How Arbitrum Won Over ApeCoin DAO—And Why Yuga Labs Is All for the ‘ApeChain’

On Wednesday, ApeCoin DAO voters picked the Ethereum layer-2 scaling network proposal from Arbitrum creator Offchain Labs and ally Horizen Labs, the original technical partner behind the token’s 2022 launch. Commanding more than 50% of the token-based votes, the Arbitrum proposal beat out those from other Ethereum scalers like Polygon and zkSync.

The governance vote ended the decision-making stage of a lengthy process that began with chatter amongst community members and stakeholders, and was formally kicked off with a proposal from Polygon Labs that ultimately failed. A formal request for proposals followed, culminating in this week’s win by the Arbitrum builders.

Why does the Bored Ape ecosystem need its own scaling network? Yuga’s public nudge in 2022 came after skyrocketing demand for a sale of NFT land deeds for the upcoming Otherside metaverse game sent a shockwave across the Ethereum mainnet, costing users $157 million in network gas fees alone.

Just last week, another NFT mint tied to Otherside—this time for free items awarded to players of the tie-in Legends of the Mara game—yielded frustration on a smaller scale, with Yuga fumbling its efforts to smooth over the outrage.

The incident only reinforced the widely-held notion that Ethereum’s mainnet is too costly and inefficient for games and other potentially mass-market applications. Scaling networks can significantly cut the costs of blockchain transactions and speed up interactions, enabling large-scale crypto apps and games.

Now, the ApeChain is coming, with Offchain and Horizen targeting a Q2 2024 launch. Executives from both companies told Decrypt’s GG on Thursday that there are finer details to finalize with the ApeCoin community, but that they’re otherwise ready to spin up the customizable and cheaper Ethereum scaling network in the near future.

What helped Arbitrum claim a considerable win with more votes than the other three proposals combined?

Horizen Labs VP of Ecosystem Growth Spencer Soloway believes the key was emphasizing the chain’s gaming focus rather than billing it as an all-purpose chain. Builders can launch DeFi protocols and other apps on the chain, but the chain will be built with video games in mind.

“We had a really strong belief that for any chain to be successful, it shouldn't just be another generic chain with Ape branding slapped onto it. That didn't make any sense,” he said. “What did make sense was for it to be a gaming-centered and gaming-forward chain.”

Yuga’s own Otherside metaverse game is the most notable project within the Bored Ape gaming space, with over $1.25 billion worth of NFT trading volume to date. The company has also pushed into other games, including last year’s Dookey Dash, which is getting a new free-to-play rendition soon, while other studios are using Ape assets to create games like Serum City.

Arbitrum’s gaming ecosystem has grown in recent months with the launch of Xai, a “layer-3” gaming network developed in tandem with Offchain Labs. Just recently, longtime Arbitrum ecosystem project Treasure revealed plans to create a more expansive Treasure Chain that will let individual crypto games launch their own chains that tie into it.

Steven Goldfeder, co-founder, and CEO of Offchain Labs, said that the Arbitrum setup would enable ApeChain to use ApeCoin itself as both the governance and network fee token. It will also allow the DAO to make other customizations, such as enforcing creator royalties on NFT sales and enabling future technical upgrades.

“We can put ApeCoin DAO in the driver's seat and allow it to make all the decisions of the chain,” Goldfeder told Decrypt’s GG.

Goldfeder and Soloway said that the overall voting process—not just the end result—should be seen as a win for the Ethereum ecosystem. When Yuga Labs called for a dedicated ApeCoin chain in 2022, the open-ended comment left potential room for other layer-1 chains to fill that role. But Ethereum’s layer-2 ecosystem has grown substantially since then.

“Within the Ape community, it's really important to remain Ethereum-aligned,” Soloway said.

The ApeCoin DAO made its decision with the hopes that Yuga Labs itself will embrace and use the eventual ApeChain, but that was never a given—formally, at least.

Due to the decentralized makeup of the ecosystem, the ApeCoin DAO is independent of the creator of the Bored Ape Yacht Club. But Yuga Labs effectively put the decision in the DAO’s hands with that 2022 tweet, and following the end of voting on Wednesday, the company affirmed that it plans to embrace the chain.

“Yuga Labs, like many other developers in the APE ecosystem, is excited about what it can build on ApeChain,” the company tweeted while congratulating Offchain and Horizen.

Ahead of this week's DAO vote closing, Yuga Labs CEO Daniel Alegre spoke with Decrypt about certain struggles with the Ethereum mainnet. He affirmed that the vote was ultimately in the DAO’s hands, but that the company was looking forward to exploring how to tap into the potential benefits of layer-2 scaling.

“The lower the transaction cost barriers to engaging with Web3, the better it is for anyone participating in this space,” Alegre told Decrypt. “We're very keen to explore what innovation L2 can do, and in particular, reduce that friction for engagement in Web3.”

Edited by Ryan Ozawa.