Replace NFT-based APE Staking

Withdrawn AIPs
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kodama.eth & I (David) collaborated to find a path to improve APE Staking to be aligned by all ApeCoin parties. We provide high level thoughts for the following discussion ahead of voting on next Thursday.

PROPOSAL NAME:

Replace NFT-based APE Staking

PROPOSAL CATEGORY:

Ecosystem Fund Allocation

ABSTRACT:

While it may first appear as a benign distribution strategy to distribute $APE to community holders in 2022, $APE Staking has been slowly diluting value from BAYC/MAYC/BAKC assets through a concept similar to “ex-dividend.” Despite Yuga’s arsenal of incredible resources (cash holdings, community, Yuga Labs product team, etc.), $APE has been completely mispriced relative to peers in the GameFi narrative, while Yuga NFTs continue to bleed in a perpetual downward trajectory as it loses its status as a “status” asset. To change course from its current trajectory, drastic measures are needed to revive the BAYC narrative in the public once again.

We propose, with the support of other key community members, that ApeCoin immediately vests of all $APE distributions related to Yuga NFTs to cleanly segregate the NFT value proposition with ApeCoin speculation with a lump-sum of 60% of expected APE proceeds (proportionally to BAYC/MAYC/BAKC).

With the surplus APE left (40%), we recommend using the existing Horizen Labs emissions to incentivize longer-dated APE-locking and continued flexible vesting

The following proposal delineates the logic behind the action, research into distribution logistics (arriving at the least disruptive methodology for the delivery of the remaining APE to stakeholders), supply-sided mitigants, and some proposed paths to maximize token & NFT holder-value into 2024.

BENEFIT TO APECOIN ECOSYSTEM:

  1. High level summary about why NFT staking is currently untenable

  • Much of the logic is delineated in this following thread: https://twitter.com/KtkZergs/status/1739905205582614551

  • To summarize, there is very little economic purpose for conjoining the two assets together other than the belief that that the whole is greater than the sum of the parts. This thinking, however, has proven to be not true over time:

  • Ending value destruction for BAYC NFTs: Due to a concept similar to ex-dividend, the NFT is perpetually losing value every time a dividend is outputted. This perpetual negative has significant consequences for a “Veblen” asset that relies on upward price as its primary quality (branding/celebrity, status items, identity, etc)

  • Ending value destruction for $APE: As the APE coin is reflexively tied back to the NFT value, it creates a negative spiral. Regardless of the tokens high inflation, it’s hard to find a specific identity to what ApeCoin represents when you buy exposure into the token(the Otherside universe by Yuga Labs). Not all NFT holders are gamers, and not all gamers are NFT holders.

  1. Most aligned way to remove NFT-based APE staking

We recently had some conversations about the very logistics related to the distribution of the APE with the least amount of disruption. Given the construction of the Horizen contracts, we did not want to introduce much additional processes and wanted to be as least disruptive to the process. There is a reliance on a “top up system” - the next available window being March 21st which wasn’t to our liking in terms of flexibility. It also creates undue pressure to modify positions to optimize for a short-term accelerated staking/vesting distribution. In order to avoid any coordination processes, the conclusion was that the best delivery system would be the original Claims system with a simple lump-sum distribution to all BAYC/MAYC/BAKC holders.

We propose, however, to incorporate a discount to this asset at a fair annualized discount rate. A ~30% annualized rate (or 40% discount across two years) is a generously low rate for a speculative asset, but the remaining amount will not be burned. Rather it can be used as incentive to help alleviate any new sell pressure by creating a supply sink.

A. Clean separation: Claims-based distribution of 60% of remaining proceeds.

  • Incorporate an annualized discount rate (~29-30%) on the lump-sum to help reduce immediate sell pressure
    • use the original Claims method from the original distribution for this lump-sum distribution

B. Reduce sell pressure: Use remaining 40% for time-locked APE yield

  • Use the remaining APE (from the discount) to help reduce the sell pressure for new & existing participants who continue to believe in ApeCoin and the Otherside ecosystem
    • Use the existing Horizen contracts for APE-only staking
    • Based on preliminary conversations with the Horizen team directly, the process has some contingencies: the foundation “top-ups” APE into the distribution contract with a specific # of tokens and it should work automatically
  1. The new staking will reward long-term holders of ApeCoin, reduce the circulating supply and mitigate sell pressure.

Including the 40% surplus APE the total amount available to APE-only staking would be the following:

  • 29.0m for 2024
  • 14.5m for 2025

We propose to divide it between the two APE pools as follows:

2024 29000000 Distribution
Locked APE 20300000 70%
Flexible APE 8700000 30%
2025 14500000 Distribution
Locked APE 10150000 70%
Flexible APE 4350000 30%

Locked APE pool: the longer you lock your Ape (e.g. 6m,12m,18m), the more rewards you get. Rewards are auto-compounded and therefore cannot be sold during this period. This not only rewards long-term holders the most but also results in a reduction of the circulating supply and mitigation of sell pressure.

Flexible Ape pool: remains unchanged.

PLATFORMS & TECHNOLOGIES:

  • Original APE airdrop Claims process (already exists)
  • Horizen APE staking contract (already exists)
  • APE locking system (off-the-shelf solution) - we are currently exploring a few options. This is an incredibly common contract design but if anyone has any decent references, we can pull some reliable & tested solutions for a smooth integreation.

STEPS TO IMPLEMENT & TIMELINE:

  1. Voting: Thursday, January 18th
  2. Distribution: February 1st
  3. Deployment: February 1st
  4. Launch: Feburary 1st

OVERALL COST:

This should bear no cost to execute the modifications as the proposal stands.

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Ehhh… David. Welcome welcome.

Interesting proposal; and been waiting to see something similar. Unsure that the current timeline listed matches standard DAO norms, but other than that I’m quite eager to see the community’s response to this.

AC

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Thank you- didnt have much of a timeline designed since I assumed there might be smart contract-based recommendations (which affects lead time). Can assume that it’s a to-be-determined timeline for now.

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Can you ELI5 the clean separation aspect. You want to take 60% of the remaining APE distribution to do a one-time lump claim? What is the annualized discount rate?

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Welcome to the forum David! So basically any NFT ape holder (BAYC, MAYC, BAKC) would be able to claim a % of ApeCoin on day 1 correct? How much ApeCoin would that be per single NFT, if any?

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Do you have any concerns over what a massive one-time payment like that might do to the $APE markets? How it will influence the actual NFT markets when people know they can get a large lump payment for minimal staking time?

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Hey, thanks for the idea!

So I’m clear, you’re proposing the one time claim would be for all BAYC/MAYC/BAKC holders? If so I’d struggle with that, long term believers in apecoin have been staking and many intend to be patient - if there is a one time ‘buy out’ it should go to that group? Maybe I’m misunderstanding.

Cheers.

3 Likes
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The proposal provides a insightful solution to the challenges in Yuga Labs’ NFTs by suggesting the separation of APE distributions from the NFTs. The distribution strategy and incentive for long-term APE locking are promising, and the clarity in the timeline, along with the absence of additional costs, enhances the proposal’s viability. Very well done.

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Yes, so NFT holders take a discount to the amount they were allowed to claim, but they “pay forward” that discount to the rest of the APE holders for a) present valuing the distribution, b) ensuring redistribution back to the original APE holders, c) helps with incentivizing re-lockup and ensuring the APE distributions are servicing APE holders across a longer duration and d) wider distribution should also help with the concetnration issue of the airdrop-claim delivery event

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Originally I wanted to explore an accelerated vesting period by looking into the Horizen contracts, but that carried a lot of coordination issues - so its a logistical matter / devil was in the details.

First off, if we do continue with the top-off (where APE is sent to the contracts which automatically distributes it) it needs to modified, and would take months (next top off is March 21st I believe). Secondly, this also affects a lot of the community coordination across multiple staking contracts and platforms (even dormant NFTs held in some escrow platforms). Having the original claims (per NFT) was rather well received by the community, and is the least disruptive seperation of the ERC721s to ERC20s, which is the ultimate goal. There is long-term value creation in its separation, and I believe this is the locally best solution (least development time as these are proven delivery methods, and least problematic economically as we redistribute the rewards to the APE holders over time).

Pre-event market expectations: I think knowing that a one-time payment in fact raises the value of the NFT themselves since it actually acts as a proper ex-dividend (single event, so the price should increase knowing it goes up). This should also positively affect APE as well as the NFT raises in price in that anticipation.

Post-event market expectations: there is naturally short term post effect, but long term value alignment. We recommend introducing APE locking to help absorb the supply, but we expect that the run up in NFT prices leading up to the event should help with the reflexive APE pricing, along with the supply sink being created with APE lock-up.

Long-term alignment: a number of catalysts are coming up with Otherside, but the fact is that APE is never ever mentioned in any GameFi narrative in the public forum. The narrative is heavily muddled (am I buying an NFT narrative… or a GameFi?). APE has a chance to reenter into the scene with a clear identity. A clear separation between the NFT and APE is the 1st path toward getting index into bigger narratives.

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It’s more an accelerated vesting not a buy out, and that vesting is being discounted at a rather high rate, (average 29% per annum, or 40% across two years). Only 60% is given to the NFT holders as a method to proper separate the two assets.

That held value (remaining 40%) is being redistributed to long term APEcoin holders so they can have exponentially higher returns if they continue to believe in the asset via lock staking.

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Yes that’s the idea. It was one of the more welcomed methods of distribution (as the 1st distribution) - far better reception than the current staking, and the least disruptive method that wont break contracts / require modifications of existing contracts.

Because its reallocated to ALL holders, the seemingly higher “unlock” is damped by a) the far broader distribution and b) discount rate and c) APE locking.

A timely process is necessary for positioning both assets in preparation for whats to come - otherwise we keep on letting value leak from both assets. #plugtheleak

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Carrying over a discussion from Twitter:

Staking proof-of-work-weighted distribution

Do you think that a time-weighted average staking period of your NFTs as a “proof of work” is the correct metric for present-value distributing the remaining APE? Instead of just a flat distribution to just the NFT holders who are not all fully staked

It does make sense from your perspective as not all NFTs are staked/havent been staked. It would also allocate the most rewards to those who are least likely to sell.

Lets do an assumption here:
of the 100% left to stake per NFT-tied allocation, I recommend discounting to the present 60% (in the proposal)

Now within that 60%, I’m also all ears for the distribution - which is why i have a public forum for it

Perhaps it could be
Address-tied: (time-weighted staking per NFT across history) * 70% of the remaining amount
NFT-tied: 30% to all NFT holders

The reason why the latter (30%) is because I still want to help elevate the value of ALL apes leading up to the event as the ex-dividend concept still applies

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Hi @david_metastreet - loved your writeup, agree with your thesis in theory.

Drawing from your experience and background, are there any potential adverse effects that you (& team) are aware of that may come about from this de-tethering? - I know its probably a tired mental exercise but humor me with a scenario (if any) that you deem to be the most probable even if the chances of it happening are low

Would there be a window to claim?

How do we solve the use case of users who are away and/or unaware of this claim but have their assets collateralized in a lending protocol? - could this scenario be gamed? if yes, is there an elegant solution to prevent this?

thanks!

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While I think $APE was one of Yuga’s single largest mistakes (alongside The Otherside), I do not see a massive buyout being a positive event. It will flood the market with liquidity which will be dumped and moved into other, better performing assets. At least IMO.

Just end the staking. There is no need for a complex, expensive buyout.

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I see. How about just ending staking for the NFTs and re-allocate all to the Ape only pool with locking periods of x amount of months/years? That way NFTs and Ape get “separated” and their value is on it’s own as you suggest.

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NFT assets only accumulate apecoin if they are staked - non staked assets have no tie to the coin so I think that aspect would need some work.

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Your perspective on rewarding long-term NFT and $APE holders, especially those who fully stake or co-stake on platforms like benddao, makes sense. Emphasizing incentives for sustained commitment could indeed contribute to a more stable and loyal community. Suggesting a higher allocation of $APE rewards for these specific holders aligns with your goal of encouraging long-term engagement and discouraging quick flips. Additionally, proposing a one-time unlock with a substantial allocation for those who have committed to long-term strategies could further enhance the overall effectiveness of the proposed changes.

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With all due respect but It’s kinda funny that this idea of “simply removing all rewards for bayc / mayc / makc holders” mostly comes from people that don’t hold any, or atleast no significant amount, of these nfts. While I see the merit in the proposal to separate NFTs and $APE values, it’s crucial to consider the expectations of our community members who invested in these NFTs with the anticipation of receiving $APE rewards for a period of at least 3 years.

Abruptly removing these rewards entirely may be perceived as backstabbing our loyal community members, and it raises moral concerns. Personally, I would find it challenging to continue supporting the club and DAO if such changes were implemented without taking into account the impact on existing holders.

I believe we can find a middle ground that benefits all of us, and this proposal is not a bad start. Perhaps we can explore adjustments to the proposed idea to better accommodate the loyalty and commitment of our existing community members as outligned in my post above.

I do believe max leverage and blur farming has contributed to the current situation we are in, and we could, together with the help of yugalabs, act as a counterweight by providing extra utility/value to our loyal and longterm members.

As outligned in the proposal, these are also the members that are least likely to simply dump their $ape allocation onto the market.

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The interest rates given are too high and are ruining the token economy. We must reduce these rates or these rates should be given for locking for at least 4 years. Unless the DAO treasury can generate income for itself, it will have a token that is constantly sold and eventually there will be nothing left to sell. Because what you have will be worth nothing.

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