NFTs are irrational. They don’t make any sense.
A JPEG you can instantly copy with a right-click of your mouse? And the cheapest Bored Ape Yacht Club NFT costs 146 ETH, or $416,000? That’s a down payment on a house… a really nice house.
Many Bored Apes go for much more. How is this even possible?
Defied the Naysayers
And yet non-fungible tokens and their magical ability to make the ubiquitous unique have defied all the naysayers, and a punishing bear market. Cryptocurrencies as a whole have lost a fifth of their value this year but the floor price for Bored Apes has has soared 131%. Absurd? Yes, indeed. But NFTs are pumping.
Perhaps no venture has maximized this strange craze like Yuga Labs, the mysterious outfit behind Bored Ape Yacht Club (BAYC) and its many spinoffs. In March, the Miami-based enterprise raised $450M in a round led by venture capital firm Andreessen Horowitz, bestowing the NFT studio with an astonishing $4B valuation. Not bad for a year-old company, eh?
Yuga was also key in releasing ApeCoin last month. The token’s $5.5B market cap already eclipses that of every DeFi project.
Oh, and in March the company also acquired the intellectual property rights for CryptoPunks, arguably the second buzziest NFT collection. Meanwhile, BAYC has captured the web3 zeitgeist, with celebs ranging from Snoop Dogg to Madonna to Paris Hilton to Super Bowl champion Tom Brady joining the club.
Now on Apr. 30, Yuga is gearing up another NFT mint for a project called Otherside, which is largely anticipated to be a metaversal world of some kind. That Yuga posted a teaser with computer animation strong enough to make Pixar blush has helped turn up the hype meter for Otherside to a fever pitch.
The Otherside video has drawn 2.7M views and depicts the images of other major NFT projects like Nouns, Cryptoadz, and World of Women, suggesting some degree of integration with the broader NFT world.
ApeCoin will be used exclusively to pay for the Otherside mint, a move that showcases the way Yuga has continued to stack elements of its ecosystem. With the token airdropped to BAYC and Mutant Ape Yacht Club (MAYC) holders, Yuga is taking another step to establish itself as the center of gravity in the NFT universe.
Even in the face of savvy business tactics, the question remains: Is the Yuga model sustainable over the long term? And for that matter, are NFTs? Given collections like BAYC are dependent on subjective taste, anything could happen.
“It’s tough to keep making hits,” says Jeff Schumacher, the founder of New Asset Exchange, a Los Angeles-based firm, and owner of a Bored Ape. “How valuable are CryptoKitties today? Do you even hear about them anymore? Andreessen can get a $4B valuation — let’s see if it can get it to $8B.”
The story of Yuga Labs is one where the improbable has become reality in the blink of an eye. To understand how it’s come so far, so fast you have to plumb the alchemy that’s powering the NFT phenomenon, and how the Yuga team seized the moment.
“A series of things went right that aren’t really replicable,” Kufi Kufuor, a partner at 1confirmation, a venture capital fund, told The Defiant.
Yuga Labs was founded in February 2021 by Gordon Goner and Gargamel, two pseudonymous friends who were revealed to be a pair of artsy Floridians named Greg Solano and Wylie Aronow in a BuzzFeed article published in February. There were two other founding members, software engineers who went by the handles No Sass and Emperor Tomato Ketchup (a classic Stereolab album), according to a Yuga Labs’ post.
From the outset, the founders focused on the cultural dimension of crypto. According to the Yuga Labs post, they had seen CryptoPunks and Hashmasks. Yet they recognized that NFTs, as replicable as they were, constituted a new business model for intellectual property.
“Not only was this an opportunity to create art and tell stories [in] a new medium,” says Yuga’s post. “But if you could prove irrefutably that a certain digital artwork was authentic, then you could use that artwork as a key to access locked content, experiences, apparel…anything.”
The concept behind BAYC sounds like the premise of a Disney movie — a bunch of well-off apes live in a treehouse in a swamp. The vibe of can’t-be-bothered hipster primates chilling in the jungle was articulated by freelance illustrators the founders recruited for the project. Chief among them was Seneca, an Asian-American artist educated at the fabled Rhode Island School of Design. She told The Defiant last year that she found the authentication features of NFTs to be a revolutionary technology with a place in fine art.
On April 23, Yuga Labs launched the Apes mint with the final sale coming on May 1. The initial floor price: 0.08 ETH, or about $240 in today’s money.
BAYC picked up mojo when NFT influencer Pransky executed a mega-buy and minted 12.5% of all of BAYC, says 1confirmation’s Kufuor. The VC highlighted other unorthodox moves by the Yuga crew.
First, BAYC sold for a flat 0.08 ETH at a time when NFTs were selling with what Kufuor called “ramp pricing,” a model where prices increase as more people buy. The VC said this helped Yuga sell Bored Apes as membership to an accessible community.
Kufuor also said the hashtag “apefollowape” did wonders on Twitter — by buying a Bored Ape, a person could join a social media community as well. Or put more cynically, by buying a Bored Ape a person could acquire followers.
Then there was the art. Unlike the retro-pixelated CryptoPunks, the Apes were finely rendered in iridescent colors. The insouciance in the Apes’ attitudes was a counterpoint to the hype of the NFT space in general, and eventually the club itself.
That was just the start. Later that May, BAYC executed a merch drop, and foreshadowed further opportunities for branded clothing. The Bored Ape Twitter account retweets photos of people wearing the brand’s clothing on a daily basis.
The first run totalled 210 hats and 300 shirts (in April someone was selling a hat from the drop for $10,000 on eBay).
Then on June 18, with the price exceeding 20 times the mint level, Yuga made another trendsetting move — it launched a spinoff collection for Bored Ape holders called Bored Ape Kennel Club (BAKC).
The images for BAKC are dogs, all with the same stance, and all with backgrounds of various places within the dilapidated clubhouse where the fictional Bored Apes reside. Some dogs look almost normal except they’re pink. Others have the bloodshot eyes of a stoner (a rare trait!) and have what looks to be an ape’s severed hand in its mouth.
Derivative drops to an NFT collection are now commonplace, but at the time BAKC, which was given to holders gratis, was a fresh idea. The floor price of these NFTs has jumped to 11.36 ETH as of Apr. 27.
Just two months later, the original 0.08 BAYC mint price looked like a steal as the collection’s floor soared a hundred times higher, past 8 ETH. By the end of August the floor broke 44 ETH, which was worth $137,000 at the time.
It caught fire with athletes and Hollywood. NBA star Steph Curry got one and so did Gwyneth Paltrow. Rolling Stone magazine put an Ape on the cover, and The New Yorker, the bible of America’s cognoscenti, published a feature asking whether the club was “the future of culture.” By design or accident, BAYC had become the emblem for the NFT movement writ large.
Even as Solano and Aronow maintained a low profile they continued leveraging the brand into new offerings. Another derivative project hit on Aug. 28: Mutant Ape Yacht Club (MAYC), a collection of apes with grotesque melting faces. They were going for a 37.99 ETH floor price in late April.
The steamroller continued with Ape Fest, a multi-day slate of events in late October and early November. Escapades included a 1,000-person yacht party exclusive to BAYC and MAYC holders and 250 of their plus-ones, as well as a warehouse rave featuring Grammy Award-winning acts The Strokes and Lil Baby.
Now Yuga is trying to bring in users who missed out on joining the Bored Ape club. They can buy ApeCoin, or take part in the Otherside mint, which is rumored to be designed for land sales in the metaverse.
With the insane trajectory of Bored Apes’ floor, every associated project feels like it might take off too and put a couple zeros behind the mint price. And underneath it all is the paradox of NFTs: You can copy-paste the exact image of any ape you like right to your desktop, but if you tried to sell that right-click-save file, you wouldn’t get a dime.
Can the down payment-worthy prices sustain? Will the market finally come to its senses and dump apes as a fad, perhaps to be revisited in a nostalgic retro trip a decade from now? Or are NFTs a new cultural force with staying power?
Punk4052, as they go by on Twitter and a two-year holder of the CryptoPunk of the same number, is skeptical. “The way I see it when you take a step back from the hype it really screams a bubble to me,” the NFT collector told The Defiant regarding Bored Apes’ valuation. “I can’t make a thesis as to why it should reign supreme looking down the line.”
While it’s easy to write Yuga off as a right place-right-time phenom, the company has ridden the bull this far. “If nfts will onboard 1bn people, bayc ecosystem cannot become a horror story,” crypto messiah Cobie, tweeted.
With Otherside imminent, Yuga’s expansion will be tested. According to the newly created OthersideMeta Twitter account, only users who performed know-your-customer checks will be eligible to mint. Such KYC moves may be antithetical to crypto yet many users decided to follow through. That shows Yuga’s power, but also its strange dissonance with crypto as a whole. Not that fans really care.
“ITS YUGA SZN!!!” tweeted the holder of Bored Ape 3374. “This week could possibly be the wildest in #NFT history…”
Maybe all that matters is monetizing the hype, at least for now.