Yuga Labs, ApeCoin, and the Future of Fractionalized NFT
Celebrities Flooding in Bored Ape Yacht Club
Madonna, the queen of pop, became the latest member of Bored Ape Yacht Club(BAYC) by acquiring a Bored Ape #4988 NFT through Moonpay with the price of $564k. Moonpay, reportedly, had paid 180 ETH for the NFT ten days before the NFT got transferred to Madonna’s personal wallet.
The list of celebrities spending hundreds of thousands dollars on acquiring BYAC NFTs includes Justin Bieber, Eminem, Paris Hilton, and the list is getting longer and longer…
With celebrities flooding into the renowned brand and changing their social media profile pictures into the Bored Apes they bought, people begin to wonder not only what BAYC is intrinsically about but also how they can be part of this fashionable and potentially lucrative NFT project.
BYAC is a phenomenon — however — excludenough that some may find this hype as an alienating and rich-people-only game reserved for celebrities and influencers. Paris Hilton and Jimmy Fallon casually chatting over their luxurious ownership of computer-generated images of human-caricature monkeys have definitely caught public unease — if not outcry — over the unsettled and ridiculous strangeness rooted in the frenzy of NFTs.
Among many who view this cultural phenomenon as nothing more than a show of absurdity, the question may have been: why do I need to care about these .jpeg speculations?
Airdrop
On March 14th, BAYC airdropped 15% of its native token, ApeCoin(APE), to its NFT holders, with Yuga Labs also receiving the same amount during this historic airdrop. APE is a ERC-20 token currently being traded on major cryptocurrency exchanges like Binance, Coinbase, and FTX. At one point, ApeCoin became the most traded token among Ethereum whales, with the number of accounts surpassing 36.5K.
The creation of ApeCoin renders the NFT landscape into a vastly different playground with a certain level of inclusivity. According to ApeCoin’s website, ApeCoin“will serve as a decentralized protocol layer for community-led initiatives that drive culture forward into the metaverse.” In other words, the token is branded as the community/in-game token for a variety of upcoming metaverse and Web 3.0 projects.
ApeCoin signifies a new model of corporate structure that is likely to remain relevant if one day NFT is proven to be more than a speck of fad on the timeline of digital history.
Art? Social Token?
Collecting arts, whether digital or physical, is never simply about the product itself. The intangibility of its value is rooted in its social and cultural implications as largely embodied and facilitated by the network effect.
Raoul Paul, the crypto bull & CEO of Real Vision, wrote that he just bought a Bored Ape for around $400K in his latest substack newsletter. Admitting that he saw this type of membership as nothing more than a celebrity-endorsed project at the beginning, he, however, changed his view later as he became fully aware of the power of IP derived from BAYC — a rapidly erupting cultural empire across music, publication, fashion, and more — that eventually consolidates his investment thesis.
Though laying out the disadvantages in dissemination due to that “this was 15,000 (ish) NFT’s that were being built upon, but that was too elitist for network effects,” Raoul doubled down his bullish outlook on the project as he noticed Yuga Labs’s recent acquisition of Meebits and CryptoPunks IP, as well as the issuance of ApeCoin — both as a sign of the company transitioning to be a predominant Metaverse company. Aligning with his thesis of seeing social tokens as the future, Raoul also sees branding effect as a prominent advantages of BAYC over other NFT projects.
“Yuga are building a Web 3 media, fashion and art brand from the ground up and had made a daring move. This was something Web 3 had not yet seen.” Raoul wrote, “After all, BTC is just a social token with unique attributes and all of the works for the various models of digital sovereign states, which is where I think we are headed.”
Raoul regarded ApeCoin as a social token that allows ordinary folks to take part in the capital-heavy speculation on BYAC-led NFT projects which are too expensive for ordinary Joe and Sam to invest in. This, in fact, was utilized as a marketing angle for promoting ApeCoin as an extended tool of financial democratization.
On March 22nd, Yuga Labs, the parent company of BAYC, revealed that the firm has raised $450 million from venture capitalist firms and major blockchain gaming studios — with the famed VC firm Andreessen Horowitz leading the new round of fundraising. Though Yuga Labs hinged that ApeCoin exists independently from the Labs, the link in between the two is nearly impossible to be viewed as separated.
Major stakeholders of Animoca Brand, FTX, and Reddits, who have backed Yuga Labs, are granted as the “initial board members” of the ApeCoin DAO. From the tokenomics designed for incentivizing the prospective growth and adoption of APE, one can decide if DAO is a hub of decentralization or simply a concealed powerhouse of big VC money.
ApeCoin Tokenomics
The total supply of APE is fixed at 1 billion tokens, and the supply won’t decrease via tokens burning, nor increase via tokens issuance.
62% of the total supply — around 620 millions tokens — are reserved for BYAC NFT holders and the DAO treasury. The former receives 150 million tokens, while the latter gets to be deposited with 470 million tokens.
The other 38% of ApeCoin is set for “initial contributors” and the Jane Goodall Legacy Foundation, which supports conservation efforts for real-life jungle primates.
Of the 38%, Yuga Labs and the Foundation are respectively distributed with 150 million and 10 million APEs, accounting for 16% of the total supply. For the remaining tokens,14% go to launch contributors and 8% go to BAYC founders.
All the tokens distributed to initial contributions are subject to lockup periods starting from 12 months, thereby major stakeholders can’t cash out right away.
In spite of not accounting for Bored Apes and Mutant Apes NFT holders which hold 15% of the APE token, Yuga Labs and its backers are still holding roughly 23% of the stash. Given that the voting power is proportional to the number of tokens one owns, there has been a question regarding how decentralized the DAO actually is as dictated by such a tokenomics.
Token Issuance — A Complementary Fractionalization for NFTs
ApeCoin is first framed as the governance and utilities token for ApeCoin DAO, a community-controlled organization overseen by its members who can vote on governance proposals and decide how the The Ape Foundation, a parent corporate company made up of investors of Yuga Labs, operates. The foundation has also been created to execute decisions on behalf of the DAO, as indicated in the tokenomics laid out above.
“With ApeCoin ostensibly coming just from ApeCoin DAO and not from Yuga Labs,” Will Gottsgen wrote for Coindesk, “there is a veneer of plausible deniability — an independent entity allocating tokens to a company and its founders, rather than that company and its founders pumping their own investments.”
The concern thereby rests in if cryptocurrencies like APE are subject to be regulated as securities — like equities issued by publicly traded companies to raise funds and potentially pump their own stocks by the owners. If Yuga Labs is decentralized enough, as pointed out by Gottsegen, it may be able to legally issue a token without registering it as a security, according to SEC’s Guidance on Digital Tokens: The Hinman Token Standard.
Based on Yuga Labs’s direct involvement with BYAC and the Ape Foundation, it utilizes DAO, the seemingly fractionalized ownership structure, to promote the capitalized membership as exemplified in the form of NFTs. “Non-Fungible” is supposed to refer to uniqueness, rarity, and a record of ownership, but, in the case of Yuga Labs releasing ApeCoin to back up its future projects and reward its shareholders as the members of BYAC, NFTs thus become monetarily divisible through fractionalized tokenization.
The fractionalization itself offers a gateway for the majority of people excluded from the privileged club to participate in the success of BYAC. Each token holder is like a retail shareholder of a listed company and he/she will gain exposure to the project by holding APE, though the token itself is not directly correlated to the pricey NFTs, but its prospective utilities for various Yuga Labs-led projects back up its current value.
Yuga Labs — the brand itself — and the monetary value of the BYAC’s IPs bolstered by its overarching applications across numerous fields are the major incentive for investing on ApeCoin. The .JPEGs are not the ends but the means that leads to the goal of capitalizing on cultural identities. Bored Apes are an aesthetics as well as a monetary status — an exclusive club for the mass to aspire to be part of.
The ambition that Yuga Labs planned to position APE as the currency for its all-encompassing web 3.0 ecosystem shows that NFT is beyond a technical medium that proves ownership but a means of raising capital and accelerating the liquidity for digital assets through ownership fractionalization.
While Yuga Labs may not directly control ApeCoin, attributed to the proportion of fractionalized capital distributed to retail investors, the token’s launch could position BAYC as the center of a broader blockchain gaming and media universe. A new form of corporate structure combined with main features of DAOs creates a novel model of governance affiliated with the capitalization of NFTs.
Fungible or Non-Fungible?
The ambitious story of Yuga Labs expanding its Metaverse empire into gaming, fashion, contemporary arts, and other fields became particularly telling with the newly installed governance mechanism: Decentralized Autonomous Organization(DAO).
The mix of governance structure — combining bottom-up voting system enabled by DAO and the corporate-styled top-down system — is simply converting a privately owned company to a publicly traded company. The issuance of native tokens could be simply understood as the process of initial public offering (IPO), where retail traders can get to participate in the promising future of a company.
The main innovation, in fact, is to fractionalize the corporate value mostly derived from NFTs — supposedly undivisible, a token that can’t find another like it is in the world. Buying ApeCoin, in a way, is to bet on the price of each Bored Ape NFT going up in the future .
Friends with Benefits(FWB), the notable success among all the rising DAOs, requires anyone who wants to join the club to hold at least 75 FWB, its native token with each equivalent to around $63 for now. The bar is relatively high, but not that much as compared to the qualification of joining the BYAC.
How much is a Bored Ape NFT currently worth?
Bored Ape #4740 NFT, as a .jpeg of a sad monkey, was sold for 200 ETH, equivalent to $661,490.00, at 02:09:35 AM +UTC on Mar 28th, 2022 on OpenSea.
Fungible or non-fungible tokens are somewhat exchangeable when it comes to acting as a form of membership. In the future, if Yuga Labs begin to develop its own blockchain network and monetize its NFT products denominated to the native token (ApeCoin)of its in-home blockchain, then a Bored Apes NFT will no longer be linked to ETH but to X amount of ApeCoin.
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