On ApeCoin or a critical look at crypto’s regulatory evasion.
The little fact that the app Autonomous Art that Moxie Marlinspike — the founder of Signal — created just to mock web3 has now attracted more than $1.6M in investments tells you everything about the investment environment of the 2020's.
And look, I am not entirely sure if Moxie’s article attracted enough attention, given how deep it cuts; to be fair it is quite technical. You can read it here, but put simply it explains that decentralized web3 is not actually decentralized at all. Since any web3 app (like the above) needs to interact with the blockchain somehow and the entire blockchain cannot live on your mobile or a web browser, it has to make calls to an API of either Infura or Alchemy — two companies that run blockchain nodes as a service.
He also made an NFT that show some picture on OpenSea, but a 💩 emoji when you view it from your wallet, since most NFTs only contain unhashed urls to an image on Google or Amazon cloud. Should anyone get access to that server, they can change or remove the image.
The other app that Moxie created — First Derivative— feels like some ominous foretelling of ApeCoin, the new coin that was issued as the cryptocurrency of the now famous Bored Ape Yacht Club NFTs and achieved a market cap of $4B soon after launch. Although the public discourse is disturbed by the fact that as much as $2B of the coins may have gone to VCs for free, which is, you could say, very at odds with the whole decentralized autonomous ethos, the really disturbing fact in my world is how much ApeCoin is a lesson in financial engineering or playing the market.
Also brilliantly laid out by Coindesk here. So you are a soon-to-be-VC-backed team behind Yuga Labs, the company governing the intellectual property of Bored Apes. You are making good money as it is, or estimated to be $127M according to a pitch deck obtained by the Block (could be royalties from the more than $1B of secondary trading of the Bored Ape NFTs), but how can you reward yourself more? Look, you cannot just issue some derivatives of the Bored Apes; there is a thin line between an NFT and a security (creating a new NFT image is art; creating a new NFT or a derivative of NFT for trading on secondary market to reward original owners is a security). No, instead you set up a decentralized organization, which is explicitly not related to Yuga Labs. And you can give it a 1 of 1 NFT, or whatever. Look, it doesn’t matter; blockchain is beyond legal stuff.
Where there is no substance, add complexity, plus some vision of future. Create a foundation and put some famous people on the DAO’s board: people like Reddit co-founder Alexis Ohanian and Amy Wu, the head of FTX’s venture arm. Give people power; each board member gets a six-month term, after which time the DAO members will be able to elect new members. Pay some Cayman entity $150K per month for admin. Total setup costs for the DAO $2M. Each board member gets $125K for 6 months in ApeCoin. Its all here. Lastly, a sense of abstract future: “Culture has found new expression in web3 through art, gaming, entertainment, and events.” And it should be in the hands of people to decide where this should head next by owning ApeCoin and participating in ApeCoin DAO.
The new DAO issues 1B coins. Of this, 62% goes to treasury and existing Bored Ape NFT holders and the remainder goes to you and the ‘launch contributors’ (VCs?). Sure the new coin is immediately listed on all largest exchanges, no problems; you are now friends with the same VCs that back those exchanges (a16z — Coinbase; Binance also investors in FTX and their venture lead Amy Wu, see above). Seems like a well-structured, masterminded even deal? And if we want to believe the Block, ApeCoin was part of Yuga Labs pitch deck, so, no, not that unrelated after all. Yes, there are lock-ups, but that doesn’t mean they won’t sell later. There is real trading in the coin, the circulating supply is real and the price is liquid at $12-14 at the time of writing.
Look, I am all in on the idea that crypto is reinventing what finance means and that it is beyond the current legal and socio-economic processes, its just that right now a small number of newly-rich people are getting even richer.
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