AIP-378: ApeChain Bid // ApeChain Developed with Arbitrum Technology with Growth Led by Horizen Labs

[TheFatherOfAllStorms]

A YugaLabs builds everything in Apecoin regardless of what layers. Let’s don’t confuse layers with chains, again.

[capetaintrippy]

great feedback/ questions. were these questions answered?

[irvinxyz]

Nope. Still unanswered, both in the forum and on Twitter.

[thecoinmaniac.eth]

Arbitrum was down and was not usable during the recent ordinal spamming attack on Dec 16th . Gas fees became very high during this period. Could you please give us some clarity on this and what measure have been taken to prevent another such event

As Apechain will be built with especially gaming in mind such outages can effect adversely to users

[Balou]

Can we get a view of the estimated three year costs, given once the three years is up it’ll be over to the DAO? Obviously an important point is the revenue model - which we can use to help calculate the breakeven point in terms of making the chain self funding. Without this info it will be difficult to approve even if the first three years are covered.

Regarding the security council I would love to see inclusion from an element of the Boring Security team, who are a community team funded by Apecoin with some of the brightest minds in the space. At the moment 4 of the 6 roles come from the same teams.

[kodama]

Please clarify if this would be a L2 or L3.
I find it very concerning that this is not clearly outlined in the AIP and would ask you to adapt that.

From my understanding you are suggesting a L3 on top of Arbitrum.
From my understanding this would mean that there is no direct bridge from ETH Mainnet to ApeChain.
Meaning a user would need to swap ETH to APE (if used as native gas token), then bridge from ETH to ARB, then bridge a 2nd time from ARB to ApeChain.

If true, please explain why you did not propose a L2 in the first place?
I heard a L2 comes with a very strict licensing agreement. Please expand further on this.

[buhrstone]

Great comment, for some reason no one had thought about it before, it’s really very important.

[Marielle_Li]

Initially, it’s not a bad idea to slowly move away from ETH, because there is a bull market ahead and very high gas for all transactions.

[TheFatherOfAllStorms]

Smells L3 for me if they want to use Apecoin for gas and that will make it more vulnerable in some cases.

[12GAUGE.Admin]

Hi ApeCoin DAO Community,

Our team has reviewed and discussed @ninarong 's AIP Draft and have sent a list of initial questions. We await answers.

Follow this Topic as further updates will be posted here in the comments.

Kind Regards,

-@Facilitators

[ajwarner]

Our intention with our recommendation in this proposal was to build what we believe is the best product design and technological solution for ApeChain. We believe this is a Layer 3 Anytrust chain that settles to the most liquid and widely supported Layer 2 (Arbitrum One). Arbitrum Orbit L3s offer a number of benefits and despite being announced just earlier this year, there are around 20 teams publicly building Orbit chains and another 30+ in either earlier stage development or testnet. These are some of the primary benefits that we believe will give ApeChain an edge:

• Customer Acquisition Cost (CAC)
  • Note: This is especially important for new users being brought into the ecosystem (likely via gaming teams in this context) who are unfamiliar with the notion of paying significantly for bridging.
    • A related question that was raised is whether users will be able to easily get from L1 to the L3 ApeChain. Users will indeed have the option to bridge natively from Eth L1 to the L3 ApeChain. Offchain Labs has built a protocol that allows for bridging from L1 to L3 with one transaction. There is no need to do a separate transaction on Arbitrum One. The unaudited code for that solution can be found [here], and it is scheduled for audit and to be production-ready early next year.
  • The majority of users will enter into the chain starting from a centralized exchange on-ramping solution. While the group aims to identify a CEX to integrate native deposits/withdrawals to ApeChain at launch, there are dozens of exchanges that support Arbitrum One, and most will unlikely add native support for Apechain (particularly in its early days).
  • In the absence of native deposits/withdrawals, launching on top of Arbitrum One will dramatically reduce CAC by eliminating the need to touch L1 in the onboarding process. Please see below to illustrate this point.
    • L2 ApeChain:
      • New users withdraw from CEX to Eth L1, then bridge from L1 to the L2 ApeChain. Cost = ~$2m per 100k gamers (assuming $20 gas fee per user on (a) transfer out of the CEX and then (b) Eth L1 to L2 bridge.
    • L3 ApeChain:
      • New users withdraw from CEX to Arbitrum One then bridge to the L3 ApeChain. Cost = ~$40k per 100k gamers (assuming $0.40 gas fee per users on (a) transfer out of the CEX and then (b) Arb One to L3 bridge.
• Finality Speed / Lower Operating Costs
  • Orbit chains with low amounts of activity can still achieve fast finality speed without paying higher batch posting costs by amortizing this with Arbitrum One traffic.
• Stylus on the base chain (Arbitrum One)
  • This is not relevant yet, but we anticipate that developers are likely to be interested in certain cross-chain messaging systems that may leverage Arbitrum Stylus on the parent chain. This will only be possible if built on top of Arbitrum One as we don’t anticipate Ethereum adding support for something like Stylus in the near future.
• Arbitrum ecosystem and community
  • Arbitrum has one of the largest and most vibrant ecosystems in the entire industry. An Orbit chain would allow ApeChain to leverage the existing Arbitrum ecosystem of apps, liquidity, and community to bootstrap the platform in a cost-effective manner with near-immediate withdrawals from the system.

[ajwarner]

Our group’s perception, based on the dialogue these past months and through conversations with key stakeholders, is that a large contingent of the community wishes to see $APE used as the gas token on ApeChain. The selection of $APE as the gas token is very deliberate and reflects a desire to make it the default token on the network based on historic conversations around $APE. From Day 1, both developers and users of ApeChain should expect $APE to play an intimate role in their experience as part of the payment mechanism.

We envision a vibrant ecosystem revolving entirely around $APE, where users can spend $APE to participate in Ape metaverse experiences, purchase Ape IP-adjacent items, trade other NFT collections denominated in $APE, etc. Thus, while the use of $APE may introduce minor points of friction relative to an $ETH-based experience, we expect that it will give birth to a rich ecosystem of activity with each transaction touching $APE, and should ultimately simplify the user experience by limiting the number of tokens one must manage on ApeChain. Meanwhile, we believe that AnyTrust’s approach to data availability will limit the resulting sell pressure. The reason for this is that the $ETH costs of operating the network are fixed, not variable, and can easily be modeled out when determining the budget of the network.

[ajwarner]

The role of the Security Council is quite different than some of the other councils that you have had in the community. Its role is fundamentally to act as a line of defense in the event of vulnerability. Its purpose is to have a distributed set of individuals that understand the technology and can make technical decisions fairly quickly. This is not a business development, growth, or community role. That being said, you can and should definitely have community participation. We would recommend adopting the Arbitrum governance structure and creating bi-annual elections for different security council seats.

With respect to budgets and compensation, you want to compensate experienced people for the role that they are playing, but the expectation is that it will not be time-consuming. The Arbitrum community pays each member of its council $60,000 a year, but the ApeCoin community can modify it to a level that they feel is appropriate.

[ajwarner]

Absolutely! Our teams are happy to work in tandem with others in the ecosystem and participate in any working groups that might emerge and supplement our efforts. We would be excited to see broad community participation and welcome community involvement. Horizen will spearhead the ecosystem growth efforts ensuring that an accountable, reliable, and community-aligned team is driving the effort forward with a clear strategy in mind on Day 1.

[ajwarner]

The cost would be approximately $1M per year and the Arbitrum Foundation is committed to support operational cost for 3 years. An easy option that ApeCoinDAO has to address this is implementing a small margin to each transaction in order to generate a revenue stream. Doing 100M transactions per year with a supplemental margin of $0.01 would result in $1M in revenue for ApeChain to be the break-even point. There are other mechanisms for revenue generation that would be interesting to explore. For example, there are some teams building Orbit chains that are enshrining creator royalties into the network. The community could consider additional revenue generation utilizing similar mechanisms.

Regarding the Security Council question, we’re certainly happy to discuss this. The original list of members was intended to be committed names. Would be great to have a broader number of members, especially from those outside the core teams in this proposal.

[ninarong]

Please see here for a full post-mortem report detailing the event.

[ajwarner]

Appreciate the thoughtful questions, answers below!

[Question 1] Our proposal is for ApeChain to be deployed with Arbitrum Orbit settling to Arbitrum One, through which developers are granted full permission to modify and adapt the Arbitrum Nitro codebase to meet their needs. The license granted for Orbit chains is both perpetual and recursive:

• Perpetual — nobody can ever take the software license away from you

• Recursive — your Orbit chain can itself host other chains governed by the same license.

ApeChain will also have access to all future upgrades to the Arbitrum Nitro stack, which ApeCoin DAO will have the option to implement on ApeChain, though there is no obligation (another example of autonomy).

More details on the Orbit license can be found here.

[Question 2] The majority of web3 game development is occurring within the Ethereum ecosystem, and we expect this trend to continue. As one of the premier NFT communities on Ethereum, we believe it would be an unforced error for ApeCoin DAO to deviate from Ethereum, which is why we identified Ethereum alignment as a core tenet of the proposal. One thing that makes Arbitrum technology unique in the Ethereum ecosystem is the Stylus protocol. Stylus allows developers to program in more familiar languages (Rust, C, C++) and have full interoperability with the EVM. This means that developers can interact with Ethereum in more familiar ways. We think particularly with gaming, this will be a major driver for adoption.

At the time of writing, it costs $2+ to transact on Polygon zkEVM, $0.15 on Optimism and $0.20 on zkSync. AnyTrust’s use of a DAC reduces gas costs to around $0.005 on Arbitrum Nova, 10-100x cheaper than alternative stacks within Ethereum. As gas fees are of chief concern for web3 game developers, leveraging AnyTrust will help ApeChain to attract teams that wish to align with a strong gaming-oriented brand while also delivering a best-in-class user experience on Ethereum.

[Question 3] This seems to be targeted toward the community, but here is our take. Utilizing a RaaS plays a critical role in the maintenance of the network and we proposed engaging a RaaS for this endeavor. We think their role is necessary, but not sufficient. Further, we actually believe that for Apechain to succeed, even the role of Offchain Labs is insufficient. It is critical that there is a collection of people who are building and driving the execution and vision for Apechain. That is why we were so excited to collaborate with Horizen Labs on this proposal, an organization that has been building within the Ape community since the beginning.

[Question 4] The Arbitrum Orbit SDK is extremely customizable and upgradeable. Stylus also expands the toolkit for developers allowing them to deploy contracts in Rust/C/C++ via the Stylus VM that are fully interoperable with standard Solidity contracts. The on-chain, self-executing governance design is also unique to Arbitrum and helps ensure that ApeCoin DAO maintains control over the chain and can continue to modify it as it sees fit. Additionally, the other options mentioned do not inherit the security of Ethereum which we identified as a core tenet of this proposal.

[Balou]

Thanks! @Feld is the best person to speak with re. Boring Security.

[bigbull]

Appreciate all the detailed answers.

[12GAUGE.Admin]

Hi ApeCoin DAO Community,

@ninarong has responded to our questions and has provided consent to share them in this forum for the community.

1. Is the Ape Foundation expected to engage in any of the steps of the AIP implementation? If so, please specify the steps and elaborate on how it is expected to work.

   • Horizen Labs will work with the Special Council and Ape Foundation to facilitate the collection of community input on various key decisions (i.e. revenue policy, on-chain governance structure, %-share for DAC participants, potential features to include, etc.). Our collective group will then present a proposal to ApeCoin DAO for ApeChain’s configuration based on this feedback, which the DAO will vote on.
   • The specific steps can be found below:

     • “Horizen Labs to collaborate with the ApeCoin DAO and Ape Foundation to formalize ApeChain’s governance structure.”

     • “Horizen Labs to collaborate with the ApeCoin DAO and Ape Foundation to establish a revenue policy for ApeChain, including a %-share for DAC members, and a potential supplemental margin that would create a revenue stream for ApeCoin DAO.”

     • “Offchain Labs and Horizen Labs to collaborate with ApeCoin DAO and Ape Foundation to gather feedback from the community for potential features to implement on ApeChain. For example, the option to hardcode creator royalty enforcement on the chain.”

2. Would the Foundation be responsible for compliance checks and administrative duties during various governance processes, for instance, the Security Council election?

   • Potentially, yes. For reference, the Arbitrum Foundation plays a similar role in the governance process for Arbitrum’s public chains. Before approval, Security Council members must pass a standard KYC check. The Ape Foundation is likely already involved in various pre-existing ApeCoin DAO processes and may wish to implement similar measures to ensure compliance for ApeChain.

3. Of the $0.005 Arbitrum Nova (AnyTrust-DAC) transaction fee outlined, would 100% of that fee be reserved for DAC members?

   • The $0.005 fee referenced relates to the typical cost of a transaction on Arbitrum Nova. The ArbitrumDAO governs Arbitrum Nova, and at present shares around 20% of the base fee payment with DAC participants. This parameter can be modified on Arbitrum Nova by the ArbitrumDAO as it sees fit. ApeCoin DAO would inherit this governance structure over ApeChain, and will always retain control over the specific percentage share for ApeChain’s DAC.
   • The gas price for ApeChain can be modified to make transaction fees for users lower or higher than the $0.005 example for Arbitrum Nova depending on whether ApeChain is looking to add additional margin (increase tx fee) or offer users additional cost savings (decrease tx fee).
   • As the governing body of ApeChain, ApeCoin DAO will retain full control over gas price configurations and revenue share percentage.

4. Who is responsible for the selection of the RaaS partner? Have they been chosen yet? If so, please provide their details.

   • A RaaS has not yet been selected. Our collective group would select one in the early stages of the development process.

5. Please provide proof of consent from the members of the DAC (Magic Eden, Darewise Entertainment, LayerZero Labs, and Yuga Labs) and their willingness to cooperate in the implementation of this proposal.

   • We are in the process of gathering written proof of consent beyond pre-existing agreements and will provide it as soon as it is ready, likely by the middle of next week.

6. After the three years of funding from the Arbitrum Foundation, who is expected to request funding and oversee this proposed ApeChain program?

   • After the first 3 years of operation, the ApeCoin DAO would be responsible for the financial obligations associated with maintaining and operating ApeChain. If ApeChain is successful, then fees should act as a revenue model to cover the cost of running the entire system and therefore we do not request funding from ApeCoin DAO.

7. What is the estimated annual cost to operate and maintain ApeChain, its Security Council, Rollup-as-a-Service provider, and the Block Explorer?

   • The cost would be approximately $1M per year and the Arbitrum Foundation is committed to support operational costs for 3 years.

8. Is there a security audit plan in place, and will you share the audit report with the ApeCoin DAO?

   • For AnyTrust chains that utilize a custom gas token, we can share an audit report with the Ape Foundation or Security Council under NDA, and will be able to share the report publicly in the near future.

9. [Questions about Adaptive OFT]

   • A) What would an officially sanctioned Adaptive OFT mean for ApeCoin tokens and the current ApeCoin smart contract?

     • An officially sanctioned Adaptive OFT would take its place as the official, trusted, and recognized cross-chain version of $APE. This official sanctioning also would receive technical support from Horizen Labs in conjunction with LayerZero.
     • This would open up additional opportunities, including, but not limited to:
       • Seeding $APE in multiple new DeFi ecosystem, helping to further drive utility and demand for $APE
       • Allowing for the build of an official “ApeBridge”
       • Open up opportunities for cross-chain voting (i.e. users could vote w/ their $APE regardless of it sitting on Ethereum, Arbitrum, EON, ApeChain or any other LayerZero supported ecosystem.
       • The ability to easily on-board applications built on top of LayerZero’s fabric onto ApeChain, further bolstering its ecosystem.

   • B) From the OFT Quickstart guide, “This standard works by burning tokens on the source chain whenever an omnichain transfer is initiated, sending a message via the protocol and delivering a function call to the destination contract to mint the same number of tokens burned, creating a unified supply across all networks LayerZero supports.” Would any of the original ERC-20 ApeCoin tokens be burned in order to participate in this proposed ApeChain?

     • No original tokens would be burnt. Because $APE is a pre-exisiting, already deployed ERC20, the OFT deployment would be via V1 (you can learn more about V1 here). This would mean that on first transfer off of Ethereum, the $APE tokens would be locked and then minted on the receiving chain. Further transfers between chains would involve a burn and mint, but when a token was transferred back to Ethereum it would be unlocked there. For example:
       • APE is locked on Ethereum → APE is minted on ApeChain → APE is burned on ApeChain → APE is minted on Arbitrum → APE is burned on Arbitrum → APE is unlocked on Ethereum

10. How and where would you facilitate community discussions to collaborate with ApeCoin DAO and Ape Foundation to gather feedback for potential features to implement on ApeChain?

    • Horizen Labs will organize forums for community discussion in conjunction with the ApeCoin DAO, Ape Foundation and other stakeholders including, but not limited to:
      • Existing ApeCoin communication and community channels, including Discourse and Snapshot.
      • Telegram and Slack groups as desired/needed.
      • Regular working groups and video calls for discussion.
      • Regularly scheduled community AMAs on Twitter, etc.
    • The group is committed to consistent and open communication with the Special Council, DAO community in general, and the Ape Foundation and will be flexible and open to ways to continuously increase communication between all stakeholders.

11. Do you provide consent to share these questions with the community in this forum?

    • Yes.

A DAR package is being worked on and upon completion this AIP will move into Administrative Review. Follow this Topic as further updates will be posted here in the comments.

Kind Regards,

-@Facilitators