappointment, high transaction fees, and stolen funds.
Yuga Labs sold NFT Otherdeed through The open sea. The collection was selling (or at least trying to sell) tokens to claim real estate and resources in the upcoming Yuga metaverse game. Other side. The NFT crash generated about $310 million in just a few hours.
Unfortunately for Yuga Labs, the sale generated much more traffic than expected on the Ethereum blockchain. This increase in traffic has resulted in Ethereum gas fees of up to $14,000 for some users and failed transactions for others. Gas fees are fees charged to users to offset the computational energy of processing Ethereum transactions.
To make matters worse, some of those who made the wrong purchase were still being charged for electricity. According to Crypto Briefing, users paid $165 million gas fee at time of sale due to poorly designed Otherside smart contract code.
Smart contracts are a feature of Ethereum’s ERC-20 token and the bread and butter of Ethereum-based applications. Contracts are small programs stored on the Ethereum blockchain that automatically execute at specified times. Contracts do not require participation or action by third parties. Instead, they initiate an action between two entities when all pre-defined criteria are met and the transaction is confirmed on the Ethereum network. In this case, poorly designed smart contracts and poorly defined criteria for their execution led to high congestion and high transaction fees on the Ethereum network.
But what good NFT story is complete without scammers trying to get their share? In addition to technical issues and outrageous transaction fees, some NFT faucets have been recruited and taken advantage of through phishing attacks through scam sites offering gas refunds and additional NFT minting options. Many scammers required users to register and connect their wallets for a full gas refund and access to the Otherside Lands lottery list, leaving their assets vulnerable to inadvertent access.
As a result of the attack, millions of dollars in NFTs were stolen and sent to scammers’ wallets. ZachXBTa self-proclaimed crypto scam survivor and online transaction explorer, has exposed several fraudulent websites and wallet addresses, one of which apparently made over $5 million from unsuspecting users.
We have refunded gas fees to anyone who made a transaction that failed due to network issues caused by the mint. The fees were sent back to the wallets used for the original transaction. Here’s how to find a refund… 🧵
— Yuga Labs (@yugalabs) May 4, 2022
This week, Yuga Labs said it has begun refunding gas fees to users who initiated transactions that failed due to network conditions triggered by the NFT Minting Event. While the move may again secure some investors trying to get them back, the users who fell victim to the phishing scam were out of luck (and the funds they lost).
This hack is by no means the first to target the NFT or the Bored Ape Yacht Club itself. In April, the company’s social media accounts were hacked and filled with fraudulent links to earth minting events. The hack resulted in millions of dollars in NFTs being transferred from users’ wallets to the hacker’s wallets.
Volatility and the possibility of quick, unexpected financial enrichment make NFTs and crypto an attractive option for many who may not understand the underlying technology. Unfortunately, this creates a target-rich environment for hackers looking for unsuspecting victims. Without the involvement of third parties, users have an increased responsibility to remain vigilant and protect their information and assets.