Why Is Yuga Labs Receiving Backlash for Its New Bitcoin Ordinal NFTs?

Yuga Labs has made a big name for itself in the DeFi industry, but things haven’t always been smooth sailing for the company. Most recently, Yuga Labs has come under fire after launching its Bitcoin Ordinal NFT collection. But why, exactly, are people upset about this?

What Is Yuga Labs and Its Bitcoin NFT Collection?

Yuga Labs is mostly known for its Ethereum-based NFT collections, particularly Bored Ape Yacht Club. Bored Ape Yacht Club (BAYC) was launched in April 2021, a year when the NFT industry would see significant growth. Some of BAYC’s NFT avatars sold for millions of dollars (or hundreds of ETH), making this collection one of the most well-known in the market.

But YugaLabs hasn’t stopped there. Since its launch in 2021, the company has released a range of NFT collections alongside BAYC, including Mutant Ape Yacht Club (MAYC) and Bored Ape Kennel Club (BAKC).

In 2023, Yuga Labs took on another venture, this time on the Bitcoin blockchain. In January 2023, a Layer 1 protocol known as “Ordinals” was launched on the Bitcoin blockchain, allowing packets of data to be sent in transactions within Satoshis. A Satoshi is a minute fraction of one Bitcoin, with each Bitcoin containing 100 million Satoshis.

In the Ordinals process, data is inscribed onto a Satoshi, which is then sent to a recipient address via a transaction. Various kinds of data, including images and text, can be inscribed onto a Satoshi. The result is a Bitcoin Ordinal, which is similar to a typical Ethereum-based non-fungible token (NFT).

Ordinals have been gaining a lot of hype throughout the first few months of 2023, so it’s no surprise that Yuga Labs wanted to get in on the trend. On March 6, 2023, Yuga Labs launched its first Bitcoin-based NFT collection, known as TwelveFold, via the Ordinals protocol.

YugaLabs’ chief content officer took to Twitter to explain how these auctioned Ordinals would work, stating that each TwelveFold art piece would be inscribed onto a single Satoshi.

This collection consists of 300 separate pieces, and it began with an auction on the official TwelveFold website. It wasn’t long before most of the pieces had been sold to a total of 288 successful bidders. The highest bid amounted to over 7 BTC, which equates to more than $154,000 at the time of writing. All in all, the first TwelveFold auction made an impressive $16.5 million.

However, this auction has received a vast amount of backlash since its launch. But why is this the case?

Why Is Yuga Labs’ Ordinals Auction Being Criticized?

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Not long after Yuga Labs announced its TwelveFold auction, people began criticizing the project. Many took to Twitter to give their opinions on the auction, with some even suspecting a sort of scam in the midst.

But what’s the point of contention here?

While many are skeptical of NFTs as a whole, it’s not the technology itself that is under fire here. Rather, it’s the way in which Yuga Labs was conducting its TwelveFold ordinals auction.

When an individual made a bid in the TwelveFold auction, they had to send the total bid amount to a specific Bitcoin address. In a typical auction, bidders will offer an amount, but no money is taken unless their bid is successful. As you may have guessed, YugaLabs owned this recipient address, meaning it was receiving swathes of bids that may not have ended up winning.

This angered many, with YugaLabs receiving a huge amount of backlash for its decision to withhold the funds.

However, YugaLabs announced that it has refunded all the unsuccessful bids.

YugaLabs also stated that all successful bidders who increased their bids after the auction’s last block should ensure their recipient addresses are empty before receiving the inscriptions.

But people still believe that the way in which Yuga Labs conducted its Ordinals auction sets a bad precedent within the DeFi space. Even though YugaLabs sought to refund unsuccessful bidders, the act of taking prospective winners’ funds prior to the end of the auction left a bad taste in people’s mouths.

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YugaLabs is no stranger to controversy, having found itself in hot water numerous times over the past few years. Yuga’s BAYC collection, for example, has not only been criticized by NFT skeptics but has had some serious allegations made against it. In September 2022, CoinTelegraph reported that a group named “Anonewsco” claimed that YugaLabs’ use of certain symbols in BAYC art was suggestive of racism, Nazism, and other dark ideas.

What’s more, Blockchain News reported that YugaLabs has faced multiple lawsuits over its NFT collections, including a class action lawsuit filed by Rosen Law Firm over Yuga’s NFTs and ApeCoin cryptocurrency. The firm stated that those who purchased such assets between April 23, 2021, and December 8, 2022, could be entitled to compensation for the financial losses suffered when the market took a turn for the worse.

YugaLabs Remains in a Controversial Spot

Having been in hot water numerous times in recent years, YugaLabs now has a somewhat dubious reputation. The company may host further Bitcoin Ordinal auctions in the future, but time will tell whether they receive the same amount of backlash.