No matter if you are an NFT collector or a cryptocurrency trader, the most impressive project to hit crypto in recent days must be ApeCoin, an ERC-20 token issued by the famous NFT collection Bored Ape Yacht Club (BAYC).
While crypto projects issue tokens all the time, BAYC is the first PFP (profile picture) NFT project to experiment with a native token. Based on BAYC’s announcement, 15% of total ApeCoin supply will be airdropped to BAYC and sister collection MutantApeYachtClub (MAYC) NFT holders.
Screenshot of BAYC on NFT Marketplace OpenSea
Why did BAYC issue its own Native Token?
To answer this question, we should look at the entity behind BAYC - parent company Yuga Labs. Yuga Labs focuses on creating PFP NFT. PFP stands for profile picture, which is one of the most popular types of NFTs because it is recognizable and can spread easily.
Yuga Labs achieved fame from BAYC, but its popularity skyrocketed after it acquired another successful PFP NFT project Cryptopunks and promised to give “full commercial rights to NFT holders.”, which it already does for BAYC.
This opens up creative freedom for holders to leverage on BAYC’s marketing potential. Case in point: There’s already an upcoming BAYC pop-up restaurant. However, Yuga Labs has bigger fish to fry with ApeCoin.
Image credit: Yuga Labs
Currently, PFP NFTs is still a niche market. Community is a key success factor to PFP NFTs, hence it would be better if more people owned the NFTs. However, as most NFT collections have a fixed number of NFTs available to mint, their liquidity on the secondary market is low.
Projects like BAYC and Cryptopunks are also viewed as the rich man’s game. The floor price of BAYC on OpenSea is currently at 101 Ether, which is equivalent to close to USD$300,000. The public generally has a lower chance to access these exclusive communities.
Another problem about current PFP NFTs is that they are all independent. Although collaborations exist between different projects, there is no ecosystem for projects to create synergies together.
Yuga Labs seems to be trying to circumvent these challenges by issuing tokens. As Yuga Labs has several IPs (intellectual property), it has a competitive advantage to build a metaverse around these IPs.
Alongside the token issue, the company announced its plans to create a gaming metaverse called “Otherside”, built around BAYC and potentially embedding other IPs in the future. And you bet it, ApeCoin will be the virtual currency of this metaverse. Ideally, with ApeCoin, not only NFT holders but others will also have a chance to access this metaverse.
Is this a Good Decision?
If you’re a BAYC or MAYC NFT holder, you’d be eligible to claim the ApeCoin airdrop.
But take note: ApeCoin plunged close to 80% on its first day of launch to settle at the $10-$15 range, an indication that even holders themselves may not fully support the token.
We too think it might be premature to launch the token. Just ask yourself one question: Will you buy the token if it is not backed by BAYC? The answer is probably a resounding no. Although the BAYC metaverse seems to be in progress, it is still very much a concept and in its early stages.
Currently, there is no concrete mechanism other than the airdrop and no existing use cases. Therefore, the price of ApeCoin may be relying totally on speculation.
That said, major exchanges like Binance, FTX and Coinbase have pledged to list the token. Legal steward of ApeCoin the Ape Foundation also include prominent board members like Alexis Ohanian, co-founder of Reddit and Yat Siu, co-founder and chairman of Animoca Brands. Yuga Labs also just announced a $450M funding round led by Andreessen Horowitz (a16z) to build its NFT-based, ApeCoin-powered gaming metaverse. All these considered, BAYC may simply be too big and influential to fail.
We could talk about the impact of ApeCoin on other NFT projects, though. The furore over this token launch could influence the current and next generations of NFT projects to launch their own tokens, all to join in the hype. Ultimately, if projects cannot create a rational token economy with token utility, they will bring in negative effects into the crypto space. Their tokens will be no better than meme coins and may be doomed to fail.
The views expressed in this article are the author's alone and do not necessarily represent the views of ApolloX.
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