ApeCoin: Does the coin have a use?
Remember last year when Paris Hilton, Neymar Jr, Snoop Dogg and many other celebrities bought into the Bored Ape Yacht Club (BAYC), which is now one of the most popular NFTs by volume? Well, ApeCoin is the ERC-20 governance and utility token within the APE ecosystem. This means that every investor who bought (or will buy a BAYC NFT) would receive APE tokens for free. They can cash out or sell whenever they want.
Another point to note is that ApeCoin was officially created by ApeCoin DAO and not Yuga Labs, the team behind BAYC. Why is this detail important? Probably for regulatory purposes. Cryptocurrencies cannot give off stockish vibes. If they do, there is a high chance that the Securities and Exchange Commission (SEC) will go after the token and the company (just like they did with Ripple). We will come back to this point a little later.
Tokenomics and its use case
There are 1 billion APE coins in total and 15% of the token supply is allocated to NFT holders. Additionally, 47% of the total supply will be given to the DAO treasury, with the amount vesting over the next 48 months.
In addition, Yuga Labs will receive 15%, founding members of Yuga Labs will receive an additional 8%, and 14% will be allocated to early contributors to the APECOIN project. Of course, retail traders who didn’t get free APE because they didn’t hold any BAYC NFT can buy the coin on the exchange.
As APE holders ponder when to sell, we should keep in mind that it also serves as a governance token. This means that ApeCoin holders can not only vote on proposed protocol changes, but it will also determine the future of the token.
APE is now the in-game currency in Animoca Brands’ Benji Bananas. E11EVEN Residencies in Miami has decided to accept APE payments. Obviously, APE will be the in-game currency for many of the projects that Yuga Labs will lead. Beyond that, its use case also lies in its value as a governance token.
Beyond its usefulness, one cannot ignore its volatility either.
Just days after hitting a new all-time high, the token fell and hit a low of $16.71 on May 2, 2022.
This was due to the launch of one of the most anticipated NFT mints, during the launch of Otherdeed for Otherside by Yuga Labs. Otherside is the metaverse built by Bored Ape Yacht Club’s parent company. Yuga Labs had revealed that the NFT mint would cost 305 APE (~$5,250) a dish; Catalyzed by this news, the APE was up the previous week.
The Mint did not go as planned, mainly due to massive demand from Otherdeed, which in turn led to high gas fees for NFTs on Ethereum. This meant that users were paying thousands of dollars for an NFT below $6,000.
Another disappointing result is that there were many victims of failed transactions. They had paid gas charges, but they did not get their NFT. After this fiasco, Yuga Labs asked ApeCoin DAO to hold a vote on whether APE could migrate from Ethereum to its own blockchain.
The biggest lesson that can be learned is that the future of APE is intertwined with that of Yuga Labs, a company valued at nearly $4 billion. As APE is used as the main settlement on most Yuga Labs products and services, one can assume that the future of this token is quite optimistic given that Yuga Labs is currently a top notch company.
Do you remember the fact that cryptocurrencies cannot act like stocks? Well, as long as APE’s sourcing metrics and future are independent of Yuga Labs, that point of contention (or a close correlation between the two) shouldn’t be an issue. However, with the SEC case against Ripple, one cannot help but wonder how the final verdict of this case will help shape the landscape of most digital assets and their tokenomics.