In addition to interesting new blockchain projects and currencies, innovations have also been constantly developing on the crypto market for years, the meaning of which is not always immediately apparent to laypersons. The DOGECOIN (DOGE), for example, was initially more of a “fun project”, but it quickly developed from a humorous reaction to the massive boom into a popular digital currency. Another phenomenon emerged in the spring of 2021 on the Ethereum blockchain and the OpenSea trading platform: the Bored Apes Yacht Club (BAYC). Another example of the blossoms that the NFT art market is increasingly producing: the so-called Cryptopunks. This is an art project that is the brainchild of the two developers Matt Hall and John Watkinson with their company Lava Labs. As images in the format of 24 x 24 pixels, the tokens represent – nomen est omen – Punks. The developed algorithm foresaw the creation of exactly 10,000 “Punk tokens”. The Ethereum blockchain forms the technical basis for the deposit.
Important details about BAYC and Cryptopunks:
- rapid success of BAYC & Cryptopunks shortly after launch
- prominent interested parties fueled the share price performance
- Cryptopunks tokens also attract hackers and other criminals
- Networks benefit from the appeal of exclusivity
- Experts regularly warn against NFT bubbles
Early Reports of Potential Abuse in the Network
At the end of 2021, a bot from the news platform Twitter reported what probably no one could have imagined after such a short time: A Cryptopunk changed hands for 500 million US dollars, which would have made the token the most expensive NFT to date. On closer inspection, it turned out that the transaction would have been a “Wash Trade”. This means that the buyer was also the seller. The buyer had borrowed the money as a “Flash Loan” unsecured via the DeFi area. The smart contract involved in the transaction recognized the missing repayment and the purchase was reversed. Said flash loans pose an increasing threat in the DeFi sector. Hackers take advantage of programming loopholes in smart contracts to withdraw funds and cause damage. Several protocols have since fallen victim to such incidents and suffered millions in losses due to wash trades. However, the aforementioned event did not damage the Cryptopunks success, or only in the short term.
Yuga Labs’ Second Big Hit – the Bored Apes Yacht Club
The company Yuga Labs is also responsible for the development of the Bored Apes Yacht Club. Here, too, the development for the collection foresaw an upper limit of 10,000
non-fungible tokens (NFTs), which were launched by Yuga Labs as unique collectibles. The tokens depict – hence the name – motifs of bored apes, with said apes being depicted in a wide variety of ways (for example, as portraits of well-known people who became members of the community). The choice of motif is explained by the fact that crypto users have always liked to call themselves “apes”. The club founders took this as a model. Borded Apes represent those crypto holders who have made a fortune since the crypto boom and are now bored. The club of bored apes is therefore the counterpart to the clubs of the super-rich in the real world. The early success of the project was not foreseeable even for the developers.
Club Members should Benefit from Attractive Additional Services
Several parallels can be drawn between the BAYC and the successful CryptoPunks project. This also allows the purchase of individual non-fungible tokens, which are clearly marked as property thanks to a unique identification address. However, anyone who acquires “Bored Apes” is not only securing the token itself. At the same time, the purchase of BAYC-NFTs guarantees access to the exclusive “Yacht Club” and thus to certain exclusive extras. For example, the developers foresaw the optional creation of virtual identities for token holders right from the start. Another advantage: access to the “The Bathroom” service, which the developers describe as a kind of retreat for token owners. This also shows the artistic aspect of the “bathroom”. Ape owners – according to the founders of the club – can gradually immortalize themselves on the virtual toilet wall and become part of a collaborative crypto artwork. The unlockable BAYC roadmap includes further special features such as discounts for partner networks.
The initial offering of 500 ape specimens with unique characteristics was quickly sold out after the launch of the Bored Apes Yacht Club at the end of April 2021, not least due to the enthusiasm of well-known NFT collectors such as the investor and Twitter user “Pranksy”, who acquired large token contingents and reported on it in a media-effective manner. The selling prices exploded – also because the exclusive club attracted celebrities from music, sports and media. Members include US presenter Jimmy Fallon, rap star Snoop Dogg and basketball player Stephen Curry. A preliminary highlight was the entry of rapper Eminen, who loosened up for the “EminApe” named after him and visually adapted to him. Even the renowned Rolling Stone magazine dedicated a cover story to the BAYC, which raised the hype to a new level. The concept of winning celebrities with free tokens as a kind of figurehead is a well-known business model that has helped many crypto projects to achieve rapid fame.
Corporations are also Recognizing the Opportunities of the Communities
The next important step was the entry of the sporting goods manufacturer
Adidas. The company not only acquired a Bored Ape – it also announced a cooperation with Yuga Labs and partners such as Comics Punks. In view of the BAYC success, it was only a matter of time before the developers would launch new collections. This happened in the form of the “Mutant Ape Yacht Club” (MAYC). Members of the first hour were able to design MAYC-NFTs using a “mutant serum”, either with identical properties to those of their Bored Apes or completely new (“original”) properties. Here, too, success was not long in coming, the Mutant Ape Yacht Club recorded enormous growth within a short time. The developers allegedly did not expect the boom. In particular, because there have been numerous dubious NFT collections in the past. Yuga Labs reacted to existing risks by treating all token holders equally and creating rights to “full commercial use”.
NFT Networks between Potential and Known Risks
Critics doubt that such measures alone will prevent criminals from exploiting the hype and finding vulnerabilities. The main risk from an investor’s point of view is probably that the great interest will disappear as quickly as it came. In addition, rapidly rising prices always carry the risk of rapid slumps as soon as the first waves of success subside. Especially on the part of prominent investors, enthusiasm often wanes as soon as the next trend emerges. If communities lack members with strong capital, prices can plummet immediately. Many market observers believe that “bored apes”, “Cryptopunks” and comparable projects will remain part of the market in the future. It is just as certain that we will continue to hear about criminal incidents that ultimately go to the detriment of the developers and owners who expect good long-term investments from non-fungible tokens.
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