APE trade volume was dominated by sharks ($1 million – $10 million in daily trading), which flipped whales (over $10 million in daily trading) for the first time since APE launched.
Throughout Q2’23, roughly 25 million APE was unlocked to non-DAO entities and almost 26 million APE was claimed by Yuga ecosystem asset and APE holders. The average APE price dropped by 32%, potentially due to the sell pressure from over 50 million APE unlocked to non-DAO entities and claimed by users in Q2’23.
Two new Special Council members were elected in Q2’23, transitioning the power of special roles within the ApeCoin DAO.
WebSlinger experienced its first full quarter as the administrator of the APE Foundation after beginning its term in March 2023.
All of ApeCoin’s key metrics fell QoQ, though daily token transfers, votes per governance proposal, and transfer volume remained higher than in certain previous quarters. Average DEX swap size and the addition of new APE holders hit all-time lows in Q2’23.
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 relevant 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.
All ApeCoin key metrics fell in Q2’23. The fall in transfer velocity simply means there was less movement of the APE asset (it changed hands less) — this could indicate that users are holding as the bear market continues. While the average number of votes and token transfers decreased QoQ from prior highs, nominal values were above a couple previous quarters for each metric.
Regarding financials, the price of APE fell by 32%, worse than the market’s single-digit decline. This price decline contributed significantly to the decline in transfer volume and DEX swap size, both measured in USD terms. While the amount of APE transferred also decreased, the amount of APE swapped increased (possibly to compensate for the fall in APE-USD price).
This report analyzes 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 fully diluted valuation hit a $2 billion floor at the end of Q2’23, a 91% drop from its all-time high in Q2’22. Despite the drop in price and valuation, ApeCoin DAO pushed forward, approving roughly the same number of proposals from the previous quarter and with slightly less funding ($1.89 million in Q2’23 versus $1.94 million in Q1’23).
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 buyers). Specifically, they show when tokens unlock and to whom.
A total of 46.8 million APE was unlocked in Q2’23, of which 24.8 million APE was unlocked 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.
The unlock to non-DAO entities represents 5% of the circulating supply. This amount of sell pressure could have contributed to the steady decline in price throughout the quarter, where the quarter-end FDV fell by 24% and the average price by 32%.
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, ultimately distributing 175 million APE (17.5% of the max supply) to Yuga ecosystem asset and APE holders. While 31.4 million APE was claimed in Q1’23, 25.8 million APE was claimed in Q2’23. In addition to the APE unlocked to non-DAO entities, the sell pressure from the claimed APE may have also contributed to the decline in APE price and FDV.
Holder Count by Account Size
We have defined account size according to the specifications in our Dune dashboard. Using the 90-day average APE price (on June 30, 2023) of ~$3.37, the size denominations are split as per the legend in the chart below.
All accounts grew in Q2’23, leading to a total growth of 8%. Krill holders, again, accounted for the largest increase, growing by 9%. Seal-sized accounts were the only group to change by less than 2%, growing by almost 2%. The growth among all account sizes can likely be explained by the wider distribution of assets via the unlocking of 46.8 million APE and the claiming of 25.8 million APE in staking rewards in Q2’23.
According to Etherscan, 250 holders account for ~97% 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.
The decrease in whale trade volume (accounts with 1-day trading volumes of greater than $10 million) led to increases in all other APE trading groups. For the first time, shark trade volume (between $1 million and $10 million) overtook whale trade volume, accounting for 43% of the total APE trade volume.
This shift in whale volume to other groups may be in part due to the 32% QoQ decrease in average APE price. The largest shifts in the percentage of trade volume occurred at the top, with shark volume increasing by 9%, dolphin volume by 7%, seal volume by 3%, fish volume by 1%, and krill volume by less than 1%.
Token Velocity
Token velocity shows the frequency through which an asset changes hands (or wallets). A change in token velocity can show a few things depending on the asset. If the asset is consumptive, such as 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.
Token velocity became more stable in Q2’23 as the average quarterly token velocity decreased from 6% to less than 4%. APE usage isn’t solely dependent on transferring the asset, but it also factors in how often APE is traded. Thus, the decrease in velocity indicates that users are generally trading and transferring the asset less frequently than in the previous quarter.
A lower token velocity may indicate that users are holding APE during the bear market. It may also indicate that users are awaiting new uses for the asset, like in the pending launch of the Otherside game by Yuga. Users are also encouraged to keep their APE for governance participation (which only requires holding APE). Proposals increased by 42% QoQ, leading to more governance votes and possibly indicating a stronger desire to hold the asset for participation.
New APE Holders
New APE holders are users receiving APE for the first time. This metric does not include any new holders using centralized exchanges to custody their assets. Roughly 373 new APE holders joined the ecosystem per day in Q2’23. Though Q2 lagged behind the past five quarters, 34,000 new holders were still added throughout the quarter.
New holders may be interested in the pending launch of Otherside and associated activity. In April 2023, Yuga Labs announced the launch of NFTs called KodaPendants. Created in partnership with Gucci and associated with Otherside, KodaPendants were sold (via a primary sale) exclusively in APE (450 APE per KodaPendant).
Unique Votes per Proposal
Unique votes per proposal measure 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.
Although the average number of votes per proposal declined by 26% QoQ, the four election votes that ended this quarter’s voting were all above the average of 605, with the largest proposal receiving more than 1,000 votes. Election proposals tend to garner more participation among community members, showing that the community prioritizes maintaining a robust DAO structure over the spending allocation.
In the future, ApeCoin DAO plans to move more of the voting process on-chain. Doing so 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 Q2’23, ApeCoin DAO voted on 34 proposals: 11 passed, 18 failed, and 5 were elections. The failed AIPs proposed costs for implementation totaling ~$6.2 million. The total of passed proposals with a cost was ~$1.9 million. The DAO pays these costs monthly or upon project completion. The election proposals determined the following positions and their compensation:
Two new Special Council members (compensated monthly at $20,833 each)
Two new Governance Working Group Stewards (compensated monthly at $9,000 each)
Two new Discourse Facilitators (compensated monthly at $8,000 each)
Listed below are five proposal highlights from Q2’23 in order from newest to oldest. For a full overview of ApeCoin governance, including preliminary discussions, see the Messari Governor page on ApeCoin.
ApeCoin DAO – Special Council Elections - Term Beginning July 2023 (Election)
June 28, 2023
The Special Council Election followed the Special Council Nomination, which determines five nominees to vote on in the subsequent election. The top two candidates from the Special Council Election then become Special Council members, compensated by the ApeCoin DAO at $20,833 (in APE) each on a monthly basis. The terms begin at the start of July 2023 and last for one year. The total compensation approved for the new Special Council members amounts to $500,000. Original Special Council members Yat Siu and Alexis Ohanian departed, welcoming new members Waabam and CaptainTrippy.
ApeCoin DAO – Governance Working Group Steward Elections - Term Beginning July 2023 (Election)
June 28, 2023
AIP-239 established the framework for operationalizing the Governance Working Group. Working groups are community-elected parties responsible for implementing the DAO’s initiatives. The Governance Working Group focuses on DAO tooling, DAO reporting, maintaining Discourse, and domain management. The initial budget for this group was $180,000 for four months (May through August).
Following AIP-239, APE holders elected ALL CITY and Tiger is fine to become the two new stewards of ApeCoin DAO’s Governance Working Group. The terms begin at the start of July 2023 and last for one year. The total compensation approved for the new Governance Stewards amounts to $216,000, with $9,000 paid monthly to each Steward for one year.
ApeCoin DAO – Discourse Facilitator Elections - Term Beginning July 2023 (Election)
May 24, 2023
Discourse refers to the ApeCoin DAO forums. A Discourse Facilitator keeps the forums healthy by reviewing user profiles and posts, troubleshooting issues, coordinating AIPs, and maintaining communication with the ApeCoin community. The Discourse Facilitator election from May 2023 followed the success of AIP-240, which proposed the creation (and planned implementation) of the Discourse Facilitators’ role. APE holders elected 12GAUGE and Chris to become the two new Discourse Facilitators. The terms began at the start of June 2023 and will last through August 2023. The total compensation approved for the Discourse Facilitators amounts to $80,000, with $8,000 paid monthly to each Facilitator for three months (and the first facilitator being paid for the month of May).
AIP-209: Ape Accelerator powered by ApeCoin (Succeeded)
May 17, 2023
Forj, a subsidiary of Animoca Brands, won a $480,000 grant to implement its proposal to create a launchpad called the Ape Accelerator. This launchpad plans to incubate and grow projects that use ApeCoin and BAYC IP. Its responsibilities include supporting NFT sales and distribution, project advisory and incubation, storytelling, tokenomics design, and the provision of capital.
AIP-230: "I don’t hate apes, I just want them to fund public goods!”
Apr. 19, 2023
In the spirit of Vitalik’s tweet, ApeCoin DAO approved a proposal to allocate $1 million to fund crypto public goods through ETH Global and ApeCoin hackathons. Specifically, $300,000 will go to ETHGlobal and $700,000 will be used to sponsor eleven ApeCoin hackathons and at least five public goods initiatives. This proposal was accompanied by three core objectives:
Give back to the Ethereum community
Further development work around account abstraction
Introduce developers to ApeCoin
Closing Summary
While token price fell by 24% and other key metrics declined, ApeCoin DAO fielded the largest number of proposals from any quarter (+42% QoQ) and issued funding at a slightly lower level than the previous quarter in USD terms. It also held multiple elections, highlighting the DAO’s ability to allocate and transition power without conflict.
Though ApeCoin DAO has yet to build an on-chain voting mechanism, it still maintains a healthy DAO. APE holders do not vote to recklessly spend funds on random projects but tend to pass proposals that better the ecosystem, like approving the Ape Accelerator and budgets for the Governance Working Group and Discourse Facilitators. ApeCoin DAO is an efficient DAO and high-functioning decentralized capital allocator whose flagship APE token may see wider adoption in the future as the ecosystem continues to grow.
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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