All about Ape, Part I
ApeCoin isn't just an erc-20 token, it's a platform
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All about ApeCoin, Part I
In this series, I want to break down what ApeCoin is. What it really is. Yes, it’s an erc-20 token, not unlike all the other tokens that other NFT projects have dropped, but it’s also so much more than that. If ethereum is the platform we build decentralized apps on, ApeCoin is the platform we build web3 gaming on - or at least it’s trying to be.
There are several parts to ApeCoin, from what it is and the platform play, to the DAO and Foundation, to Yuga Labs and BAYC role in this ecosystem, to the broader implications of what is being created here. So naturally, this series will have multiple parts. We’ll start with the basics and ramp up from there.
Let’s dive in!
Hello, ApeCoin
Back in the Fall of 2021, NFT projects left and right were announcing and launching ERC-20 tokens. Stake your NFT to earn $bananas or $mice, or $milk. It was all the rage - and became a must-have for every project to compete for attention in the limelight. If your token could earn people thousands of dollars per day, well, you were a star on Twitter for that week. Naturally, lots of Bored Apes and Mutants started asking: wen token?
And, graciously, BAYC responded.
It’s a short thread and it essentially said:
“Launching a token is easy, takes minutes to do but doing it in the right way, where it’s compliant with laws is much harder. We need to be thoughtful of the utility, governance and what benefit it brings to the BAYC and the wider ecosystem. All of this needs to be done in a way where it’s self-sustaining too (meaning, no pump and dumps like 99% of tokens that launch).”
With all that said, the aim for token launch was Q1 2022. And well, the team delivered. On March 16, ApeCoin was announced, along with ApeCoin DAO and the Ape Foundation.
Let’s break each one of these down, starting with ApeCoin (or $APE, i’ll be using both interchangeably).
ApeCoin: a token for culture, gaming and commerce
ApeCoin and the ApeCoin DAO
ApeCoin wants to be the token that supports web3 culture and helps drive it forward. How does it do this exactly? By supporting the creatives, creators, developers and community that’s building in web3. All ApeCoin holders (aka ApeCoin DAO members) can submit a proposal to the DAO to get funding for their project. Then, members of the DAO vote on each proposal, electing to approve or deny it.
There are two ways to get ApeCoin: you could claim a set amount using BAYC or MAYC, or purchase it on an exchange (Coinbase, Gemini, Kraken, Uniswap etc). Once you’re a token holder, you are part of the ApeCoin DAO, able to vote on proposals submitted by the community. Each token represents 1 vote, so the larger the amount you hold, the more voting power you have. The DAO also lays out some guidelines on how we should think about projects when we’re voting. The guiding values are:
Boldness: We don’t shy away from the weird, the hard, or the new.
Equality: One APE equals one APE.
Transparency: Processes and decisions are shared openly with the community.
Collective Responsibility: We leave everything better than we found it.
Persistence: Success is an ouroboros, not a straight line.
Applying for a grant through ApeCoin DAO
While every DAO member can submit a proposal, not every proposal will make it to vote. Each one needs to pass through 7 phases before it is voted on. Check out the full details on submitting a proposal here. While the process to get an idea to vote is lengthy, it does create a robust structure ensuring that only well-thought-out and detailed proposals make it to the voting block. In total, it looks like the proposal process would take anywhere from 4-6 weeks, from start to finish.
ApeCoin Tokenomics
At its core, ApeCoin is just an ERC-20 token that’s built on Ethereum, not unlike the Uniswap or Chainlink token. It has a total supply of 1 Billion, of which 15% or 150,000,000, is made available to all BAYC and MAYC holders immediately to claim (this comes from the 62% ecosystem fund in the graphic below). 16% is set aside for Yuga labs and charity initiatives, 14% is for the launch contributors, and 8% is for the BAYC founders.
You can read more about the specifics of each category on the ApeCoin website. The part I want to highlight is the unlock schedule. Apart from the initial release of tokens to BAYC/MAYC holders, every single category of tokens has a time-lock. Take Yuga Labs portion of tokens - the 150,000,000 allocated to them has a standard 4 year vesting with a 1-year cliff we see in stock options packages in startups.
Ultimately, by having token lock-up periods, everyone’s incentives are aligned: do what’s best for the ApeCoin ecosystem (and saying the quiet part loud here: otherwise, your portion may be worth less (or worthless) by the time it unlocks).
Now, let’s get into the interesting part about what we know about ApeCoin. There are thousands of ERC-20 tokens on the market, why is this one any different?
ApeCoin as a P2E platform
What many people may not fully grasp or overlook with $APE is that it’s a gaming platform play. A platform, by standard definition, is “a raised level surface on which people or things can stand.” Naturally, you might ask, what makes ApeCoin a gaming platform? Isn’t it just a token? and why does P2E even need a platform?
Well, you may not see it, but there’s a big check or the egg problem when it comes to P2E. Let me explain.
The problem with P2E games
Right now, play-to-earn (P2E) gaming ecosystem is disparate. While most (if not all) blockchain games are built on ethereum, they all still attempt to create their own mini networks and economies with their own token. Each token, to work, needs network effects to kick in. Network effects is the concept that the value of a product or service increases when the number of people who use that product or service increases.
It’s the same problem every social app startup faced in the 2010s: how do you attract enough users to create a flywheel that accelerates your growth and captures more users? Well, every P2E game launching this decade will face the same problem. Almost all your success as a P2E game hinges on your players earning a token that’s actually worth the time investment. To have an attractive token, your game needs to be constantly attracting new players, and incentivize them to bring their friends to establish a robust network effect. With a robust network effect and strong tokenenomics, with a healthy balance of earners, buyers and sellers, your token can be a sustainable ecosystem. This is a problem every cryptocurrency faced when it launched - including Bitcoin and Ethereum. This is a tough problem to solve but P2E games have it especially rough. Not only does your token need to be attractive to acquire, the game itself needs to be fun and engaging to get users to come back and play more.
If you’ve been around crypto long enough, you know that the tens of thousands of ERC-20 token experiments have been tried and the majority failed. I don’t have any official figures on how many tokens have failed, but that number could well be in the 95-99% range.
P2E games will be no different - without a fun and engaging game, their token won’t take off because a critical mass of users won’t acquire it, ultimately killing the project because it failed to establish a robust network effect. But even if you create an engaging game, without a robust token economy, no amount of flashy graphics and fun will attract enough users to continue to play. The opportunity cost in the P2E economy is too high. Players would rather be putting in time earning a token that is appreciating in value, than waste time earning one that’s worthless. Chicken or the egg all over again.
How Apecoin addresses the chicken or the egg problem
ApeCoins solves this problem in two ways: access to an established in-game currency + access to users. Let’s start with: access to an established token.
Instead of integrating your own in-game currency and having to build network effects to make it valuable, you skip all that with ApeCoin. Your team can abstract all that away and focus on building the best game possible. With a fun and engaging game, the players will come because the earn is worth it: more ApeCoin.
Pause - you might be asking, “How is ApeCoin an established currency, didn’t it launch last week?” Well, yes. The token did just launch. But ApeCoin isn’t just a token - it’s the whole BAYC ecosystem energy captured in a token. That ecosystem is less than a year old but is the premier NFT project, ran by the highest performing team in the space, backed by the most engaged holders in the space, with the highest floor price and volume. In the same way that BAYC and MAYC holders diamond hand their NFTs, and the floor price entry is ever-increasing, the same will likely be true for ApeCoin. While we may seem like a bunch of apes, many of us are in fact, long-term thinkers. We understand the long-term rewards far outweigh short-term thinking. So many of us will hold our tokens, purchase more and be the biggest advocates for it. But don’t worry, my argument for ApeCoin being established isn’t: “trust me we'll diamond hand, number will go up.” There’s more to it.
Did you notice how ApeCoin launched? Every major centralized exchange listed the token on the same day - from Binance, to Coinbase, to Kraken, FTX, the list goes on. I don’t think I’ve ever seen token launch on this many exchanges at the exact same time. But this is an incredibly important point though and demonstrates that the team and partners have thought out the tokenomics thoroughly. A token can only grow as fast the number of onramps to it. All P2E tokens thus far exist only on decentralized exchanges like Uniswap, requiring the community to pool their tokens to make them swappable for ETH or vice versa. ApeCoin, by launching with centralized exchanges, has tapped into the biggest pool of currency in the world: fiat. This is a massive onramp that hasn’t existed yet for a P2E tokens.
One sub-point that is also missed here. By listing on centralized exchanges, you can assume that ApeCoin is compliant with US securities law. No other P2E related token, apart from Axie Infinities governance token $AXS, has those honours. I imagine the partners’ Yuga Labs worked with (namely Horizen labs and Fenwick & West) helped tremendously in making sure everything was compliant.
Second, by using ApeCoin, you have a built-in user base. Anyone with ApeCoin is already in the ecosystem and can theoretically start playing your game to earn. I compare this to launching iPhone Apps on the App Store. Developed focused on creating the best app and abstracted distribution away to Apple’s App Store. ApeCoin is no different - ApeCoin lovers will be looking for an engaging and fun game to play, so they can earn ApeCoin.
So what does that leave us with? As a P2E game developer, you have two options. You can either launch your own ERC-20 token with Uniswap being the only onramp and hope to attract a massive userbase so that your token is worthwhile to play for. Or you can choose to integrate a securities law compliant in-game currency with massive onramps from fiat currency, with a built-in userbase looking for more tokens to earn. The choice seems obvious to me.
This is a multi-part series that I’m writing about ApeCoin. Part I covered the basics and dove deeper into my thesis on how we should be looking at ApeCoin as a platform, rather than a token.
In the next part, we’re going to get down with the DAO - ApeCoin DAO that is. What it is, its potential, and how it plays into the Ape ecosystem.
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you are doing a really good job. one notices your love for web3 and its future. greeting ugnu
you are doing a really good job. one notices your love for web3 and its future. greeting ugnu