Good morning, and welcome to Protocol Fintech. This Monday: ApeCoin’s muddled launch, Vitalik Buterin and Tom Brady chat, and Chanos on Coinbase.
Off the chain
Decentralization is the next big thing. So why is it so … centralized? Today, Lindsey Choo writes about the ApeCoin launch, which, while technically orchestrated by a distinct entity, is wrapped up in the Bored Ape economy created by Yuga Labs. In 2018, an SEC official named Bill Hinman proposed a test of decentralization for crypto tokens: “As a network becomes truly decentralized, the ability to identify an issuer or promoter to make the requisite disclosures becomes difficult, and less meaningful.” It’s not that hard to identify the promoter here. Oh, and Hinman? He’s now advising Yuga Labs investor a16z.
— Owen Thomas (email | twitter)
Going ApeCoin
Yuga Labs seems like it’s on top of the NFT world. Universal Music Group just bought one of its Bored Apes with plans to turn the avatar into a music star. The company is also rolling up management rights over other hot digital collections like CryptoPunks and Meebits. And it’s reportedly in talks to raise money from a16z at a $5 billion valuation. So why was its ApeCoin token launch kind of a mess?
ApeCoin is meant to be the coin of the Bored Ape Yacht Club realm. But it’s a little fuzzy what that means.
- Is it a fan token for NFT owners to get merch? Is it a speculative financial tool? Is it a right to vote on future developments? Is it an incentive for developers? Yes.
- It’s also, frankly, a huge publicity stunt, building on the existing popularity of Bored Ape Yacht Club NFTs.
- Yuga Labs, like many other crypto projects, is trying to build an economy around itself. A billion ApeCoins are getting split between Bored Ape owners; a new ApeCoin DAO; Yuga Labs itself; its four founders; and other companies and people who contributed to the project. The Jane Goodall Legacy Foundation is a charitable beneficiary.
The project used an airdrop, a classic crypto marketing technique. But it didn’t go smoothly.
- Owners of Bored Apes and related NFTs were eligible to claim as many as 150 million ApeCoin tokens starting Thursday. The coins were then airdropped — a fancy crypto term for “sent” — to their wallets.
- Calling the distribution an airdrop played on crypto speculators’ FOMO. “Airdrop” is a marketing term, not a technical one, and it’s a common way to call attention to a new token. Sometimes tokens are sent to specific users, often influential ones, while sometimes they’re mass-distributed to everyone who owns a specific type of cryptocurrency. Getting in on the latest hot airdrop is a thing in crypto.
Still, the ApeCoin airdrop was the talk of crypto town. The token was quickly listed on some of the largest crypto exchanges out there: Coinbase, FTX, Binance, Gemini and Crypto.com.
- Bored Apes are expensive, while ApeCoin tokens are relatively cheap, initially going for a little over $20. By rewarding Bored Ape owners first with the tokens, Yuga may have hoped to play on that exclusive-club FOMO.
- While an airdrop “can be very positive for building hype … sometimes this hype is short-lived,” said Ethan McMahon, an economist at Chainalysis. That turned out to be the case: The value of the token surged upward to a peak of $39.40, then sank overnight by over 80% to as low as $6.48 after token claimers quickly turned around and sold them.
- The price then bounced back from its low to a value of $17.75, before falling back to under $13 in its second day of trading.
- McMahon said that reflected “the nature of early price volatility when a coin first becomes more publicly traded.” It’s a brand new asset, so who knows what it’s worth?
In chasing hype, Yuga may have overlooked security. There were other bumps in the token airdrop.
- The ApeCoin Twitter account warned that scammers were “out in full force” on the day of the launch.
- The airdrop also suffered a flashloan attack, a complicated maneuver that takes advantage of the lack of checks in some DeFi lending protocols.
- BlockSec, a blockchain security firm, said that the attack likely happened because the ApeCoin token’s airdrop process “only considers the spot state, which can be manipulated by the attacker.”
- Most airdrops use a snapshot mechanism that takes into account how long a user held an NFT before claiming a reward. Yuga Labs did not, allowing anyone who wanted to participate in the airdrop to buy an NFT in real time and claim the reward — hence the vulnerability.
The value of ApeCoin largely depends on how you view Yuga Labs’ future plans. Yuga Labs has said it plans to make ApeCoin a governance tool and the “primary token for the BAYC ecosystem, as well as future Yuga products and services.” Executives in the gaming industry from FTX and Animoca Brands already sit on the ApeCoin DAO’s special council, and the token is slated to be used as in-game currency for a slew of upcoming Yuga Labs releases. It’s worth noting that it doesn’t give away any ownership in Yuga Labs itself. That’s for founders and VCs to keep, of course.
— Lindsey Choo (email | twitter)A MESSAGE FROM FIREBLOCKS
As one of the top super apps in the world, Revolut is always looking to launch new products and improve their existing offerings. Revolut used Fireblocks to handle the heavy lifting on the tech side so they could focus on shipping new products for their 15.5 million users.
On the money
U.K. crypto firms are still waiting to hear back from the FCA. Out of more than 100 firms that have applied to register with the Financial Conduct Authority to operate in the U.K., only 27 have been approved so far.
An Australian government agency is suing Meta over misleading crypto ads. The Australian Competition and Consumer Commission alleges that Facebook was aware that the ads misled users into believing that Australian celebrities endorsed certain crypto investments, but didn’t do anything about it.
MaiCoin is considering a potential Nasdaq IPO. The largest cryptocurrency exchange in Taiwan is reportedly raising a series C funding round to solidify its finances in advance of an IPO, which could take place in the next two years.
South Korean lawmakers want to delay crypto taxation. The People Power Party drafted a bill that proposed a one-year delay for taxing crypto gains, along with a more generous tax exemption than the current one, in line with its newly elected president’s crypto-friendly stance.
A man was convicted of defrauding crypto investors by saying he was a U.N. affiliate. Asa Saint Clair, the defendant, defrauded more than 60 people by claiming they were going to get returns on an investment in IGObit, a digital coin offering that he said was part of a U.N. affiliate called the World Sports Alliance.
Overheard
Ethereum founder Vitalik Buterin got roasted on Twitter over his Time magazine cover, where users compared the slender entrepreneur to a “dystopian Tom Brady.” “I didn't even know who Tom Brady is, had to ask people around me. My best guess was that he was the actor from Mission Impossible,” he tweeted in response to the memes. A laser-eyed Brady responded by saying he was a “big fan” of Buterin.
Investment manager Jim Chanos doesn’t think Coinbase is going to be profitable this year, given rising competition in the crypto industry. “We basically think Coinbase is overearning. If you do the numbers, their revenue base is roughly 3% to 4% of their custodian assets, their customer assets,” he said in an interview with CNBC.
Former presidential and New York City mayoral candidate Andrew Yang thinks that crypto skeptics just need the right kind of persuasion. “The fact is if you get the right group of people together, DAOs can be a transformative force for governance and a different way to activate people,” he said in an interview with CoinDesk.
Coming up
The Pay360 Conference is happening on Tuesday. The physical part of the hybrid conference will take place in the Business Design Centre in London, and sessions will be broadcast live. Speakers hail from SWIFT, the FCA, Mastercard, Santander U.K. and others.
FinovateEurope runs Tuesday and Wednesday. The two-day event will be held in London, but digital passes are available to tune in virtually. Executives from major banking companies like JPMorgan Chase, Citi and UBS are slated to attend.
The Fintech Meetup event also starts Tuesday. The three-day event will be held virtually, with a wealth of professionals from different sectors of fintech participating.
The MoneyLIVE Summit 2022 will start Monday, March 28. The two-day event will be held at the QEII Centre in London, featuring speakers from payments companies like Revolut, HSBC and Zip.
The InvestOps USA conference will also start next Monday. The three-day event takes place at the JW Marriott Tampa Water Street in Florida, and will feature speakers from Deutsche Bank, Vanguard, BlackRock and others.
A MESSAGE FROM FIREBLOCKS
Over 1,000 institutions have enabled crypto and digital assets for their customers with Fireblocks. Help your team accelerate time to market, minimize tech maintenance, and provide an easy to use crypto treasury system. Fireblocks is quickly becoming the go-to platform for the most innovative organizations.
Thanks for reading — see you tomorrow!