Comma confusion in this sentence

Solution 1:

No, both aren't correct (a generally meaningless term when applied to punctuation: only incorrect works), but they're both acceptable to someone or other. What's correct here depends on who's making the judgment. Comma rules are amoebic and amorphous. They vary with the writer, the editor, the style manual, and the linguist/grammarian/English teacher who looks at the sentence.

This, of course, wasn't the only functionality that came with iCloud, but, regardless, developers weren't exactly enthusiastic. [OK]
This of course wasn't the only functionality that came with iCloud, but, regardless, developers weren't exactly enthusiastic. [OK]
This, of course, wasn't the only functionality that came with iCloud; however, developers weren't exactly enthusiastic. [OK and better]
This of course wasn't the only functionality that came with iCloud; however, developers weren't exactly enthusiastic. [OK and better]

See this for so-called comma rules. Not everything is clear, but it's a generally very good analysis of how to use commas. Don't take the names of the comma types seriously unless you want to be confused. Just look at how Trask uses them and what he says is proper use.