Original Author: Scarlett Wu
It has been a year since the last review of the Yuga ecosystem (see "Reassessing Yuga Labs Ecosystem Value at a Critical Juncture: APE Staking is Near, Regulatory Pressure Builds Up"). A year ago, Yuga Labs, which was worshipped as a deity, still frequently delivered products that met or occasionally exceeded expectations. However, the prices of ecosystem tokens and NFTs have already shattered the market's high bubble fantasy for the metaverse / crypto IP. Meanwhile, with AK's Twitter pinned call and the fundamental aspects and delivery of the Yuga ecosystem having refreshed the previous research conclusions, as a long-term follower and participant in the game and metaverse market of Mint Ventures, I will reevaluate Yuga Labs and its related ecosystem.
https://twitter.com/Rewkang/status/1679643703751876609
This study attempts to answer the following questions:
Have the product deliveries of Yuga Labs and ApeCoin DAO over the past year gained enough trust from the community? (This will be discussed in detail in the following sections regarding the support for NFT and $APE prices)
What are the upside and downside scenarios for the future ecosystem? Are AK's inferences reasonable?
1. Annual Review of Yuga Labs Ecosystem
The previous review of the Yuga Labs ecosystem was published in October of the 22nd year. In these nine months, the fundamental changes of Yuga Labs can be summarized as follows:
1.1. Yuga Labs Mainline: MDvMM Arrives Late
In the seed round pitch deck circulating within Yuga Labs, the storyline of MDvMM (Mechanical Dog vs. Mechanical Monkey) was originally planned as a 3-month-long event. It started in August 2022 and ended in October 2022.
Screenshot of the Yuga Labs' pitch deck
However, due to significant internal personnel changes, MDvMM only released the first update about this storyline on November 25, 2022: The Trail begins this Christmas.
https://twitter.com/BoredApeYC/status/1595864347355537408?s=20
This also marks the starting point of the NFTs' surge in the Yuga series. Taking BAKC as an example, several crucial points in the subsequent release of key narratives and game rules will coincide with changes in BAKC prices.
Parsec, Charted by Mint Ventures
MDvMM Timeline
In the narrative of MDvMM, there are many key points worth discussing. This is not only highly related to the NFT/FT prices of Yuga itself, but also involves the creation of the narrative for the entire NFT community. Yuga Labs, once pioneering the NFT narrative universe, can it still bear the responsibility of saving the NFT market with a new narrative?
1.1.1 Common problems with incentivized games – the much-criticized web2.5 anti-cheating
Since the first phase of Dookey Dash, due to the expectation that "Sewer Passes ranked higher can be upgraded to NFTs with higher value" in the market, slave accounts and game boosters can potentially earn hundreds or even thousands of USDT per transaction. (In fact, this speculation is true - at the time of writing this article, the price of higher-level HV-MTL HOLO floors is 6.5 E, while the price of the most common HV-MTL floors is 0.6 E.) It is the market's expectation for Yuga Labs' game and the trust in the fairness of the game that has created such a profitable trading market.
Unfortunately, despite the existence of "suspicious" detection in the game process, there are still simple ways to bypass the anti-cheating system:
@xClearHat
The core logic is: Although Dookey Dash appears to be random and cyclical, the selected process is actually limited. This process depends on a "course seed". When entering the game multiple times, as long as the same seed is inserted locally, the exact same game process, from rewards to obstacles, can be generated. The anti-cheating logic set by Yuga Labs is that as long as the "game process corresponding to the local process seed" matches the "player's actual operation data input to the server", the player is considered genuine. With a determined process map, cheaters can design a rule-based bot or use optimal path algorithms to efficiently navigate through these obstacles while collecting fragments. Since the bot can simulate mouse movements and clicks, it is difficult to detect cheating based on the bot alone - players can even livestream themselves playing the game on Twitch, pretending to be deeply engrossed while the cursor moves haphazardly on the screen, while the monkey on the screen precisely dodges obstacles and collects enough fragments, receiving applause and cheers.
Unfortunately, the author @xClearHat believes that Yuga could have avoided/delayed the game from being completely invaded by cheaters by:
Providing process maps and data on the server side instead of locally: This means higher costs, as low latency requires bandwidth, and bandwidth means dense deployment of servers, while Dookey Dash players are scattered around the world.
Encrypting the game rules: Two days before the end of the first round of Dookey Dash, the game goes into maintenance and the JavaScript file is recompiled into a new file that partially obfuscates cheaters. Previously, the files used by the game were almost plaintext, making the reverse engineering mentioned above exceptionally simple. Since Dookey Dash is a time-limited game, as long as the cracking process is complex and time-consuming enough, fairness of the game can be maintained in practice.
Establishing a dynamic system to provide process seeds at random intervals: Players can no longer directly generate game processes and correspond with the server at any time using a specific process seed, but they need to find the right timing - this will greatly increase the difficulty of cheating.
Although this thread has been widely circulated, it cannot prevent Yuga Labs from announcing the final game result - the first-place esports player was not actually the first-place, but after kicking out the cheater based on the game video, he obtained a valuable key. But how many cheaters who are not greedy for the first-place but just want to maintain a higher ranking have not been discovered? We don't know. The games in the blockchain world are not all about absolute fairness and justice - at least web2.5 games are not.
Example of cheating system gameplay of Dookey Dash made by @xClearHat
Perhaps the wide circulation of this thread is enough to attract attention, or Yuga Labs has already planned to change strategies in the next phase. HV-MTL's Forge uses a clever way to weaken the impact of bots and cheats on the gaming experience: voting. In the six stages, the AMP level of each stage is determined by the ranking, which is determined by voting. Users can choose to upvote and downvote - even if they use robots to vote themselves to the top of HV-MTL, as long as the screen name of the base is not true, or other players agree that the increase in votes is not reasonable, it may be downvoted to a very low ranking.
https://forge.hv-mtl.com/preview/1
Community self-supervision is certainly a good solution, transferring part of the auditing cost from the project party to the game players. Advancing to the top ranking not only requires advanced computer skills (operations that require occasional manual mouse clicks can still be accomplished through cheating, although there is a risk of being banned), but also requires extensive social relationships (group chats for mutual voting), and sufficient capital (if there are not enough votes from individuals, more Mech votes need to be collected, or buy tickets at a price of about 1 USDT / ticket through OTC). But the question is, why spend so much time and effort on a game that has mediocre gameplay and focuses solely on ranking? Currently, the main methods of campaigning are still "mutual voting" and "having more Mechs to vote for oneself". Although Yuga has set up Twitter account binding for non-holders to vote, it is actually used to differentiate the rankings under different score ranges for same-holders, and is not the core differentiation for rankings (based on the results, there are indeed many cases with the same score range, so it is necessary to attach importance to Twitter binding voting.)
@0x Cygaar
The first season that ended in late July has given some clues. With over twenty thousand HV-MTLs, only 133 of them achieved the highest level AMP. The first season's AMP corresponds to the Mech's head, and the ongoing second season corresponds to the Mech's weapon- if Yuga Labs can deliver as expected or even exceed expectations, the six AMPs should form a pretty cool Mech- but will there still be thousands of ETH buying the Golden Monkeys or the myth of the keys?
AMP conceptual diagram
Cheating is a key element that undermines the Magic Loop in the traditional gaming industry. Web3 games, due to the introduction of richer incentives, need to pay more attention to the booming brushing group and bots. Community self-supervision is likely to be a good solution, and being bot-friendly may be another - auto battler mode has been increasingly introduced by traditional game companies into their existing game mechanisms. When auto battler simplifies most of the player's interactions in the game, what we need to consider is, what kind of experience do players want to get? Is it the result of the account balance increasing through play & earn, the exhilaration of experiencing another story, the pleasure of showing off skills by defeating bosses one by one, or the symbol of social status that can be flaunted among friends?
From Dookey Dash and HV-MTL, it seems that the core goal of players is simple - to acquire scarcity, that is, NFTs with higher potential value. There may be social value and cultivation experience, but not much.
1.1.2 Token Release and Economic System Expenditure - Value Capture in Vain
When it comes to the consumption and value capture of $APE, we need to first clarify a concept - where do the consumed tokens go?
Since players directly use $APE, it is not a buyback; $APE will neither increase nor burn on the total supply of 1 B, so it is not deflationary - in fact, the earned $APE goes into Yuga Labs' wallet. For Yuga Labs, this is their game revenue.
According to Arkham's analysis, after the Dookey Dash game ends, some of the revenue goes into Coinbase, and after a brief stay in another multisig, it also goes into Coinbase.
https://platform.arkhamintelligence.com/explorer/address/0x9223abD716FF22C62Db2c6760eB6A59a33AF729E
https://platform.arkhamintelligence.com/explorer/address/0xDa7a4a45cE9c5b42102fcb456AE2532beD252a24
That is to say, the consumption of $APE does not lead to a long-term decrease in circulation, but rather brings a certain level of buying pressure in the short term, as well as a temporary lock on circulation. The length of this time depends on Yuga Labs' mood. And if Yuga Labs holds a large amount of $APE, it may also bring the issue of concentrated selling pressure.
Under this premise, we can analyze the consumption of $APE by Dookey Dash and HV-MTL separately:
Regardless of whether Yuga Labs received tokens that were immediately sellable, even if the project team behaves ethically and does not sell these tokens, it is only a small amount compared to the tokens rewarded by the staking system and the tokens unlocked by investors and the project team during the same period.
1.1.3 NFT Utility vs. Narrative - Why has BAYC's price faded?
Since BAYC's price came off the "floor stabilizing around 50 E", the market has always been puzzled: Why has BAYC's price and consensus faded?
The answer could be very simple: the past glory was when retail investors hitched a ride on the wealth creators' train - once the big players who hoarded BAYC exited the market, the liquidity consensus for BAYC ceased to exist, and so did the value consensus. Most notably, Machibigbrother.eth and Franklin.
The former became an early core holder and evangelist of the BAYC series NFT, holding dozens to hundreds of BAYCs. The latter once used "Franklin has 61 Apes" as their Twitter name to demonstrate their identity in the BAYC community. They also orchestrated several dramas of crashing the market using BendDAO, earning them the nickname "Monkey Market Maker" (for more details, refer to Jessica's analysis: "AYC price drop again: In-depth analysis of NFT lending leader BendDAO's "crisis" and "opportunities"").
During the market downturn in the past six months, Machibigbrother was forced to acquire 71 BAYCs in February because of trusting Blur's bidding wall, but unfortunately suffered a huge loss and had to sell them all at once, causing the price of BAYC to plummet. Franklin announced a temporary retreat from Twitter on April 19 and sold all the remaining BAYCs in their possession, further reducing the number of large players willing and capable of catching a large quantity of BAYCs during the market crash.
On June 22nd, after building a Bored Ape Yacht Club (BAYC), Ma Ji initiated a proposal for ApeCoin DAO, suggesting that the DAO use the treasury to buy back NFTs to support the NFT prices. As the information spread in the market, on June 25th, he dumped 39 BAYC tokens he held - evidently, the belief and narrative in the eyes of small holders became nothing more than tools for hype and profit in the hands of large holders. (In reality, there is still a considerable distance for ApeCoin DAO from the proposal to the voting stage, and Ma Ji's previous proposal has never been recognized and pushed to the voting stage by the DAO. However, the news was enough to scare and gain market feedback from the public who were not familiar with this ecosystem.)
This reminds me of the previous conversation I had with Shim: the narrative consensus at the beginning of an NFT project is most intuitively manifested through price consensus - not only in the NFT market, but also in the traditional luxury goods industry. Looking back at the changes over the past year, it can be clearly seen that the price consensus of Yuga Labs is declining while the game product power consensus is rising. In other words, its NFTs are transitioning from luxury goods that were difficult to price and skyrocketed overnight, to consumer goods that can be priced in relation to peers.
As BAYC transitions from a consensus of uncertainty in pricing to a tool for calculating airdrop prices and discounting cash flows, and then becomes a part of in-game items and functional enhancements, it moves from pure storytelling to more utility. Utility increases the baseline price, but it also limits the price ceiling. At the same time, holders transition from being collectors who "HODL and show my status" to speculators who "accumulate before airdrops and sell after airdrops." Even though Yuga Labs tries to differentiate BAYC from MAYC, BAKC, HV-MTL, and $APE through psychological positioning, it still cannot change the fact that they mutually influence each other, and BAYC has fallen from the luxury goods pedestal.
1.2 Otherside subplot: Price slump, but promising game quality
March 2023, Otherside 2nd trip went live, dividing players into four teams led by esports anchors, game, and NFT community KOLs, engaging in a score competition. Unlike last year's 1st trip, this experience truly achieved 1) interactive and data upload among thousands of people on the screen 2) gameplay attempts with thousands of people on the screen.
https://youtu.be/_RmFWo9Htwg
Although the author was limited by the load and unable to enter the game (despite having 5w+ Otherside holders, actually more than 8,000 people were able to enter the game), they could still experience the gorgeous visuals of UE 5 and the excitement of battling with thousands of people. From single-player games to MMOs, from MMOs with dozens of players to tens of thousands of people on the screen, technological upgrades have brought about the possibility of completely new gameplay, and Otherside is likely the pioneer of gameplay with thousands on the screen.
Undoubtedly, Otherside's delivery of this experience has exceeded expectations, but such exceedance has not resulted in an increase in the price of Otherdeed. The prize for the winner of the 2nd Trip is a helmet, Otherside Relics, totaling 2220 pieces, airdropped by Otherside to the wallet of the winning team's corresponding Otherside holder. On the day of the airdrop, the price of Otherside Relics once reached 0.7 ETH, and it still has a floor price of 0.2 ETH.
However, the price of Otherdeed is not so lucky. It seems that the market interprets the landing of the airdrop expected by Otherside as negative news. With each new NFT distributed, it means that the number of NFTs that can be obtained in the future by holding Otherdeed decreases, and the corresponding future cash flow also decreases, resulting in a lower valuation of the NFT.
Furthermore, the subsequent separation of Otherdeed has intensified the decline in its price,
Otherdeed (without Koda): Separates into Otherdeed Expanded and Otherside Vessels. Vessels will evolve into Mara in the subsequent Mara mini-game and can be combined with Koda to form Kodamara.
Otherdeed (with Koda): Separates into Otherdeed Expanded, Otherside Vessels, and Otherside Koda.
Obviously, Otherside wants to maximize the development of the game attributes of the NFTs. However, from the perspective of investing in the NFT series, the overly complicated series nesting will only confuse most non-hardcore players, and the scattered liquidity will also be difficult to support the NFT returning to its original price. Therefore, we have seen the continuous decline in the floor price of the Otherside series.
On July 28, 2023, Otherside official account released a preview video of the offline playtest. The experience is no longer limited to coloring mechanical exploration, but a true exploration of the jungle, mountains, lakes, and bars by the avatars. It seems that the official launch of Otherside game is no longer just a dream, and it may achieve the experience expected of the first Web3 game.
https://twitter.com/OthersideMeta/status/1684756832265621504?s=20
1.3 ApeCoin DAO Subplot: Lackluster Ecology and Staggering Inflation
In the past six months, ApeCoin DAO has only passed over twenty proposals, with a large majority related to governance processes and efficiency improvements in Ape Staking (which seems quite absurd - it's hard to imagine that a company established in a traditional way would still spend a lot of time perfecting departmental configurations and improving management processes, more than a year after its operation began). Some of the proposals relate to rewarding $APE contributors (which aligns with voters' interests), and the remaining parts mainly involve business development and storytelling, such as creating movies, games, and comics with Ape's ideology as the narrative core. The only proposal that seems somewhat promising is the establishment of the Ape ecological project incubator led by Forj - although it is still too early to see substantial outputs.
From the ApeCoin DAO Council initially composed of investors to the power transferred to Council members elected by the community, we can see that the innovation and courage actually become less and less. Actual participants in DAO activities are also scarce. With billions in circulation, the total number of votes in each vote is always around 10 M. It seems that $APE holders are not concerned about governance content. For them, the greatest utility of $APE is staking.
Recalling what we mentioned earlier, the introduction of ApeCoin DAO use cases for $APE:
Ecosystem token: Yuga Labs' products are all paid with $APE, but the actual demand is not proportional to the circulation (see 1.3). The DAO ecosystem has also not shown significant growth, making it difficult to see the possibility of matching ecological value with monetary value.
Payment Methods: Although some NFTs from Gucci / Times / OpenSea do accept payment in $APE, it seems more like a gimmick rather than a practical use case. Few people are willing to hold a token with fluctuating value as a payment tool in the long term.
Staking Profits: The price of $APE has dropped from $5 at the beginning of staking to less than $2, which means that without hedging, there is a high possibility of substantial losses. But if all staking users are hedging - do they really have confidence in the future of $APE?
It seems that these use cases, under the inertia or incompetence of ApeCoin DAO (or, the entire Yuga Labs token/NFT holder community), are only realized through staking profits - purely mining coins with coins. Even if users make some profits, does it really benefit the Yuga Labs brand? Staking + rewards are only means of buying time, leaving opportunities for ecological construction. If the ecosystem fails to thrive during this time and inflation is quite scary, it will be a huge blow to token prices and can only wait for the token to be halved and halved again.
2. Potential Upside and Downside Deduction
Reviewing Yuga Labs' issues, challenges, and achievements, we have summarized the following potential upside and downside key points:
2.1 Potential Upside
Release of Otherside and its fun factor
It's the 2nd trip now, but there have been leaked reports of offline playtests. Yuga Labs' previous delivery level in games has not disappointed.
Breaking through audience barriers
Deep brand collaborations (such as previous collaborations with adidas / Gucci, which depend not only on the team's BD level but also align with the trend of brand collaborations in the broader environment)
Derivative games, movies, etc.
Securities narrative reversal
Last October, Yuga Labs was investigated by the SEC, but $APE is not included in the SEC's lawsuit list in June this year.
Ape consumption
Value capture in mech games (in terms of previous activities, consumption is quite limited compared to inflation)
Ape Fest (the next offline gathering in HK, which may drive high-net-worth individuals in Hong Kong to purchase NFTs)
2.2 Potential Downside
Loss of price anchoring and narrative + inadequate liquidity
Lack of market makers (previously, Maji and Franklin) and heavy reliance on Yuga Labs in the community. The price will continue to fluctuate with the impact of Yuga Labs' new activities. However, in the current low liquidity market, the price does not fluctuate significantly with positive news but drops significantly with negative news. Unlike the decentralized art collection logic of Punks, most collectors do not care about the temporary price. Without the desire to sell, there won't be a dramatic decline due to liquidity shortage.
Token inflation
$APE still has significant inflation, and investors may further sell off their holdings (the current price is already lower than the valuation in the primary market, $2 billion fully diluted valuation, which is lower than the $4 billion given by the VCs. Although the VCs' holdings are not only mapped to tokens but also correspond to Yuga Labs' equity and IP)
Source: Token Unlock
Almost no token use cases
Payment purposes - very few people use $APE for trading on OpenSea, it's just a gimmick
Ecosystem development - ApeCoin DAO has been highly inefficient in the past six months. The organizational structure of the DAO is inefficient and lacks incentives, which drags down Yuga's level instead
Staking - Currently the only real use case. However, the APR (Annual Profit Rate) has dropped from 300%+ at the beginning to 50% (pure $APE) / 140% (paired with NFTs). Hedging miners may make profits, but naked stakers suffer heavy losses
Currently, it appears that the Downside force is still greater than the Upside. Of course, Yuga Labs' delivery level may mean that they will still stand unshakable in the industry (not dying but possibly being surpassed), but perhaps "bubble bursting" will still be a major trend for Yuga Labs assets in the foreseeable future.
References and acknowledgments: The writing of this article would not have been possible without discussions with @Noah_nftn@Z 57831357 on the topic of Dookey Dash cheating, as well as @CryptoScott_ETH's detailed data tracking on HV-MTL. Special thanks to @anymose 96 for the detailed breakdown and current status sharing of HV-MTL rules, and to @0x_bobo@alpacacheeze for the brainstorming and discussions at each critical point.
References:
https://www.panewslab.com/zh/articledetails/w23ypcwje9p9.html
https://snapshot.org/#/apecoin.eth
Yuga Labs, MDvMM, and Otherside official websites
