Supported by Yuga Labs, ApeCoin is a new token which may not be as decentralized as it claims to be.
Since its launch last year, Bored Ape Yacht Club (BAYC) has risen in popularity in the crypto space. The funky-looking monkeys in the form of non-fungible tokens (NFTs) were sold for millions of dollars. Its success might lead you to believe that everything associated with it will be profitable; well, that depends.
In March 2022, the creators of BAYC—Yuga Labs—bolstered the origin of ApeCoin, BAYC’s native crypto token that is run by a dedicated ApeCoin decentralized autonomous organization (DAO) and Ape Foundation. By naming these entities as the managers of ApeCoin, Yuga Labs is indicating that ApeCoin’s activities are entirely in the hands of the community of its users. However, the question on potential investors’ minds is: how decentralized is this community truly?
But first, what is ApeCoin?
Launched on March 18, 2022, ApeCoin, or APE, is an ERC-20 token within the APE ecosystem. It is both a governance and utility token with which token holders can participate in the eponymous DAO to support their Ecosystem Fund. “We don’t shy away from the weird, the hard, or the new,” reads the ApeCoin DAO whitepaper, listing the values that guide the cryptocurrency. With a market cap of US$3.3 billion, the token, despite being a new entrant, is witnessing immense growth. In fact, over 130 million tokens, worth over US$1.8 billion, have been airdropped to BAYC and Mutant Ape Yacht Club (MAYC) holders.
As governance token holders, users get to vote about decisions pertaining to the token. Additionally, they also get to elect the “Board” of the Ape Foundation that finally executes the community’s decisions. As for the use-cases of the token, investors can:
- vote using governance tokens;
- utilize ApeCoin to buy virtual land, play games and purchase services;
- access exclusive merchandise and games; and
- use the token in third-party applications. For instance, play-to-earn mobile game Benji Bananas from Animoca Brands is currently offering APE tokens as incentives to players.
Yuga Labs, too, has made ApeCoin the fundamental token for purchasing products and services on its website.
Is ApeCoin truly decentralized?
ApeCoin claims that their priority is decentralization. As per their website, “APE is a token made to support what’s next, controlled and built on by the community. It will serve as a decentralized protocol layer for community-led initiatives that drive culture forward into the metaverse.” However, a deeper dive into the platform shows that it is not as decentralized as it declares.
The first alarming sign was the free ApeCoin airdrops to holders of BAYC, MAYC and the like. In doing so, it placed governance powers in the hands of the existing powerful players. This move signified that the platform was set up to profit those who were already profiting from the Ape NFTs. Given that Bored Ape NFTs already come at a high price, other investors that couldn’t afford the NFTs have been left out of decision-making positions.
Additionally, some feel that this is Yuga Lab’s way of retaining power and profits without taking any legal liability. With crypto regulations being a gray area, by crediting the DAO as the decision-maker, the company is taking the onus off itself. Given that, it’s worth noting that ApeCoin’s tokenomics suggest that over 60 percent of the tokens are allotted to their Ecosystem Fund, of which 15 percent have already been airdropped, and the rest is in the treasury. 30 percent are kept aside for Yuga Labs, charity and launch contributors, and 8 percent are for BAYC founders. With these predefined allocations, ApeCoin makes it evident that not everybody can profit from the token, especially if you’re outside the Bored Ape community.
Besides the seemingly biased token distribution, the platform also experienced a phishing attack within two weeks of its launch. On April 1, 2022, its value plummeted 8 percent, as its Discord channel was attacked.
Backed by one of the biggest names in the crypto space, Yuga Labs, one can expect the APE token to garner the same amount of attention and, possibly, revenue. However, its distribution strategies might result in power resting in the hands of the few. It might urge people to question the concept of “decentralization”, foundational to the blockchain space, and where crypto is headed.
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