The Sunday Drip #15 | 6 details worth discussing about BAYC's ApeCoin
Diving into the details of the ApeCoin leads me to make some bold predictions.
Welcome to The Sunday Drip from the Sunday:Drip Society crew. Each Thursday, we’ll breakdown a broad web3 topic and share our thoughts on what’s really happening beneath the surface.
How could I possibly not write about ApeCoin, the biggest news (so far) for NFTs in 2022?
On Thursday (today), the Bored Ape Yacht Club finally released the details of their long awaited ApeCoin (suck it Coinbase NFT marketplace). To save myself some time, here are some context snippets from Decrypt’s article, giving a quick overview of the coin:
ApeCoin is an Ethereum-based token designed for utility and governance. There are 1 billion of them in total, with CoinMarketCap reporting that about 28% are currently in circulation. Many of the total supply of tokens will vest gradually over the next few years.
It’s a decentralized token that can be used for payments and transactions within Web3 apps of all sorts, even those not created or controlled by Yuga Labs or related to the Bored Ape Yacht Club. - Decrypt
(Editors Note: It went up 15% since I started writing this article but I don’t want to change the numbers)
The coin dropped on most major exchanges this morning, rocketing the price up to ~$40 before settling around $8, and it’s been on an uphill climb since then. Seriously.
There is your context.
Now, beyond the high level information, I took the time to read the fine details of the ApeCoin on their site and there are some very interesting aspects of the coin buried in the Discourse. Let’s break those down starting with the least interesting to the most interesting.
I’ll also make one bold prediction at the end.
1. The Jane Goodall Legacy Foundation just made a ton of money.
When looking at the distribution of tokens, what immediately jumps out is the 10,000,000 token donation to the Jane Goodall Legacy Foundation. Right now, that donation is worth about ~$90M dollars in ApeCoins! Yes.
According to the Jane Goodall annual report data, the entire organization took in about $20M in revenue (grants, contributions, investment income) in all of 2020. BAYC just blew that all out of the water with their massive donation (that has lock up periods and a slow release period for some coins over 3 years). But still. Good for them.
Real Apes 🤝 Digital Apes
2. The BAYC founders just got paaaaaid. Yuga Labs too.
Another obvious one, but the 4 founders took home 20M tokens each and Yuga Labs took home 150M tokens. As I write this, those 20M tokens are worth about $180M. Wow. The Yuga Labs share (which they are also the founders of) is worth about $1.35B. Wooow.
I’ll skip over this section. Just wanted to highlight the insane amount of wealth that was created in a single year.
Also, their taxes are going to be brutal given that they can’t touch their ApeCoin’s for a year.
3. The lock-up periods are worth paying attention to.
Everyone on the distribution table has a lock-up period for the tokens they were granted. The language looks like this, “Initial lock-up for 12 months, then 2,222,222.22 unlocked per month for 36 months.” They all roughly last for about 4 years with tokens becoming available after year 1 on a monthly release schedule.
The lock-up periods were established to control the price of the coin and prevent anyone involved from dumping and hurting the price. This is standard practice for any startup that pays their employees with stock grants.
I bring this up because it is worth noting that only 27.75% of the total tokens are currently available to be traded starting today. This is significant to note given the price of the ApeCoin today. The price is a function of buy/sell pressure and only a fraction of the tokens can even be sold.
One year from now, only 41.56% of the total tokens will be available to move. Then, (roughly) 1.56% of tokens will become available to move every single month starting at the end of year 1. Many companies issue new shares every year, but this will be significant considering the percentage increases after each year.
Okay, on to the good stuff.
4. 17.5% of the total ApeCoin supply will be distributed in a staking pool.
This was the first detail that blew my mind. A) That’s a ton of ApeCoin up for grabs, and B) that is going to seriously impact the behavior of the NFT holders. The amount that can be earned by staking is actually MORE than the amount given to the BAYC NFT holders. That’s significant.
For a while, everyone expected the floor of all BAYC projects to take a nose dive after the ApeCoin air drop, but now the holders again have a reason to hold. Take a look at the pool types.
Staking Pool Types:
ApeCoin Staking Pool
BAYC Staking Pool
MAYC Staking Pool
BAKC Staking Pool
Initial Staking Period:
ApeCoin Staking Pool: 30,000,000 ApeCoin Tokens
BAYC Staking Pool: 47,105,000 ApeCoin Tokens
MAYC Staking Pool: 19,060,000 ApeCoin Tokens
BAKC Staking Pool: 3,835,000 ApeCoin Tokens
Staking Pool Periods:
Year One: 100,000,000 ApeCoin tokens (10.0% of the total ApeCoin supply)
Year Two: 50,000,000 ApeCoin tokens (5.0% of the total ApeCoin supply)
Year Three: 25,000,000 ApeCoin tokens (2.5% of the total ApeCoin supply)
My favorite tweet of the day comes from tropoFarmer:
The staking IS going to make them do it again. This is an extremely important proposal and when approved, will create a significant amount of supply pressure for interested buyers. Not only that, but you can stake every BAYC NFT for ApeCoins!
I predict that people will want to stake the NFTs and collect their ApeCoins and future airdrops hinted at by the leaked roadmaps.
A major lingering question though, what happens after year 3? Will there continue to be a mechanism convincing BAYC holders to hodl on for dear life? Will everyone be playing a game theory game to determine the best time to exit before all of the lockup periods end? All important, but we’ll cross that bridge.
I predict the holding incentives will never end. Bold I know. lol.
5. There might be some problems with the staking…
Chris Maddern was the first person I saw point this out, but there might be a major issue with the staking I just laid out above.
The ApeCoin that can be accumulated from staked ApeCoin, or any ApeCoin attributed to NFTs, is dependent on the amount of ApeCoin staked by the user, the duration of the stake, and the total amount of staked ApeCoin in the relevant staking pool.
Maintained NFT Tradability:
Only ApeCoin is ever staked. The owner of a specific NFT at the claim point is able to claim the accrued ApeCoin tokens attributed to that NFT, even if they were not the one who originally initiated the staking commitment.
Although tradable, committed NFTs cannot be recommitted, unless a holder has previously uncommitted the NFT.
The Foundation’s website UI will be updated to have an option to enter the BAYC, MAYC, or BAKC token ID and check the following:
Is the MAYC, BAYC, or BAKC currently committed to a staking pool?
Does the BAYC or MAYC have a committed BAKC companion NFT?
NFTs that are currently committed will have an updated status in a UI that serves as a notification for potential buyers, so they’re aware of the commitment status, and the amount of ApeCoin that NFT has earned, before purchasing.
Thissss, seems like a big problem. Maybe not a big problem, they seem to have a solution, but this seems like it might be annoying.
We can stake an NFT and then sell it… but still accrue ApeCoin?
This brings up some major questions for how the NFTs will look on OpenSea. Can OpenSea even do this?
Excellent literary transition question, me.
6. Up to .3% of the Ecosystem Fund for an ApeCoin NFT marketplace
Stuck at the bottom of APE Improvement Proposal #3 is this line about the budget for an ApeCoin NFT marketplace. This is veeeery interesting. The most interesting line in the entire ApeCoin site in my opinion.
I’ve written before about how network affects are driving the success of OpenSea and it’s getting harder and harder each day for users to move to another platform (again, suck it Coinbase NFT marketplace). But this… this could really shake things up in the NFT marketplace world.
Take a look at the top projects on OpenSea by all time volume (I know Punks have their own marketplace):
All 3 of those top projects are now owned by Yuga Labs. (Meebits is #10 and BAKC is #15). But let’s take a look at the next 3 projects.
Oof. Decentraland and Sandbox are also moving to their own ecosystems, powered by their own tokens, free from OpenSea. Further down we see Decentraland wearables too at #13.
The future is starting to look a little scary for OpenSea.
I know that we’re still early in NFTs, but you can quickly see a future where OpenSea is no longer the dominant player. You can quickly see the ApeCoin holder loyalists will want to support an ApeCoin NFT marketplace, further driving value to their own currency. It might start out with the YugaLabs in-house projects, but if you are a new project starting out, you might want to launch on an ApeCoin marketplace where the deepest pockets in the NFT world hangout.
How long will Doodles, Cool Cats, and Clone X stay around? I am betting that BAYC just created the playbook for independence from OS and we just don’t know it yet.
Final bold prediction: The BAYC ApeCoin will push OpenSea into dropping an OpenSeaCoin. We’ll call it $BOOTY. Hopefully for them it’s not $SWANSONG.
Bonus: Last hilarious tweet from the past day:
Agree? Disagree? Comments? Questions? Let me know! Possibly some typos.