APE activity remained resilient in the face of a contracting economy. Metrics like token velocity, new holders, transfer volume, average market cap, average DEX swap size, and average unique votes all increased QoQ.
Over 33.2 million APE was unlocked to non-DAO entities in Q1’23. Despite the sell pressure, this did not result in any asynchronous price volatility that would indicate APE was sold en masse.
Over 31.4 million APE was claimed by Yuga ecosystem asset holders and APE holders throughout Q1’23. Despite the constant sell pressure, the average APE token price still ended 20.6% higher than the previous quarter.
Special Council members elected at the end of Q4’22 began their terms in January 2023, proving that ApeCoin DAO can transition the power of special roles without conflicts.
ApeCoin DAO voted to select a new administrator for the APE Foundation, transitioning responsibilities from Cartan Group to WebSlinger.
Primer on ApeCoin
ApeCoin (APE) is an ERC-20 token used for governance of the ApeCoin DAO. Holding any amount of APE qualifies the holder as an ApeCoin DAO member. Members create and vote on ApeCoin Improvement Proposals (AIPs) that encompass Ecosystem Fund distribution, governance rules, partnerships, and more. Third-party developers can incorporate APE into their respective projects.
APE is the adopted token of the APE Foundation, a legal entity that administers the decisions of the ApeCoin DAO. The APE Foundation also has a Special Council, called the DAO’s Board, to perform certain functions within the governance process. The operations of the APE Foundation are run by transient administrative entities elected by members of the ApeCoin DAO.
The ApeCoin DAO and the APE Foundation are separate entities from Yuga Labs, the creator of the Bored Ape Yacht Club (BAYC) and associated NFTs. Below is a breakdown of the relevant entities associated with the APE token.
ApeCoin DAO — A decentralized autonomous organization (DAO) made up of APE holders that create and vote on AIPs.
APE Foundation — A legal entity incorporated in the Cayman Islands that administers the decisions of the ApeCoin DAO. Consists of the Special Council and a third-party project management team also called an administrator.
Special Council (the DAO’s Board) — Five individuals that oversee the APE Foundation’s administrators, can approve grants outside of the AIP process, and perform certain functions within the ApeCoin DAO governance process. The current Special Council members are listed below.
Cartan Group — The first and former administrator of the APE Foundation. Registered in the Cayman Islands.
WebSlinger — Current administrator of the APE Foundation; started its 12-month renewing agreement on March 1, 2023. Based in the Cayman Islands.
Yuga Labs — A Web3 company responsible for creating the Bored Ape Yacht Club (BAYC). Yuga Labs is a contributor to ApeCoin and plans to use APE as the primary token in future projects like Otherside, an NFT-based game incorporating APE and Yuga Labs IP co-developed by Yuga Labs and Improbable
The APE Foundation, the DAO’s Board, and WebSlinger are the primary entities that ensure the implementation of passed ApeCoin DAO proposals (AIPs). Yuga Labs is largely an associated third-party developer facilitating the adoption of the APE token by incorporating it into its future projects.
Key Metrics
New Year, New Apes
Despite a macroeconomic environment categorized by rising interest rates, inflation, banking failures, global conflict, and corporate risk mismanagement, APE activity persevered. More APE holders were added in Q1’23 than in either of the previous two quarters. APE’s daily average token transfers set a quarterly record, increasing 206.9% QoQ, and ApeCoin DAO governance averaged its most unique votes per proposal in Q1’23. Throughout the quarter, ApeCoin operated as a healthy DAO with diverse vote outcomes while implementing passed proposals.
Regarding financials, the price of APE grew 20.6% QoQ, though it has yet to recover to the Q2’22 average. That said, APE’s average market cap at quarter-end approached the Q2’22 market cap, thanks to a relatively stable price and token unlocks at the end of Q1’23. While Q1’23 saw a near-stagnant average DEX swap size, APE’s total transfer volume increased by 65.3%.
This report looks deeper into the metrics and events that explain the health of the ApeCoin ecosystem.
Performance Analysis
FDV
Changes in fully diluted valuation (FDV) reflect an asset’s price. Moreover, tracking FDV complements price volatility with a sense of scale for the asset’s significance.
APE’s all-time high (ATH) valuation was over $22 billion, with its lowest never breaking the $2 billion floor. To add context, three traditional companies with market caps around $22 billion include eBay (online marketplace), Kellogg’s (cereal), and Canon (cameras). Three that hover around $2 billion include CarGurus (online automotive marketplace), Yelp (online reviews), and Frontier Airlines (a worse Spirit).
Although ApeCoin DAO’s valuation has never dropped below unicorn status ($1 billion), it is not explicitly clear what the project has to offer. Other crypto projects with relatively high valuations tend to provide tangible products, like Arweave with data storage or Render with cloud GPU rendering. Even with these products, crypto projects tend to have higher relative valuations than their traditional counterparts with similar products, likely because of the significant scaling potential and security benefits brought on by decentralization.
ApeCoin is simply a DAO with an ever-depleting treasury fund. It neither facilitates decentralized organization to offer services like many product-offering crypto protocols nor does it generate revenue or own fixed assets like traditional companies. Instead, APE’s primary use case will be as the medium of exchange in Yuga Labs’ new metaverse game Otherside. As such, its current value is likely based on the belief that this game will onboard hoards of users leading to widespread, consumptive use of the asset.
Since Q3’22, APE’s FDV has hovered between $2 billion and $8 billion. In Q1’23, it did not drop below $3.5 billion. Compared to the broader crypto market, APE has held value relatively well throughout the first quarter of 2023, despite being down over 70% from its ATH. Quarter over quarter, FDV has increased by 20.6%.
APE Liquid Supply
Liquid supply curves help determine when an increase in sell pressure may occur for certain assets (or, when tokens may get dumped onto unsuspecting retail buyers). Specifically, they show when tokens unlock and to whom.
A total of ~55.3 million APE was unlocked in Q1’23, and 33.2 million APE of that total was unlocked in March to non-DAO entities, including Yuga Labs, Yuga Labs Founders, three groups of Launch Contributors (unnamed entities that helped initially build ApeCoin DAO), and the Jane Goodall Legacy Foundation. Normally, an unlock of this size would have the potential to increase sell pressure on a token.
Despite representing ~7.8% of the circulating supply, the unlock did not cause the APE token to experience any asynchronous price volatility, which would indicate a large selloff. Instead, the average market cap at quarter end increased by 38.7%. A QoQ increase of this size versus only a 20.6% increase in FDV shows that general price volatility was more impactful on valuation than the potential sell pressure from the unlocked allocations.
Claimed Staking Rewards
ApeCoin DAO issued staking rewards in Q4’22 after passing AIP-21 and AIP-22. APE holders and Yuga Labs’ ecosystem projects like Bored Ape Yacht Club (BAYC), Mutant Ape Yacht Club (MAYC), and Bored Ape Kennel Club (BAKC) received staking allocations.
Staking was implemented in early December 2022 and will last for three years. Given the December start, Q4’22 ended with a total of ~5.2 million APE claimed, and an additional ~31.4 million APE was claimed in Q1’23. The linear increase in staking rewards claimed throughout Q1’23 indicates a greater distribution of APE within the community, given that tokens get dispersed as users claim them. Although staking rewards are typically accompanied by selling pressure, APE did not experience any abnormal, negative price movements — instead, its price rose 20.6% to end the quarter.
Holder Count by Account Size
We have defined account size according to specifications in our Dune dashboard. Using the 90-day average APE price (on April 1, 2023) of ~$4.93, the size denominations are split as per the legend in the chart below.
While total accounts grew by 10.7% QoQ, Krill holders accounted for the largest increase, growing by 14%. Dolphin-sized accounts were the only group with a change of less than 2%, shrinking by 0.22%. The growth among almost all account sizes can likely be explained by the wider distribution of assets via the unlocking of 55.3 million APE and the claiming of 31.4 million APE in staking rewards in Q1’23.
According to Etherscan, 250 holders account for ~97.5% of the maximum APE supply. However, not all large holders are liquid. At least 102 of the accounts are wallets controlled by the APE Foundation. According to the APE Foundation Transparency Report (pg. 13–15), it maintains 100 Coinbase Prime wallets and two Gnosis Safe wallets. Hence, at least 27% of the Whale wallets — based on the numbers in the Transparency Report — are maintained by the APE Foundation.
Volume by Trade Size
Volume by trade size shows what percentage of the trading volume is dominated by trades of various sizes. For example, if the total volume were $200 million and two wallets traded $50 million each (a total of $100 million), then the wallets with a volume of $50 million would account for 50% of the trading volume.
Whales (accounts with 1-day trading volumes of greater than $10 million) remained the largest cohort by dollar-denominated volume share in Q1’23. Whales have dominated every quarter over the past year. However, their dominance has trended downwards, accounting for less volume QoQ.
While all other groups stagnated in growth either in Q4’22 or Q1’23, Sharks gained volume share from Whales in every quarter, accounting for 34% of the total trade volume at the quarter’s end. This change can not be explained by a drop in the price of APE, given that APE increased by 20.6% QoQ. It could be that many sharks are BAYC, MAYC, and large APE holders that are active in trading APE staking rewards, but this doesn’t explain the decrease in Whale dominance; as of now, there is not enough evidence to determine a clear cause.
Token Velocity
Token velocity shows the frequency through which an asset changes hands (or wallets). Change in token velocity can show a few things depending on the asset. If the asset is consumptive, like a token used within a game, an increase in token velocity may imply that the game encourages the adoption/use of the asset. If the asset is more speculative, then a decrease may imply that users are more interested in holding the asset or that it has low demand. In the chart below, token velocity is calculated by dividing the circulating supply by the seven-day moving average (7DMA) of transfer volume.
APE token velocity tended to oscillate between 1% and ~6% till the end of Q4’22, where it shot up to almost 12%. The most likely catalyst was the heightened speculative interest due to the launch of staking. In Q1’23, velocity slowly decreased to a ~3.5% floor before shooting back up to ~10%. This sharp increase in mid-March could have been caused by speculation after news of Otherside’s second test demo.
There are few catalysts that would drive token velocity to grow significantly. The most substantive one is Yuga Labs’ pending launch of Otherside. If the game gains traction after launching, APE will likely experience increased velocity as it is used as an in-game medium of exchange.
New APE Holders
New APE holders are users that have received APE for the first time. Roughly 650 new APE holders joined the ecosystem per day in Q1’23. Additionally, there may be new holders who use centralized exchanges but are not counted in the APE ecosystem. This growth could have been catalyzed by interest in the launch of APE staking in December 2022 and the pending launch of Otherside.
Unique Votes per Proposal
Unique votes per proposal measures how many individuals are participating in governance. If new voters only hold small amounts of an asset, then the impact of their unique votes would be marginal on proposal outcomes in token-weighted governance systems like ApeCoin DAO. However, counting unique votes can show the interest within a DAO, diversity of the active holder base, and decentralization of the active holder base.
Despite being associated with memetic Yuga Labs assets like Bored Apes, ApeCoin DAO is a legitimate DAO. For the past three quarters, the average unique votes per proposal have increased, peaking in Q1’23 at 814 votes per proposal. The increase in unique voter participation implies that decentralization at the voting level is also increasing.
In the future, ApeCoin DAO plans to move more of the voting process on-chain, which would remove central points of failure (like the reliance on Snapshot) and would add to the governance structure’s decentralization. However, implementing on-chain voting would require gas fees for participation. In this scenario, the resulting gas fees could dissuade users from participating in governance.
Qualitative Analysis
Throughout Q1’23, ApeCoin DAO voted on 24 proposals: 11 passed, 12 failed, and 1 was an election of new administrators for the APE Foundation. All failed AIPs proposed costs for implementation, totaling ~$10.3 million. Passed proposals with a cost totaled ~$1.94 million. The DAO pays these costs monthly or upon project completion.
Listed below are five proposal highlights from Q1’23 in order from newest to oldest. For a full overview of ApeCoin governance, including preliminary discussions, see the Messari Governor page on ApeCoin.
Selection of Cayman Islands Administrator(s) for the APE Foundation (Election)
Feb. 22, 2023
At $75,000 per month ($900,000 per year), WebSlinger was elected to replace Cartan Group as APE Foundation’s new administrator. Cartan Group was APE Foundation’s first administrator; it charged $150,000 per month, as per AIP-1. Before officially departing, Cartan Group attempted to be re-contracted, as per AIP-183, for ~$350,000 per month ($250,000 + 20,000 APE, assuming APE = $5); however, the proposal failed. If WebSlinger can maintain a similar quality to Cartan Group, ApeCoin DAO will have cut its largest renewing cost at no detriment to its operational abilities.
AIP-182: The App to Create Visuals, Banners, Stickers, Memes & GIFs with your NFTs (Succeeded)
Feb. 8, 2023
At a cost of $135,000, 3Verse Lab proposed the creation of an iOS/Android/Web application called Web3 Creative Studio. It will allow users to create visual content with their NFTs. Based on AIP-182, the app will be free, with an option for premium features that integrate the APE token as the primary payment currency. The application is planned to be fully shipped within a 20-week timeframe, by the end of June 2023.
Web3 Creative Studio does not plan to exclusively use APE for payments; it only plans to offer discounts for transactions using APE. Thus far, 3Verse Lab only charges its users for two features: exclusive templates and unlimited drafts for visual creations. Unless this application pivots into a social media platform, its prospects of providing real mainstream exposure to the APE token will be scant at best. Its Web3 focus will likely capture only a niche audience, while legacy social media platforms can simply incorporate Web3 features, automatically onboarding their existing hundreds of millions, even billions, of users.
At a total cost of up to $242,000, the ThriveCoin team proposed Thank APE, a system that will reward ApeCoin contributors with on-chain thank you notes (via Polygon) and APE tokens. It will also detect bots and automate the thanking mechanism. The ThriveCoin team plans to build a fully sustainable Thank APE product by August 2023. AIP-124 passed with an over 80% majority.
Thank you notes will potentially be awarded based on Snapshot activity. APE will be awarded based on metrics that will be decided by APE holders, Special Council members, the Thank APE board, and any relevant ApeCoin DAO working groups. Depending on how APE is rewarded, this project may encourage more thoughtful contributions to the ApeCoin DAO, as users participate to earn automatic rewards.
AIP-155: Should we fund an ongoing bug bounty program for all AIPs that introduce security risk? (Failed)
Jan. 18, 2023
After proposing a budget of 1 million APE ($5 million, assuming 1 APE = $5), AIP-155 failed in the voting process, only winning 43% of the vote. This proposal set out to create a bug bounty program on Immunefi and Solidity.io for AIPs that would introduce smart contract security risks. At ~$5 million, AIP-155 proposed the largest budget of any proposal in Q1’23.
It is not explicitly clear why the community did not want to fund this bug bounty program — the comments from the forums were overwhelmingly positive. Given the lack of specific criticisms, it is possible that the roughly $5 million price tag was a factor for some voters.
AIP-196: BORED AIP: Bringing Order and Reliability via Ecosystem Decentralization (Succeeded)
Jan. 4, 2023
At the cost of ~$524,000, multiple ApeCoin community members authored AIP-196 to implement a transparent request-for-proposal (RFP) process. It would elect subsequent APE Foundation administrators and create working groups within the DAO to inherit the responsibilities of APE Foundation administrators that were out of their scope.
An interim working group, called Working Group Zero (WG0) executed this proposal under a three-month mandate. It worked with Cartan Group under a two-month extension to fully transition responsibilities and build the RFP to elect a new administrator.
Closing Summary
Despite operating on many layers of trust, the ApeCoin DAO functions as a healthy DAO in practice. In Q1’23, ApeCoin displayed that Special Council members and APE Foundation administrators can transfer power peacefully, that it upholds successful proposals, and that it can organize quickly despite a complex governance structure.
APE activity remained resilient in the face of a contracting economy. Metrics like token velocity, new holders, transfer volume, average market cap, average DEX swap size, and average unique votes increased QoQ. These increases all occurred without major consumptive uses of the APE token outside of governance.
For APE to continue these trends into the future, it will require demand outside of the DAO. Yuga Labs will likely facilitate much of this demand with its commitment to using APE in future projects. Notably, Yuga’s development of the Otherside metaverse game, which plans to use APE as an in-game token, should drive demand for the asset upon a mainnet launch.
As a DAO, ApeCoin’s strategy is determined by the will of APE holders. If the holder base continues to diversify and expand, ApeCoin’s prospects for adoption will rely on strong community voices and the ability to rally voters to support initiatives that seek to grow the ecosystem.
This report was commissioned by the APE Foundation. All content was produced independently by the author(s) and does not necessarily reflect the opinions of Messari, Inc. or the organization that requested the report. The commissioning organization may have input on the content of the report, but Messari maintains editorial control over the final report to retain data accuracy and objectivity. Author(s) may hold cryptocurrencies named in this report. This report is meant for informational purposes only. It is not meant to serve as investment advice. You should conduct your own research and consult an independent financial, tax, or legal advisor before making any investment decisions. Past performance of any asset is not indicative of future results. Please see our Terms of Service for more information.
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