Why Ownership is Vital to the NFT Community Following the Sale of CryptoPunks

When Yuga Labs, “the world’s premier NFT brand” and the creators of Bored Ape Yacht Club (BAYC) and Mutant Ape Yacht Club, purchased the famous NFT collection, Crypto Punks, and Meebits, from Larva Labs, it appeared to be a ‘match made in heaven’. “Yuga Labs are the best in the world at what they do, and are the ideal stewards of the CryptoPunks and Meebits,” said the co-founders of Larva Labs, Matt Hall and John Watkinson, who created CryptoPunks: “In their hands, we are confident that they will continue to be vital, thriving projects in the emerging decentralized web.” Others in the CryptoPunk community aren’t so sure this is good news.

As DCinvestor pointed out, what’s to prevent Yuga Labs from selling the Crypto Punks IP to Apple or Disney at some point in the future? This difference of opinion neatly highlights a key tension currently in the web3 as a whole, between the passionate ownership rights of the NFT community and the drive by startups and VCs to secure their place in a multi-billion dollar market. Consider the words of Yuga Labs CEO Nicole Muniz, who is just as keen to allay the features of her BAYC community members: "We’re honored to take on the stewardship of these brands and the communities behind them and are very excited to build alongside CryptoPunks and Meebits holders as we step into this new world. That said, we want to make it abundantly clear to Yuga’s existing community that the BAYC ecosystem will always stay at the center of our universe.”

So, what’s the significance of the transfer of full commercial rights from the CryptoPunks NFT holders’ point of view? As Punk6529 explained on Laura Shin’s Unchained podcast the news was “bittersweet” for holders, as they got one thing they liked and one thing they didn’t like. The thing holders like was that CryptoPunk holders have the same commercial rights as BAYC holders, which represents “a substantive improvement in the rights of the punt holders” according to Punk6529. The part they didn’t like was having to be part of the same family of NFTs as Bored Apes: “The punks are the punks, right? The punks stand alone. The punks aren't commercial guys trying to commercialize these things. And suddenly, it turns out that Larva Labs sold the rights to a very specific commercial entity, and this has caused a lot of discomfort.” And with that the worry that as part of a highly commercial entity there’s nothing to stop it being sold to a Facebook or Disney further down the road, he added.

In an interview with Corrales Cachola regarding the Yuga Labs purchase, a previous expert guest in the future of NFTs AMA hosted by BigONE, said he was worried about the purchase of CryptoPunks, and also concerned that there seemed to be so little concern within the NFT community. “The punks really represent; I mean they're punks. They are the epitome of decentralized culture of anti-establishment anti trad art.” Cachola said it felt it was strange there was so little said within the punk’s community at the news. But maybe it was the power of the ApeCoin drop, which effectively silenced people, he suggested. As Punk6529 said in his interview with Laura Shin, “It's one thing to be the counter cultural, crypto rebels. And it's another thing to be the fourth collection in a conglomerate backed by venture capitalists that are going to be clearly commercial. It's a different narrative.”

Clearly, these concerns are grounded in part by the positive price action caused by the sale on March 11 which also caused a spike in the floor price of Larva Labs-created NFTs like Meebits. A few days later, the $APE token, primarily aimed at BAYC and MAYC holders, was released, with BAYC holders receiving up to $100,000 in $APE tokens and MAYC holders receiving between $20 and $30,000 in $APE tokens. Upon its initial release, the $APE reached an all-time high of $39 before plummeting to its current price of $13. Although it is important to note that the $APE token has not been directly affiliated with Yuga Labs, but is rather created by ApeCoinDAO, an organizational unit governed by token holders. Indeed, the claim made is that it is neither a security nor run by Yuga Labs. That said it is not out of place to say there is some relationship with Yuga Labs, especially given the tokenomics of $APE in the whitepaper released by ApeCoin DAO, with Yuga receiving a significant cut of the entire $APE supply.

Finally, Yuga Labs also raised $450 million in a round led by venture capital firm a16z, bringing the company's valuation to around $4 billion. Clearly Yuga Labs' success with Bored Ape was not a one-time occurrence, and they have much larger goals in the crypto space. The metaverse concept, which has gained traction since Facebook changed its name to Meta, is at the heart of Yuga Labs' plans. After completing its most recent funding round, Yuga Labs announced that it intends to use the majority of the funds to power its NFT-based gaming metaverse known as Otherside. According to BAYC co-founder Wylie Aronrow, the goal of Yuga Labs is to create an interoperable world that is gamified and completely decentralized. Yuga Labs' position at the forefront of this movement would have a significant impact on the next bull run for cryptocurrencies and NFTs, no doubt a key reason for the level of VC funding.

The emergence of new types of web3 ownership

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T**he current controversy over the purchase of Crypto Punks IP by Yuga Labs, which is currently reported to be in funding talks with A16z at $5B valuation, the role of VC investment in this space comes with both opportunities and risks, Lian observed. While Yuga Labs has now acquired a dominant position in the NFT market, and top VC interest along with that, there remains the challenge of keeping diverse communities onboard. I believe that the most powerful NFT projects have a deep motivation to build strong communities, which is not just a matter of saying you are community-led, but as with Yuga Labs by ensuring community ownership, said BigONE Chairman Anny Lian. “There is a lot of hype in the crypto market around DeFi and particularly NFTs right now. But one essential factor that sets the projects apart is the strength of their community. I think that community aspect needs to be clearly laid out when seeking VC investment,” Lian said.

While in the world of startups you traditionally started with a product or service and then sought to find and acquire customers in the DeFi and NFT world, these rules have changed. Indeed, during the ICO boom days when a white paper and a founding team with advisors was enough to gain funding, in 2022 that’s certainly no longer the case. While a strong project team is still essential, just as important is a clear vision of what the project is aiming to achieve together with real utility, said Lian. “There’s a lot of talk about projects being community-focused but what does that mean? It’s certainly true that building a community cannot just be based on a series of airdrops, otherwise the community will soon disappear once the incentives dry up. I believe there needs to be, along with an engaged community, a sense that the community has a real stake in the startup through its governance and its tokenomics,” Lian added.