ApeCoin (APE -1.16%) is an Ethereum-based token linked to the Bored Ape Yacht Club (BAYC) non-fungible tokens (NFTs). It was distributed by the ApeCoin DAO, a decentralized autonomous organization with many members having ties to YugaLabs. YugaLabs is the company that owns the rights to Bored Apes, Mutant Apes, CryptoPunks, Meebits, and Kennel Club NFT projects.
YugaLabs and the ApeCoin DAO are using momentum from their NFT projects to create new web3 applications. They have already launched their own metaverse, dubbed the Otherside. And they plan to take it even a step further by establishing an entire community based around web3 and blockchain technologies that will use ApeCoin as the reserve currency.
For example, the Otherside recently launched an initial sale of digital real estate that could only be purchased with ApeCoin. It is also the governance token for the ApeCoin DAO. Holders can vote on policy changes and other decisions. Additionally, there are plans for ApeCoin to be integrated as a form of payment in YugaLabs-based metaverse games.
Tokenomics of ApeCoin
There are a reasonable number of use cases for ApeCoin. Especially when considering it has only been in existence for a little more than a month. But use cases shouldn't be the only thing taken into consideration when evaluating the long-term prospect of ApeCoin. Looking at the supply and distribution of the coin upon the initial issuance shows that of the one billion total ApeCoins to be minted, some of these holdings are more concentrated in certain groups than others.
The ApeCoin DAO's website states that 62% will be allocated to holders of Bored Apes and Mutant Apes and will be used as reserves for the treasury. An astounding 15% will be left for YugaLabs. And of all ApeCoins, 14% will be reserved for "Launch Contributors" -- defined as the people who initially helped get BAYC off the ground. Another 8% is set aside for the four founders of BAYC. And last but not least, 1% is headed to the Jane Goodall Legacy Foundation to support conservation efforts for real apes in the wild.
When combining the allocations that will be held by founders, YugaLabs, and Launch Contributors, nearly 37% of all ApeCoins will be in the hands of a select few. Not so decentralized, is it?
To sweeten the pot a little, the DAO's website indicates that these reserved holdings will be distributed on a schedule and not all at once. This holds these people accountable, at least for a while, so they can't just run off with profits.
Should you Ape into the Metaverse?
This group's plans for the metaverse and web3 are undoubtedly ambitious and leading the way. However, More than one-third of the entire supply is in the hands of an exclusive group. The portrayal of the ApeCoin DAO as being decentralized seems a bit misleading.
As an investor, it comes down to preference on the amount of decentralization you prefer. Before deciding to ape into the metaverse, ask yourself whether you value true decentralization. If so, ApeCoin is probably not the best investment. However, if you are a believer in the Bored Ape community and YugaLabs' vision, this might be worth considering.
Unlike many cryptocurrencies that exist for no apparent reason, there are meaningful use cases for ApeCoin in the works. It is likely the notoriety that the Bored Apes have generated and the direction that YugaLabs is headed will be enough for ApeCoin to stick around.