Amid strong demand for BAYC land – Otherside NFTs, Yuga Labs proposed that ApeCoin would need its own blockchain, Layer 2 network/Subnet or other sidechain solutions.
Messari analysts examine the ramifications of the scaling solution that Yuga Labs has launched, and its impact on the accumulation of value in other assets within the BAYC ecosystem.
BAYC’s Land NFT (Otherside) sale is one of the worst ETH burns in recent history, and a monumental achievement for the Boring Ape NFT. From a demand perspective – considering the strong user demand for BAYC land Otherside NFTs, Yuga Labs proposes that ApeCoin will need its own blockchain, Layer 2 network/Subnet or other sidechain solutions. While Yuga Labs has not provided any other explicit information, they have started encouraging DAOs to start thinking in this direction.
With the launch of the Otherside NFT, the BAYC brand is worth about $25 billion in total, or about 12% of Disney’s market cap.
Analysis of BAYC
This resulted in an important list of questions, some of which were at the top of the minds of Messari analysts:
- What are your thoughts on BAYC announcing its own blockchain?
- How does this affect the value of the BAYC ecosystem?
- Other thoughts or comments around BAYC’s strategy?
With no shortage of opinions, analysts at Messari assessed the BAYC ecosystem separately based on these questions.
Mason Nystrom: Disneyification or cash grab?
The Disneyification of NFTs is happening in real time, but unlike Disney, it’s not based on a love story.
During Walt Disney’s early career, his animation studio teetered on the brink of financial collapse as the studio’s relatively successful animations were money losers. In the mid-1930s, cartoons were expensive and demand in the film industry was severely affected by the long-term unemployment brought about by the Great Depression. Suffice to say, the prospects for the newly formed animation studio were bleak, which is to say, it wasn’t until the release of Snow White that catalyzed the Disney Empire as we know it today.
NFTs are in a similar position, with early brands such as Axie Infinity and BAYC trying to build economic empires on top of NFT series profits. Sky Mavis (the developer of Axie Infinity) effectively isolated the AXS token from the Axie world, launching the Ronin sidechain along with its own native asset, RON. While developing Sky Mavis still has upcoming Axies like its own digital land sale, Sky Mavis clearly wants to strengthen its business model by creating a vertical gaming infrastructure. Another well-known NFT game developer, Immutable Labs, took the same approach, building its own Layer 2 network (IMX) for its flagship trading card game Gods Unchained, while also launching the GODS token for Gods Unchained’s ecosystem.
AXS has its definite function in the world of Axie Infinity, while ApeCoin does not have the same restrictions, launching some new chain (ApeChain?) with its own token may appear opportunistic, even if Yuga just adopts the play of other competitors.
Due to the limited utility of ApeCoin, the launch of the new chain presents an opportunity to add more value to ApeCoin, although it is more likely that Yuga Labs will launch another native token for their scaling solution (given that this is what all scaling solutions to date have done) made).
We are not going to argue whether this is a necessary shift (both pros and cons), one that will meaningfully affect the accumulation of valuable assets within the BAYC ecosystem. More specifically, given that Yuga Labs’ recent $4 billion funding round with partners like Animoca and a16z was equity-based rather than token-based, competing incentives may begin to trickle down to the Yuba Labs team and its institutional investors.
BAYC has navigated the release blueprint very well with the release of Dog Companion, Mutant Ape Yacht Club, and now BAYC Land, which are doing pretty well from a financial standpoint. But the long-term value of these collectibles is still based on their luxury status and potential airdrop rewards. Even the commercial viability of scarce digital land has yet to be proven.
If Yuga wants to create the Disney of Web3, they need capital and intellectual property that can generate sustainable cash flow. Yuga clearly has capital, and while BAYC’s transaction fees and NFT launches generate substantial returns, they are not necessarily recurring or sustainable. The future of Yuga Labs and The Boring Ape will depend on the ability to create a platform that consumers are willing to pay for, or a business built on valuable intellectual property.
Chase Devens: Sometimes less is more
The past half century has seen no shortage of ambitious companies whose early successes have convinced them that they can (and should) continue to grow at the speed of light. In just over a year, BAYC has penetrated the global mind and embedded itself into the cultural cornerstone of cryptocurrency. Its original product (a community-based NFT that is also a PFP) was so successful that it is almost impossible for any subsequent version of it to reach the same level of success.
Why has BAYC become so valuable? In my opinion, this is the perfect timing and adoption from high profile people outside of cryptocurrencies. The minting in late April 2021 comes weeks before the summer NFT explosion. When the price of NFTs really took off, early BAYC whales like j1 mmyeth and Pranksy successfully pitched the project to the first wave of celebrity adopters like Steve Aoki and Josh Hart. As an outsider who knows very little about NFTs, why do your own research if you can follow the whales?
BAYC’s network effects intensify as more of the cultural attention shifts to the boring ape in 2021. Like any other fixed-supply NFT collectible, increased demand drives prices higher and higher. The owners started organizing parties with their boring ape companions in the physical world. Yuga Labs may have created desirable cartoons, but the community is responsible for driving its value.
When Yuga Labs chose to release a BAYC-related series, launch their own coin, and create a virtual land, they unknowingly took a huge gamble on their brand positioning. As I detailed in a recent report, successful NFT collections today look very similar to luxury brands and are likely to suffer from the same low-end market brand stretches. Essentially, an established brand may actually dilute the value of its existing assets if it tries to create more products to cater to a larger audience.While the launch of Mutant Ape, Kennel Club, and ApeCoin was a huge success, the negativity surrounding the launch of Otherside Land could do permanent damage to the original Boring Ape.
If you asked me about the boring apes last week, I would be hard-pressed to find any evidence against them being considered immortal. However, now a small crack has appeared in their wall. Will this cause holders or potential buyers to reassess the brand’s collective $25 billion value?
We can let the market decide that. Now, I’m interested to see Yuga Labs’ reaction. Personally, I think it’s too early for brands to bet their success on a potential Metaverse game. As far as I know, the Boring Ape created FOMO by showing up on basketball courts and coffee bags. Why are people moving from the adoption of the physical world to the virtual world when the Metaverse is not ready for the masses to inhabit?
Even if ApeChain becomes a reality, how many Boring Ape holders will be lost during the migration from Ethereum?Boring Ape is notorious for having their Ape stolen forever by the holder clicking on a scam link. Such migrations arguably allow scammers to target temporary holders.
Cryptocurrencies are moving so fast that it can easily be overwhelmed by the craze. While this is usually advice given to new entrants, it must be kept in mind by all actors. If I were Yuga Labs, I’d take a step back and reassess my priorities to keep the seat I’ve always had on the throne.
Tom Dumleavy: It’s a bold strategy, let’s see if it pays off
Why didn’t the boring ape start his own blockchain? What can Ethereum offer BAYC? BAYC started on Ethereum because when they launched NFTs, that’s where NFTs started. NFTs are still largely the story of Ethereum, but the Boring Ape ecosystem has moved beyond normal NFT status. If NFT projects launch today, there’s nothing on Ethereum that they can’t do on Solana, the Avalanche subnet, or their own chain.
BAYC is a brand, BAYC is a luxury, BAYC will definitely be recognized by your cousin, possibly by your mom and grandma.Leaving Ethereum doesn’t change that.
In fact, we have already seen NFTs with brand awareness exit from the traditional main chain and start their own chain.The most successful example that comes to my mind is the Dapper Labs team and the Flow blockchain they created. The Dapper Labs team leveraged the NBA, NFL, UFC, and other brands for which they have intellectual property rights to collaborate, and launched their own custom chain, which, guess what, worked better for their use case than Ethereum.
Is there a question here? Great, roll back the data on-chain. We are not addressing decentralization. People spend a lot of money on these, in part because they have confidence in the leadership’s vision for the future.
Something misplaced or sent to the wrong address? It’s great that centralized institutions can sort things out.
Existing brands worried about intellectual property infringement? No problem, Flow has partnered to ensure that their IP partners are not misused on their blockchain.
Worried about charging your new Metaverse? Forget it, the rules here are yours. Let’s put these puppies on the ground.
For the planned BAYC Metaverse, a new chain solves many existing problems.
The value accumulation of the ecosystem is constant. There are basically no marginal users for the boring ape ecosystem we’re courting. Those few who want to join and can afford the price will seek out ways to do so. Whoever wants to transact in the Bored Ape ecosystem needs Ape tokens, whether the tokens are on Ethereum or not. With the new chain, they don’t have to worry about gas fees.
The glaring downside is the ongoing development and maintenance of the new chain, but hey, it’s not that Yuga Labs can’t afford it.
Kunal Goel: I don’t buy their account (and I can’t either)
While it may seem tempting to follow the path set by Dapper Labs and Sky Mavis, it seems to me that 2022 is too late to launch a copycat blockchain. While Yuga Labs has had great success with their brand and NFTs, they have not shown any skill to show that they can build a new and better blockchain. Conversely, the lack of gas optimization in the launch of Otherdeeds NFTs is a negative indicator. Maybe an intermediate solution like Avalanche subnets or Polkadot parallel connections might work best. Still, they’re unlikely to choose it, as BAYC is perhaps as big a brand as these alternate platforms. The benefit of NFTs on public chains compared to database assets is that they are independently secure and composable; launching a new chain will negatively impact these properties.
Exclusive NFTs have a built-in flywheel mechanism. They are Veblen’s commodities that become more desirable and exclusive as prices increase. Not only does the launch of Otherdeed NFTs dilute exclusivity by increasing the supply by 2.5x, but issues at launch may even hurt the brand. Unfortunately, the flywheel spins in both directions and the prices of all Yuga Labs assets took a hit.
Yuga Labs may still be able to. If they lack expertise in blockchain or game development, they have a way to get it.Otherdeed NFTs are a disaster just because of how popular they are. Cryptocurrency investors tend to have short memories, and future successful launches can dilute past problems.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/apecoin-plans-to-launch-its-own-chain-messari-what-analysts-think/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.