With the recent launch of ApeCoin, it seems that most people have been focusing their analysis on the financial upside of $APE… “it’s down 80% from its peak!” or “it’s up 60% from yesterday!” or “you don’t actually own any portion of Yuga Labs!”
Focusing on the financials misses a key point… with the launch of $APE, we're witnessing the dawn of social tokens.
To take a step back, in any early crypto hype-cycle, there is an outsized focus on financial upside. The potential for economic gain attracts financial speculators and drives liquidity within the market. Over time, the opportunities for quick cash grabs diminish and the financial speculators move on… which prompts an opportunity for enduring projects to focus their efforts on driving utility and recruiting core community contributors.
NFTs are no different… most of the attention over the past year has been focused on the potential financial gain from collecting speculative NFTs. Given this outsized focus on financials, NFTs have been experiencing some negative headwinds. As daily sales and trade volume have steadily declined over the past few months, the financial speculators have started to focus their attention elsewhere. I predict this will lead us into a new phase in the NFT landscape where utility and inclusivity becomes even more important than scarcity and financial gain. This was a popular topic at SXSW, and I imagine we’ll hear similar themes at NFT LA next week.
That said, when considering what kinds of utility they can incorporate, NFT communities are beginning to realize that the fundamental characteristics of NFTs can be limiting… a community cannot operate on a barter system alone. While NFTs are great at creating scarcity, they inhibit new community participants from onboarding without having the economic means to purchase limited supply NFTs and they reduce opportunities for the free flow of funds across the community. As a result, communities are starting to look towards social tokens as a way to create new ways for folks to onboard into the community and to transfer value within and across the community.
$APE is a major indicator of this trend and demonstrates how social tokens are the next phase of a community’s web3 lifecycle. As with all social token launches, the success of $APE will boil down to the project's abilities to:
When it comes to utility, $APE provides utility to its holders via governance rights, access to exclusive aspects of the ecosystem (games, merch, events, etc.), and the ability for 3rd-party developers to incorporate $APE into other services and games. This is a great vision, but it’s still just a vision. How $APE executes on these aspects of utility will largely determine the value of their ecosystem. $APE has assembled a strong “board” of the ApeCoin DAO made up of heavy hitters with strong track records. I'm excited to see how they bring these value propositions to life.
Utility is important, but there is no value in web3 without community. A lot of communities are considering how to bring members into their ecosystems without having to purchase expensive NFTs. Holding $APE is more accessible than owning an Ape; $APE offers new participants a way to onboard through small purchases or by earning their way in via digital labor.
This creates a new class of members and builders who can help deliver against the project's priorities. Instead of focusing on scarcity and exclusivity, fungible social tokens create opportunities for abundance and inclusivity. More owners means more potential believers to show up when you need them to… which means that $APE Holders become a new community and a new asset for the Ape community in and of themselves.
What does this mean for BAYC? It means that they now have a wider and deeper community that can increase their ability to attract partnerships, brands and other exciting opportunities for collabs. It’s what has made other projects in crypto so successful: power in numbers. Of course, this only works if you get your holders to buy into the vision. The $APE holder community will only become an asset if the core team and existing community is able to convert holders into members, engaging with them in honest community building in addition to offering them a piece of the Ape brand. The next six months should be an indicator of how successful they are in this critical part of their journey.
Finally, the ability to govern the project might not be the main draw for the token right now. As it stands today, community members want to be able to participate in the upside of the $APE community by holding a digital asset that functions as an asset pass. But as opportunities for the community continue to grow, the ability for token holders to help steer the trajectory of the project becomes a strong long-term benefit. Token-holders will be able to vote on key decisions like hiring, partnerships, benefits, and investments. This becomes the most powerful demonstration of collective ownership and democratic process and will be a strong driver for the community-value. Most importantly, $APE's ability to onboard a diverse and inclusive group of community participants will differentiate the project.
In short: $APE won’t survive solely as a speculative asset or diluted version of the BAYC status-symbol. The launch of $APE demonstrates an opportunity to trade exclusivity for inclusivity and opens up new opportunities for the community and its participants.
The success of $APE / BAYC won’t make or break social tokens, but it does serve as a great validation of the need for both fungible and non-fungible tokens within a community, and it’s also the highest-profile social token launch to date. I’m excited to see where the $APE community takes it from here!