It’s been a banner couple of weeks for the company behind the Bored Ape Yacht Club, the most-valued NFT project on the market, Yuga Labs. It acquired Larva Labs’s blue chip NFT projects CryptoPunks and Meebits. Yuga also announced a $450 million funding round that values the company at $4 billion. As part of that announcement, Yuga unveiled Otherside, its metaverse project that aspires to bridge the worlds of the various characters under its aegis. If all that wasn’t enough, an ApeCoin token (APE), governed by its Ape DAO (decentralized autonomous organization), started trading on major crypto exchanges.
If there’s one person who can explain what all this means for Bored Apes as a cultural phenomenon, for the potential and perils of one company controlling 5 of the 20 most-coveted NFT collections, and for what all this means for NFTs and their role in popular culture, it’s Jimmy McNelis. He’s one of the most prominent NFT collectors, as well as CEO of the NFT brand-building platform NFT42. McNelis has been a fierce champion of this space, having also launched his own NFT project Avastars in 2020. He made a splash last year when four of his Bored Apes formed the band Kingship, a project spearheaded by Celine Joshua, founder of Universal Music Group’s Web3-focused label 10:22PM, but he holds a number of NFTs in his portfolio, including CryptoPunks and Meebits.
All of that makes him the perfect person to give a state of the union on NFTs at this seminal moment: his take on Yuga’s game-changing acquisition, the problems plaguing the crypto space, Web3 going mainstream, and what NFT projects will be the next wave. What follows is an edited version of our conversation.
Let’s start with the big news from two weeks ago: Yuga Labs acquiring Larva Labs’s NFT projects CryptoPunks and Meebits. Did you see this acquisition coming?
I was actually pretty shocked. There were rumors going around the night before it all happened. And my reaction when I heard was, “There’s no fucking way that’s true.” I think it’s actually amazing. As much credit as Larva Labs deserves for innovating and creating in the space, they’ve often done a great job demonstrating a new technology and a way to use it and then done a lackluster job of continuing to support the community and listening to the community and continuing to develop the product beyond the initial launch.
They’ve definitely had a few missteps. There was a lot of confusion around the IP rights for NFT holders. There was that fiasco with their version 1 CryptoPunks. I don’t want to call CryptoPunks a failure at all, but . . .
Oh, it wasn’t a failure! That’s the interesting thing. They just didn’t do it the exact way that they should have, which is really hard. When they created CryptoPunks, this was the first foray. They accidentally unlocked something that’s gonna change the world. So, they didn’t have the foresight or ability to know how big it could be at that time. So, they probably weren’t aptly prepared to handle the success, and that’s understandable.
Larva Labs copped to that in its announcement. Its leaders said, “Our personalities and skill sets aren’t well suited to community management, public relations, and the day-to-day management that these kinds of projects require and deserve.” How is the broader NFT community thinking about where CryptoPunks went wrong?
A lot of people are drawn to the idea that they can just do an NFT project, mint 800 to 2,000 ETH, and make millions of dollars. But a lot of people aren’t thinking about what happens after that, and how much responsibility you have to your community in order to maintain the project and continue to deliver on your promises. When CryptoPunks started, the ethos for them was: We launched this project. We launched this marketplace. Have at it. And that was actually a very valid approach back then. But, the community has decided that they want roadmaps. So, the space has definitely changed for the better in that regard over the last couple years.
What do you think Yuga’s acquisition of Larva’s main NFT projects signals?
The fact that Yuga has taken money they’ve earned from their own NFT project and decided to go out and buy the blue chip NFT projects that exist right now is a very bullish signal in general for the space and the market. I have no details, but I wouldn’t at all be surprised if there were larger non-Web3 native companies that were interested in that IP as well. I don’t know, I’m just speculating. But it could have been a defensive move to protect that IP from someone that may not treat it the same way they would. And there was the Otherside announcement as well, that world they’re building to incorporate their partner tokens and everything into there. I really think that Yuga is trying to take a very broad approach here on the NFT ecosystem and help be a leader in the space. And they have a great deal of momentum.
See you on the Otherside in April. Powered by
— Yuga Labs (@yugalabs)
Is there too much power shifting to one company? I know this is all in the name of decentralization, but you can’t ignore the vast amount of sway Yuga is holding in this space.
I’m actually not concerned about them taking on that IP. They were the right people to take hold of it right now. The space is still extremely nascent. There are not really many entities in the space that can handle something as important and of this breadth. There were a couple other suitors out there. I saw that[creator of the crypto-native Punks comic] was trying to buy the IP. That would’ve been a pretty cool thing. I’m not sure if it would’ve had the same overall impact and benefit that it did with Yuga Labs purchasing [CryptoPunks and Meebits], even though I really like the Pixel Vault team. The alternative would be, what if someone like Meta bought it? It’s better that it ended up in a Web3-native company’s hands rather than some incumbent, because we are gonna see a lot of incumbents in the space this year. Some of them are gonna do really well, but they’re all gonna be behind the curve as far as understanding Web3 community and ethos.
Will the integrity of the Web3 ethos be maintained as it gets bigger and more mainstream?
You do it for me in this context.
Okay, to put it simply first, I believe that as mainstream incumbents and the world comes into NFTs, the corporations and those paying to develop on top of it are gonna take the best bits of blockchain and use those and leave out the stuff they don’t like. So, I think we’re gonna end up in a world, at least over the next few years, where we’re more like Web 2.5 than 3.0. We’re gonna be incorporating elements of cloud computing and SaaS and everything else with this Web3 layer of the internet. But I believe that the integrity shall, by and large, remain in place, because that’s the benefit of Web3. There is a trustless ownership layer of the internet that now exists, and it’s on blockchain technology. So, there’s gonna be huge bumps in the road along the way, I’m sure. But overall, the integrity should stay intact as mainstream comes into the space. I think the foundations have been laid down correctly.
Yuga also launched ApeCoin. Did that seem inevitable to you?
No, actually. I would’ve expected like OpenSea or MetaMask to do a coin before I expected the Bored Apes to do a token.
What are your thoughts on ApeCoin so far?
The Ape token actually has a real chance to become one of the primary tokens that are used in the NFT ecosystem over the next couple years. It has all of the meme potential that Dogecoin and Shiba and all those tokens have, which, for some reason, the broader communities really like to rally around. But it’s also gonna provide direct utility in the Yuga ecosystem. We feel some ownership over this community and over the existence of this token, because we’re the holders that basically enabled this to happen by believing in the project.
Speaking of the Ape community and the DAO overseeing it, there’s been a lot debate around just how decentralized DAOs really are. In the Ape DAO, for example, there are 1 billion tokens: 15% of that goes to Bored and Mutant Ape holders, 16% to Yuga, 14% to launch contributors including VC firms Andreessen Horowitz and Animoca Brands, 8% to Bored Ape Yacht Club’s founders. But 47% of those tokens are locked up in the DAO treasury and will be released over the next three years. It seems like the people who “aped in” from the start will slowly lose their majority of the DAO?
What the community has identified is right now our voice is the loudest, and we have the most sway, because a lot of those tokens aren’t unlocked yet. We realize that the Bored Ape community itself, the current NFT holders, are gonna lose our sway over the community pretty quickly. So, we’re trying to lay down the groundwork now that allows us to have a say. Over the next six months, I think they’re gonna be electing new board members to the DAO, and I think the community has an opportunity to get some people on there to advocate on their behalf as well.
Shifting gears a bit, an area that can’t be ignored are the security concerns around NFTs. I feel like every day there’s a new story of a hack.
This is what I’m saying. What do you think is needed to mitigate hacking?
It’s extremely scary. People have lost immense amounts of money that would’ve changed their lives if they hadn’t lost it. It’s daunting to get everything right and to not make mistakes. We’re in a world right now where all of our money is basically held custodially by institutions. We have banks. We have FDIC insurance. Those mechanisms don’t exist yet in crypto. However, this is an opportunity for all of those existing institutions who are solving those problems with fiat money and traditional banking today to provide products and tools that will help protect consumers as well. And the government clearly wants that as well. So, I think we’re gonna see crypto start to move in that direction a little bit more.
[On April, 1, after this conversation took place, the Discord servers for BAYC and other NFT projects were hacked.]
Right,is part of the crew now. We launched our community about a week and a half ago. We have over 25,000 members in that community that are excited and hungry for what we have coming next. I had no idea how many people cared about Kingship. Man, KC, I can’t wait for this to materialize.
Meet Manager Noët All, the new ape-in-charge leading KINGSHIP to greatness. She & the band have been busy working on top-secret schemes. If there’s one thing she learned back in herclubhouse days, it’s that good things come to those who wait. Right, ?
— KINGSHIP (@therealkingship)
On the topic of NFT projects, I can’t help but notice that a lot of them—or at least the ones that are constantly pitched to me—look very similar. What are you seeing that’s new and innovative?
CyberBrokers just recently launched from an artist named Josie Bellini. [The NFT is] a complete person. And I love that they are continuing to innovate by putting the SVG [scalable vector graphics] directly on chain. It’s preserved forever. And because it’s layered SVG, you can actually take off pieces of clothing and reveal hidden traits underneath. I think she’s developing a whole ecosystem around CyberBrokers. They have traits like professions and specialties. It’s not just a typical NFT drop. I don’t know if my friend Nate Alex coined the term “adjective animal projects,” but I give him credit for it. It’s like Bored Apes, Cool Cats—that’s what I would classify what you’re talking about.
That’s exactly it. Cheers to your friend for that!
All of us that have been in the space for a long time. We wanna see more cool stuff. We wanna see innovation on the tokens. Of course we wanna collect things that everybody likes, but we are more interested in, how does this evolve beyond this?
Where do you want to see this NFT space go?
I do wanna see broad adoption of NFTs. I’d like to see big companies come into this space and start to play with their existing IP, with new IP. I’d love to see . . . if we could start to build in some forms of safe identity. I’m incredibly excited to see more and more interest in NFTs throughout the world. Everybody I speak to now when they hear what I do, they want to know more. Before it was very dismissive.
Dismissiveness and skepticism in this space is certainly not uncommon.
To me, the skepticism comes from ignorance. I’m not trying to dog anybody for that. It’s hard to understand some of this stuff initially. I don’t know how to explain it. It’s almost like you have to change the way you think in order to really understand blockchain. But as soon as you do, a switch flips. So, what all of us are probably trying to do is create that aha moment for people and figure out what’s that thing that’s gonna cross that chasm and get people to understand there’s a benefit here for them as well. Right now, people don’t understand what’s in it for them. Why do NFTs matter for me? Why does blockchain and crypto matter for me? Once we can convey that clearly to everyone, then that’s when this thing just goes all the way.