The launch of Apecoin attracted a lot of attention from investors in the last bull market. The token price was up 1700% after being listed on Binance and reached its ATH of $27.6 seven weeks later (up 2660% from the listing price)-this is evidence of the hype of Apecoin. However, their proposal for a staking program seems to be inappropriate. Here is the full story.<h2>Apecoin overview</h2>ApeCoin is a type of Ethereum blockchain build-it-yourself coin known as an ERC-20 token. It fortifies the decentralized APE community, which is at the forefront of Web 3.0. The ApeCoin DAO is a decentralized autonomous organization (DAO) in which all APE token holders have the ability to vote on governance issues. They are in charge of allocating the Ecosystem Fund, establishing governance rules, selecting initiatives and collaborations, and so on. Following ratification of the proposals by DAO members, the APE Foundation will carry out the community-led governance decisions.<img src="https://cdn.builder.news/news/11ed08c6a1259900a8e6023f659fee92.jpg" alt="APEcoin" title="Apecoin" width="600" height="339">The APE ecosystem consists of the ApeCoin community as well as any companies or services that utilize APE. Yuga Labs is primarily known for creating the Bored Ape Yacht Club. It will be a community member in the ApeCoin DAO and will use APE as the primary token in new activities. At the time of ApeCoin's launch, holders of Bored Ape Yacht Club and Mutant Ape Yacht Club NFTs were entitled to claim a combined 15% of the ApeCoin supply (150 million tokens of the 1 billion total tokens in supply).<h2>Apecoin’s tokenomics</h2>The max supply is 1 billion APE. There is no function that allows minting or burning so the total supply of APE is always 1 billion:<img src="https://cdn.builder.news/news/11ed08c6a1264ec4a8e6023f659fee92.jpg" alt="Apecoin tokenomics" title="Apecoin tokenomics" width="600" height="177"><ul><li>62% ─ for Ecosystems’ funds, where 150 million tokens are for BAYC/MAYC Airdrops, and 740 million tokens are reserved in DAO Treasury.</li><li>16% ─ for Yuga Labs and Charity, where 150 million tokens are for Yuga Labs, and 10 million are donated to the charity.</li><li>14% ─ for Launch contributors, with a total amount of 140 million tokens</li><li>8% ─ for BAYC founders, with a total amount of 80 million tokens</li></ul>So with the ~$4.3 current price of APE at the time of this article being written, APE DAO Treasury holds about $3.2b. We will discuss this later.<h2>The misuse of the term “staking”</h2>Back in the past, when Peercoin was the first coin to use POS (Proof Of Stake) protocol, it created a new trend for the new blockchains to use this consensus. These POS blockchains share one common method: Staking. Staking back then had a purpose. Owners of the coins from these blockchains would pledge their currencies as collateral in exchange for the opportunity to validate blocks and would be paid for doing so. As a result, staking compensated users for risking collateral and performing work: participating in functions required for the network or protocol to continue operating.<img src="https://cdn.builder.news/news/11ed08c6a1265f00a8e6023f659fee92.jpg" alt="How staking works in the proof-of-stake consensus mechanism" title="How staking works in the proof-of-stake consensus mechanism" width="600" height="401">The term "staking" has been repurposed and modified over time. It is now more like a “stop the selling” tool: the owners will now just “stake” their coins and receive the reward of the same coins with no actual reasons. In other words, the whole process is like “ Just stake your coins, don’t sell them and you will get rewards even though your staked coins literally do nothing”.These contemporary staking methods serve no purpose in the ecosystem of which they are a part. They don't do anything practical or technically. They do not strengthen an ecosystem. They are a shell game, using the name of something else to conceal their true objective, which is to encourage less selling.When POS mechanisms give stakers rewards, they are purchasing chain security. It's a good use of equity. DeFi projects that offer liquidity mining programs are purchasing growth and TVL. It can also be a worthwhile use of equity, depending on how the program is designed. It appears worthwhile to spend equity on things that make the protocol more sustainable, larger, or secure.However, these new "staking" methods (which do nothing but pay users additional coins for staking) give away equity for no reason other than to reduce selling pressure.&gt;&gt;&gt; Related articles:&nbsp;<ul><li><a href="https://www.builder.news/crypto-insights/6-best-crypto-staking-platforms-pGT6T" alt="6 best crypto staking platforms in 2022" title="6 best crypto staking platforms in 2022" target="_blank" rel="" class="">6 best crypto staking platforms in 2022</a></li><li><a href="https://www.builder.news/crypto-insights/idle-money-for-defi-lending-and-staking-what-you-need-to-know" alt="Idle money for DeFi lending and staking - What you need to know" title="Idle money for DeFi lending and staking - What you need to know" target="_blank" rel="" class="">Idle money for DeFi lending and staking - What you need to know</a></li></ul><h2>Apecoin Staking Plan</h2>As mentioned said above, there are a lot of projects that now use staking as a way to diminish potential sellers. Apecoin is a classic case with its AIP-5 staking proposal written by Animoca - a famous venture capital.<img src="https://cdn.builder.news/news/11ed08c6a1266a4ca8e6023f659fee92.jpg" alt="Apecoin staking pool allocation" title="Apecoin staking pool allocation" width="600" height="414">Here is the purpose of the staking program from the proposal: to make ApeCoin the preferred token of web3 by incentivizing early NFT adopters and existing and potential ecosystem participants to participate in activities benefitting the APE Ecosystem.The whole proposal is very complicated but it is technically the following: People who stake their ApeCoin during the next three years should receive 17.5% of the total supply of ApeCoin. If they also own BAYC/MAYC/BAKC, we should give them separate percentage returns.<img src="https://cdn.builder.news/news/11ed08c6a1267a26a8e6023f659fee92.jpg" alt="Apecoin staking pool types" title="Apecoin staking pool types" width="600" height="363">Here are what we can conclude from the proposal:In the purpose part, the phrase “incentivizing to participate in activities” itself is really vague. How can one APE holder be more motivated to participate in activities benefitting the APE ecosystem while all he/she needs to do is to stake their coins, sit back and do nothing afterward? The answer is simple. The staking does not incentivize any participation at all. The whole process is about preventing the APE holder to sell when the vesting happens.At the time when the proposal came out, DAO Treasury held around $7b. Animoca's proposal called for APE holders to get $2.6b in free tokens (37% of the DAO's remaining tokens) over the next three years. This equity could be used for a variety of purposes: it is now valued at $2.6b. ApeCoin might gain a lot of value, allowing it to construct a sustainable ecosystem and attract new, external funding.From the outside, it may appear like the DAO is spending more than a third of its remaining equity to bribe people not to sell while the early contributor coins are in their early unlock phases.When you consider the supply/demand dynamic that will result from this staking program, however, this appears to be more of a conspiracy theory than a practical malicious approach. There is now 15% of supply liquid on the market. In just the first year, this inflation/emissions program will increase the volume of supply on the market by 75%. Nonetheless, there is little possibility that it will raise ApeCoin demand by 75%. As a result, the staking scheme may appear to be detrimental to the financial interests of locked-coin holders.<h2>What Apecoin DAO can do with their treasury other than the so-called “staking for reward”</h2>The primary goal of Apecoin is to become the main currency of Web 3. However, this approach of using this proposal does not seem to make progress. They can, instead, use their fund to solve the existing problems and users’ needs in their ecosystem. Here are the 3 things they can do:<ul><li>Developing an NFT exchange: Why is OpenSea the most popular Bored Ape exchange? In the last year, BAYC and MAYC traders spent 20,000 ETH on OpenSea fees. Every year, more than $60 million leaves the ecosystem.They should spend money to develop their own NFT exchange.</li><li>Enabling their NFT holders to lend their NFTs: Holders of BAYCs, or NFTs in general may wish to establish a line of credit on their NFT while maintaining ownership. Can ApeCoin DAO establish itself as the major NFT lending marketplace?</li><li>Enhancing Bored Ape’s security: Getting hacked is another problem of Bored Ape. Why are Bored Ape users constantly being hacked? What educational materials are required to assist persons in exercising more effective self-custody? Could ApeCoin DAO offer an appealing custody service?</li></ul><img src="https://cdn.builder.news/news/11ed08c6a1267e76a8e6023f659fee92.jpg" alt="apecoin staking" title="Apecoin and their misuse of the term Staking" width="600" height="401">The DAO's equity should be used to provide more value for APE ecosystem members and potential users. It should address real issues that people in the NFT community are experiencing. But if they still insist on a staking program, there are 3 scenarios in which the staking program should be:<ul><li>If ApeCoin DAO wants the staking program's purpose to be to attract new members, a legitimate staking program can include paying ongoing payouts to NFT holders within the APE ecosystem. The APE ecosystem may also acquire additional NFT collections and issue APE to these communities.</li><li>If the purpose of the staking program was to promote the liquidity of the BAYC ecosystem, then APE emissions would be issued to those who provide LP in APE/WETH markets, as well as those who provide liquidity to NFTX-style pools and others.</li><li>If the staking program's purpose was solely to pump prices, it would necessitate time-locking assets off-market, rewarding longer time-period locks with bigger payouts, and strangling supplies off-market for as long as possible.</li></ul><h2>Conclusions</h2>Staking methods should be developed to serve the ecosystem's aims. They should be used to reward portions of a product, community, or network that demand users to undertake effort or take risks.Instead of giving it away as an interest rate incentive for not selling, the Treasury should utilize it to incentivize people to take risks, work, and develop the community.Spending 37% of the budget on controlling emissions without utility or value capture is not only pointless but could be actively damaging to the APE ecosystem's long-term prospects.We should have objected to the repurposing of the phrase "staking" from a reward for work in a consensus mechanism, with the risk of losing collateral, to the present "Stake so you don’t sell," but it's probably too late now. The phrase is now intrinsically false and can signify a variety of things.&gt;&gt;&gt; Check out <a href="https://www.builder.news/" alt="Builder.news" title="Builder.news" target="_blank" rel="" class="">Builder.news</a> for more crypto insights.Written by Blue Pine<div class="pr-block-special">Disclaimer: This article is intended for and only to be used for reference purposes only. No such information provided constitutes advice or a recommendation that any investment or trading strategy is suitable for any specific name.</div>

A brief overview of Apecoin, the organizations behind it, and its token allocations. Investigate its proposal for a “staking for reward” program and other things they can do instead of launching it.

Apecoin and their misuse of the term "Staking"