The Breakdown - Otherside and the Rise of the Bored Apes

Episode Date: May 7, 2022

This episode is sponsored by Nexo.io, NEAR and FTX US.  It’s only been a year since people were able to mint a bored looking ape NFT for about $200. But in that year, the company behind the Bored Ape Yacht Club has recruited celebrities, raised hundreds of millions of dollars, acquired the IP of other key NFTs, launched its own cryptocurrency, and most recently, sold plots of virtual land for its forthcoming metaverse.  - Nexo is a secure crypto exchange and crypto lending platform. Buy 40+ hot coins with your bank card in seconds and swap between exclusive pairs for cashback. Earn up to 17% interest on your idle crypto assets and borrow against them for instant liquidity. Simple and secure. Head over to nexo.io and get started now.  - NEAR is a blockchain for a world reimagined. Through simple, secure, and scalable technology, NEAR empowers millions to invent and explore new experiences. Business, creativity, and community are being reimagined for a more sustainable and inclusive future. Find out more at NEAR.org. - FTX US is the safe, regulated way to buy Bitcoin, ETH, SOL and other digital assets. Trade crypto with up to 85% lower fees than top competitors and trade ETH and SOL NFTs with no gas fees and subsidized gas on withdrawals. Sign up at FTX.US today. - Consensus 2022, the industry’s most influential event, is happening June 9–12 in Austin, Texas. If you’re looking to immerse yourself in the fast-moving world of crypto, Web 3 and NFTs, this is the festival experience for you. Use code BREAKDOWN to get 15% off your pass at www.coindesk.com/consensus2022. - “The Breakdown” is written, produced by and features Nathaniel Whittemore aka NLW, with editing by Rob Mitchell, research by Scott Hill and additional production support by Eleanor Pahl. Jared Schwartz is our executive producer and our theme music is “Countdown” by Neon Beach. The music you heard today behind our sponsors is “Catnip” by Famous Cats and “I Don't Know How To Explain It” by Aaron Sprinkle. Image credit: Mario Tama/Getty Images, modified by CoinDesk. Join the discussion at discord.gg/VrKRrfKCz8. 

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. The breakdown is sponsored by nexus.com, near NFTX, and produced and distributed by CoinDesk. What's going on, guys? It is Saturday, May 7th, and that means it's time for the weekly recap. Before we get into that, a little housekeeping. There are two ways to listen to the breakdown. You can listen on the CoinDesk Crypto Podcast Network feed, which comes out in the afternoon, or the breakdown-only feed, which comes out in the evening. The CoinDesk feed has not only the breakdown, but also some other great shows.

Wherever you are listening to The Breakdown, if you're enjoying it, please go rate, review, help other people discover the show. Speaking of CoinDesk, if you haven't bought your tickets yet, I highly suggest you check out CoinDesk's Consensus 2020, which this year is. happening in Austin, Texas, between June 9th and June 12th. The event has voices and topics representing a huge cross-section of the crypto space. You've got your CZs and SBFs, but also Punk 6-529 and Kathy Wood. It should be a really, really good time. If you're interested, you can use Code Breakdown for 15% off your ticket. Check out CoinDesk.com slash Consensus

2022. And lastly, as always, in addition to them being a sponsor of the show, I also work with FTX. All right, so for today's weekly recap, we're actually just going to be talking about the other side NFT sale last week, but really I think there's a broader exploration here. If you listen to my interview with Vance Spencer yesterday, one of the things that we talked about and I was reflecting on at the end of the interview is this sense that I have that there is a huge battle brewing for the metaverse, these digital worlds that will occupy huge amounts of time and attention and economic resources. It seems to me that a huge number of different types of companies and projects are all converging towards that goal, but coming at it in very different ways.

Meta is building off from a social network. Decentraland and the sandbox are building off from NFTs in a crypto-native way. Epic, which created Fortnite and which just took in $2 billion of investment, is coming at it through the lens of games. I don't think it's clear who's going to win or even what strategy is going to win, but in terms of the sheer, amount of human attention that will be concentrated on the other side of this, the stakes are pretty high. I think Yuga Labs, the company behind the board ape yacht club, is one of those contenders and a lot of what they do is going to set the tone for what other competing projects do as well. So let's start with the Yuga backstory. The original board ape release was on April 23rd of 2021. These things which are now so expensive, minted at a price of only 0.08-e,

around $200, and sold out in around 12 hours. The narrative discussion in NFTs was all about digital art. Beeple was the biggest thing going at that time, and his piece every days had just sold at Sotheby's for $69 million. Profile Picture projects or PFPs weren't nearly as widespread yet. By the second half of last year, it was clear that Bored Apes were another pillar of the NFT space. Mutant Apes, which was the first Bord Apes spin-off project, were released in August. The floor price of Bored Apes jumped by 40% at the start of September. And at the time, there were lots of debates in the NFT community about what was the key driver of value. Was it about historicity and historical significance, i.e. the OG collections like Cryptopunks that were the first to have come on the scene that could never be replicated because of where they sat in history. Or would something else be the reason that people came to NFTs?

Board Apes took a very different strategy. not just not trying to pander to crypto-natives, but actively going to recruit from outside the space. In particular, they were going into the world of celebrities. Some of the early celebrities to change their profile pictures on networks like Twitter to their bored apes included people like Stefan Curry. But the biggest thing was in October of last year when Yuga signed a management deal with Guy O'Siri. Osiri is famously the manager for Madonna, U-2, and many, many others. Over the next couple months, Jimmy Fallon, Paris Hilton, Eminem, Tom Brady, Gwyneth Paltrow, and many more joined. In November, the board apes landed on the cover of Rolling Stone, and on the 21st of December,

the board ape floor price flipped Cryptopunks and hasn't looked back since. There were a number of key differences. Whereas Larva Labs, the company behind the Cryptopunks, was a pretty hands-off, not particularly involved group, Yuga Labs were clearly aggressive about creating worlds from the basis of these humble pictures. In their Rolling Stone interview, they said that they wanted to be a Web 3 lifestyle company. There was another fundamental difference, though, too, which was really important. Whereas there were very unclear IP rights and commercial rights for the Cryptopunks, Yuga sold board apes with a really straightforward agreement, granting complete commercial use IP rights to their owners.

Chubby Corp in 2019 said, the value in punks is the asset itself. The value in apes is them being Yuga's core NFT. These are very different things. By the end of 2021, it was clear that that involvement and the value that YG Labs was trying to invest in the broader BAYC community was shaping what people's expectations of an NFT community could be.

By the beginning of this year, it became clear that their ambitions were much bigger. Looking for ways to step up your crypto game? Then go with Nexo. For starters, you get free crypto for each purchase or swap. How about earning guaranteed yields? Up to 17% paid out daily. Ideal for you hardcore hodlers.

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Reimagined your world today at NIR. The breakdown is sponsored by FTX US. FtX US is the safe, regulated way to buy and sell Bitcoin and other digital assets, with up to 85% lower fees than competitors. There are no fixed minimum fees, no ACH transaction fees, and no withdrawal fees. One of the largest exchanges in the U.S. FDXUS is also the only leading exchange that supports both Ethereum and Solana NFTs. When you trade NFTs on FTCS, you pay no gas fees.

Download the FTCX app today and use. referral code breakdown to support the show. In March, as Yuga Labs was out preparing to raise capital, their pitch deck was leaked to the block. There were big numbers on revenue and growth, but the bigger revelation were details about how Yuga was thinking about their Metaverse strategy. In the deck, Yuga referred to current Metaverse offerings as underwhelming, saying, today's metaverses are trying to make something new, but they're really just creating

something boring. They also specifically pointed out that current Metaverse platforms were somewhat disconnected, both from each other and from the Web3 personas that people had started to form. Within a couple weeks, Yuga announced a monster $450 million raise at a $4 billion valuation. And since then, it has just been thing after thing after thing. They acquired the rights to Cryptopunks and Mebits from Larva Labs and immediately gave those projects the same type of commercial rights that had been guaranteed with Port Apes.

They created an airdropped ape coin to Yuga NFT holders with no specifics about what the new coin would be used for. And finally, they released a hype trailer for their Metaverse named OtherSide. As soon as the OtherSide announcement came out, there started to be rumors of a land sale. On April 24th, two weeks ago, the rumors started to firm up with announcements. The Mint would be held on April 30th a week after the announcement. The other deed land NFTs would be for sale for 305 ape coin each. A total of 55,000 NFTs would be available to mint with an additional 45,000 being reserved for current board ape and mutant ape holders. Users would have to complete a KYC process on a Yuga website to participate in the Mint, and Yuga reminded buyers that they would need, quote,

some ETH to pay for gas fees, which, as you will see, becomes a key part of this story. Leaning into the Mint, ape coin went up 25%, and during the Mint reached a volatile range of between 20 and 26. The hype on crypto Twitter was crazy. Zero X-Bender says, other side drop is shaping up to be dangerous. The entire timeline is preparing for war, countless tweets about how many blocks it'll take to mint, people calculating their first transaction to avoid getting gassed out late. This isn't the way the drop should be happening. Could be very ugly. Josh Browski wrote, B-A-Y-C land sale is going to set records. And set records it did. 27,000 users purchased all 55,000 other deeds at a price of around $5,800.

When the dust settled, 16.7 ape coin had been spent, worth around $317 million, making this buy a lot the largest NFT mint ever. Those were not, however, the only record set. Ethereum gas fees spiked in a huge, huge way, with users spending between $4,000 and $10,000 per transaction on the gas fees alone to mint the other deeds. Overall, $172 million in Ethereum transaction fees were spent during the mint. Keep in mind for context, the previous largest entire day ever for transaction fees on Ethereum was last May and was $122 million. The narrative turned almost immediately to how chaotic this had been, how much gas had been wasted, and how Yuga Labs could have let this happen. Yuga took to Twitter and stirred up even more controversy saying,

this has been the largest NFT mint in history by several multiples, and yet the gas used during the mint shows that demand far exceeded anyone's wildest expectations. The scale of this mint was so large that ether scan crashed. We're sorry for turning off the lights on Ethereum for a while. It seems abundantly clear that Apecoin will need to migrate to its own chain in order to properly scale. We'd like to encourage the Dow to start thinking in this direction. There were many on Twitter who seized on this statement about Apecoin leaving Ethereum for a native chain as evidence that that had been Yuga Labs plan all along.

long. Zerox Fubar says if the unnecessary gas war was simply a marketing stunt to generate interest in a future ape chain, I find it extremely distasteful to burn $150 million of other people's money for a cheap trick. Mark Baylon writes, just finished exiting all of my ape-related NFTs. Now that Yuga has revealed their true colors, I can't unsee it. Instead of designing their launch properly, Yuga broke Ethereum so they would have an excuse to launch their own L1. Ape needed a new narrative after the land sale. The art of a good conscience, artist is that they'll promise you something new the second you come asking them for the last thing. They'll just keep adding more and more layers of complexity to distract you from what's really going on.

It wasn't just Ethereum folks who responded with disappointment, however. B-A-Y-C community member ape father wrote a thread saying, the community responded atrociously to this mint. The level of doomsday talk was terrible. Our bag bias was much too prevalent. But almost worse than that was the level of arrogance. Too many apes and mutants have let the money begin talking. The situation as a whole made me grasp onto how crazy this all is. I'm beyond blessed to be in this situation at 24 years old. Last night I was brash in my reaction and was emotionally greedy at not being able to mint an extra to my already five free lands, embarrassing. Fortunately, I have gotten over that, but the community's response, I cannot get over. You may have millions in NFTs and that's outstanding, but grab on to

reality. Yuga has given me more money than I can imagine for that I am blessed. But last, Last night was the first time in the Board of Apiote Club history that I wasn't having fun. For that reason, I am taking profits off the table. I hope the community settles down and owns up. Now, of course, the other side to this was that this is the leading project in this space, and it just had enormous demand and excitement. Bender writes, I'm shocked that the secondary volume of the other side isn't being talked about more. 215K-Eath volume in four days.

That's 623 million. insane. Keep telling me NFTs are dead. Nathan Head writes, y'all acting like Yuga Labs killed someone or something. Sure, the Mint was a shitstorm, but welcome to the very early stages of Web 3. Chill.

But I think, and this gets back to that opening discussion we had around the play for the Metaverse, this thread from Udi Werthheimer is incredibly on point. When Valve released Half-Life 2 in 2004, everyone wanted it. So when you got the game disc,

Valve forced you to install a new thing called Steam to play. It didn't have a lot. many other games, but everyone installed it because they had to, and the rest is history. Anyway, so Yuga Labs chain. This isn't a one-off example, by the way. Epic Game Store is the single most credible competitor to Steam, and it was spawned off of a mandatory installation for Fortnite players. It's beyond obvious to me that the winning long-term L1, insofar as such a thing exists, will come from creators that hit it with consumers, not from platform builders.

I don't know if Yuga specifically can execute on this, but they have a better chance than Binance, Solana, et cetera, in my opinion. Now, I have no idea about that last statement, but I do think it's a good reminder that so many projects out there right now, ultimately, are competing either to build the plumbing for whatever the metaverse becomes or to actually be the ones to own it. Within that, there are going to be huge questions around tradeoffs of things like speed and efficiency versus decentralization. Different companies, projects, and protocols are going to have very different answers to that question. Meta's not even going to pretend to have it be open and interoperable. It doesn't seem to me

like traditional AAA game studios like Epic are going to either. For these projects that are Web3 native, what will they choose? I think that's a big part of what this is about. Anyways, that is the long story so far of what, even if you're not a holder or not particularly interested in the NFT space, is clearly one of the most dynamic industry-shaping projects. around. For now, I want to say thanks again to my sponsors, nexus.io, near and FtX. And thanks to you guys for listening. Until tomorrow, be safe and take care of each other. Peace. Hey, breakdown listeners. Come join CoinDesk's Consensus 2020, the festival for the decentralized world this June 9th through the 12th in Austin, Texas. This is the only festival

showcasing and celebrating all sides of blockchain, crypto ecosystems, Web3, and the Metaverse and is designed for crypto newbies, investors, entrepreneurs, developers, and creators. Don't miss speakers like Kathy Wood, SBF, CZ, Punk 6529, and Joe Lubin to name just a few. Use code breakdown to get 15% off your pass at coindesk.com slash consensus 2022.