Dirt: Bored Ape Universe
What does a company coin mean?
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Bored Ape Yacht Club launches its own cryptocurrency and acquires other NFT IP. Kyle Chayka explains why you should care about the biggest crypto culture company.
Last Thursday, the NFT project Bored Ape Yacht Club launched its own cryptocurrency, Apecoin. Before you instantly click away from that lead, this is as important a news item as it gets in crypto, and holds plenty of implications for the wider business world. Because Apecoin, or $APE as it appears on Coinbase and other exchanges, is as close to a fake stock as you can get without being blatantly illegal. The SEC must be paying close attention.
Apecoin’s launch was more or less like a start-up IPOing: preexisting holders of Bored Ape Yacht Club NFTs could claim a certain amount of the currency for themselves, for free1 just because they have an ape.2 That currency immediately had value. It hit a quick peak, like an IPO pop, of somewhere around $40 per coin, but dipped to around $8, rose to around $14, and is now on a slow slide around $9. So if you had an ape, you could get free money, and even if you just bought the currency on its own, you could also make money. Very cool.
But what gives $APE any value to begin with? It’s not directly, legally tied to the profits of Yuga Labs, the parent company of BAYC — that would make it a totally illegal security. In a literal sense, owning the token only allows you to vote in matters of concern to the decentralized autonomous organization (DAO) that formed around the currency. The DAO will be able to use the $APE left at its disposal3 to do things, like hire employees or develop Apecoin-branded projects.
If you buy Apecoin, you’ll be able to “elect members for the DAO’s Board”! Wow, great. You have just become a shareholder in an imaginary entity, except you have no protections enforced by the US government. You can always sell your coins for more $, though — as long as the price doesn’t go down or it gets regulated out of existence. Here are all the things you can do with your $APE, listed on its website. Crucially, there is nothing in here about any transfer of profits or share in company value.
I’d argue that the price of $APE is nevertheless connected to the perceived value of Yuga Labs / BAYC. It’s a harmony of vibes: BAYC NFTs are literally valuable, so its new derivative currency feels like it should also be valuable, even though they are not explicitly financially linked. It’s like the way a simple Gucci T-shirt is expensive because the rest of Gucci’s products are expensive. The brand imparts an aura, no matter what the specific item is, because they are all perceived to be linked.
And Yuga Labs is really valuable. With BAYC, they have more or less overnight created a lifestyle brand on par with years-back Supreme, whether you think it’s cool or not. The company is in talks with investors at a valuation of $5 billion. Secondary-sale fees on apes probably net them tens of millions of dollars a month.4 It just acquired the rights to CryptoPunks and Meebits, two of the other most valuable NFT projects that were created by another company, LarvaLabs.
But — laughing out loud — Apecoin crucially has nothing to do with these transactions. It is just a fictional currency made by the same company. It’s likely that the value of $APE will go up in times when there is more general demand for or awareness of BAYC. The coin will be the “primary token for the BAYC ecosystem, as well as future Yuga products and services.” And yet there’s no guarantee. The DAO could be boring and new Apecoin-driven projects could fail to materialize. To restate the problem: Apecoin has to be considered as a product on its own, and succeed on its own.5
It has to be exciting to participate in a DAO. Decision-making needs to be interesting and feel high-stakes. People have to identify with it. Apecoin currently doesn’t have that narrative momentum, the kind of user-generated excitement that the original BAYC thrived on, because at the time the avatar images represented something weird and intimate and new.6
A lawyer once went to great lengths to explain to me that NFTs are not securities, and thus perfectly legal as commodities. They are more like artwork or souvenirs, whose prices also fluctuate. Just because a signed photograph of Kanye West gets more valuable if West is more famous doesn’t mean it qualifies as a stock. But $APE is much closer to a security, because it’s not an artwork; it’s money. It’s already meant to be used toward an end other than itself, as a medium of some kind of exchange. There’s no inherent story there. The ironic thing is, crypto’s most famous lifestyle brand might be more valuable as art than as currency. — Kyle Chayka
The Dirt: Always look at the fundamentals.
Well, you still have to pay capital gains tax I guess.
OG ape holders got more coins than mutant ape holders, and if you only held the oft-neglected Bored Ape Kennel Club dogs, you got nothin
Not all of the currency is distributed at the outset, a stash is left to the organization that immediately becomes valuable when a market is created for the coin.
I’m not doing the exact math on this, sorry, don’t bother me
This might be different if, say, the $APE DAO was given control of 10% of all apes in existence, like De Beers controlling the supply of diamonds
PFP drops are still more innovative than vague ICOs, which already peaked c. 2018.