Popular NFT brand, Bored Ape Yacht Club, is in talks with venture capital firm, Andreessen Horowitz, to lead a funding round of about $5 billion to raise their valuation, according to the Financial Times. The deal is still a work in progress as no terms have been agreed upon but will surely be one to watch out for.

 

Although BAYC has yet to comment on the negotiations officially, they have previously said they plan to create a strong brand and hand it over to the community. Another source, NFTNick.eth, told his Twitter followers that this would likely be huge for the NFT industry as it will validate the NFT business model if this deal comes to life and the news gets out.

 

Crypto companies generally utilize funding to expand their businesses and scale their operations globally. For example, back in 2013, When Coinbase was valued at $143 million, it received about $20 million in funding from Andreessen Horowitz. It is currently valued at $86 billion. Even successful brands like BAYC require external funding to grow faster than what investments from their own profits can achieve. BAYC receiving VC funding will allow the brand to expand its business, and you will expect its valuation to increase in the future as the demand for BAYC NFTs continues to grow.

 

Bored Ape Yacht Club, a collection of 10,000 uniquely generated cartoon images of ape NFTs, went viral in 2021 even before prominent celebrities like Eminem, Stephen Curry, and Jimmy Fallon, amongst others, bought them. The frenzy does not end with merely acquiring a Bored Ape NFT, as ownership connects you to many celebrities and popular influencers who are members of this club. The number of celebrities ‘aping in’ is increasing every week.

 

Bored Ape NFTs, which were minted on the Ethereum blockchain, has recorded more than 393,000 in trading volume and have at least 6300 owners on OpenSea, with the lowest priced Bored Apes selling for about 18.5 ETH at the time of writing. Yuga labs, the team behind BAYC, has remained committed to growing the BAYC brand even further, and this potential deal with Andreessen Horowitz is a testament to their resolve.

 

 

Who is Andreessen Horowitz?

 

Andreessen Horowitz is an investment company based in Silicon Valley, California, founded by Marc Andreessen and Ben Horowitz in 2009, commonly known as A16z. The company has more than $28b in assets, with investments spanning from Crypto and Fintech to Healthcare.

 

A16z invests in companies across different stages of growth, from seed to startups, mid and late stages. They boast of a strong track record of having backed highbrow companies like Coinbase, Airbnb, Github, and Slack, transforming the then small businesses into giants.

 

A16z are not newcomers in the crypto space. In June 2021, the company announced a $2.2 billion fund to invest in crypto founders, teams, and networks. In addition, the Financial Times reported on plans by Andreessen Horowitz to raise more than $4.5 billion for crypto investments this year, doubling last year’s figures. A16z has been investing in crypto since 2013 and has shown interest in decentralized finance, Web3, creator funds, and the next-generation payment methods.

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Imagine accidentally selling an NFT worth over $1 million for only $26. That is precisely what has happened to Timothy McKimmy, who owned Bored Ape #3475 from OpenSea’s Bored Ape Yacht Club NFT collection.

 

Because of this, he is now suing OpenSea—whose legal identity is Ozone Networks—claiming they knew of a glitch that made the sale possible. So what does this mean for NFT buyers and sellers? Let’s take a look.

 

About the OpenSea Lawsuit

 

The claim being made by McKimmy is that OpenSea knew of a bug that allows people to purchase NFTs when they’re unlisted on their platform. De-listing an NFT from OpenSea’s platform with their “transfer” feature doesn’t necessarily remove listings on the blockchain’s back end, making it possible for hackers to purchase tokens for far less than their floor price.

 

Previous Victims

Others have fallen victim to this glitch already, and OpenSea has since added a feature that allows users to see their current listings, including those they may have believed were cancelled. From there, users can fully de-list their NFTs by paying Ethereum gas fees. However, those who have already fallen victim to the bug aren’t at all helped by this.

 

The Damages

McKimmy is demanding that OpenSea either return his Bored Ape NFT—which was shortly after resold for 99 ETH (about a quarter of a million dollars)—or pay him damages of over $1 million. He claims the Ape was worth $1.3 million, comparing it to one of lower rarity bought by Justin Bieber for a similar price.

 

Negligence Charges

McKimmy claims that OpenSea was negligent in that they knew about the vulnerabilities in their code but did nothing to fix it. Instead, they continued sales on their platform rather than pausing to rectify the problem despite knowing this.

 

 

Does McKimmy Have a Case?

 

The claims made do seem to have some weight. It’s true that OpenSea had been in communication with other victims of their platform’s exploit and had even made some settlements (though for less than the tokens in question may have been worth at the time), so it seems reasonable to believe that they were aware of the exploit and had done little to repair it.

 

On the other hand, OpenSea did recently add their “Listings” feature, allowing users to see their current listings, including those that they might have previously believed to have been de-listed. This may prevent future incidents but does not satisfy the damages against McKimmy and others in similar circumstances.

 

There seems to be a good chance that McKimmy’s negligence charges could secure a reward from OpenSea, even if his lawsuit, as it currently stands, has some errors (such as naming OpenSea as defendant instead of Ozone Networks, listing the incorrect address, etc.).

 

 

Lessons and Preventive Measures for NFT Holders

In terms of lessons that can be learned from this case, here are a few preventive measures NFT holders can put into place:

 

1. Know the Platform

It’s generally best to deal with platforms that already have a solid reputation in place. OpenSea has been at the center of multiple controversies in addition to this lawsuit, and that should be a warning to buyers to proceed with caution.

 

2. Keep an Eye on Listings

Just because you use a platform’s tool to de-list something doesn’t mean it’s completely gone. Rarible provides a tool where you can check on all current and previous listings, as does OpenSea with its new “Listings” tab, so it’s easy to keep an eye on what’s actually on the market. You may have to pay a fee to completely de-list your token, but that’s a small price compared to the value of a highly appreciated NFT.

 

3. Get Your Legal Stuff Right

The errors in McKimmy’s lawsuit may not altogether avert his efforts to recover damages, but they can still be an obstacle. Make sure you know which company you’re dealing with (not just the first name that pops up on their platform) and the jurisdiction in which they operate. Having some legal help on your side isn’t a bad idea either.

 

 

Lessons and Preventive Measures for NFT Sellers

 

There are some lessons to be gleaned for sellers as well. Even if you don’t lose a lawsuit, it’s still expensive to resolve it, making the following preventive measures invaluable.

 

1. Know Your Customer

While many value blockchain technology for its potential to protect anonymity, it’s still a good idea to know your customers. Doing so can help you avoid dealing with hackers and keep you more secure against liabilities that might result from exploits or illicit activity.

 

2. Review Your Code

To further shield yourself and your users against exploits, it can be worthwhile to review your code and platform activity every so often. Doing so can reveal potential bugs that could open you up to liability. If you find anything, correct it quickly. It may mean taking your system down, but expensive lawsuits can be far more costly.

 

3. Give Users Visibility

One of the issues with OpenSea appears to be the fact that users didn’t have much visibility over their listings. They used the platform’s “transfer” feature, believing that it would completely de-list their tokens when it, in fact, did not. If they had had more visibility, these errors might not have occurred (or at least wouldn’t have been OpenSea’s responsibility). As such, it’s worthwhile to implement functionality that gives your users plenty of visibility over their assets.

 

The Takeaway

 

It will be interesting to see what happens over the course of this lawsuit. The nature of blockchain technology and the various forces at work, in this case, could present some unique challenges when it comes to presenting the case to a jury, and the courtroom proceedings that follow could well shape the case law for future NFT-related suits. But, for now, it’s advisable to play things on the safe side.

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Just when people were saying that the NFT collectibles market was grinding to a hault, along came the Bored Apes. Over the course of several days, Bored Apes Yacht Club has sold 10,000 NFTs and has grossed over 3,000 ETH and marks the second most liquid generative art collectible on Open Sea to date.  On April 18th, 2021, the Twitter account @Boredapeyachtclub began promoting a new collection of Cartoon Ape NFTs.  Similar to Cryptopunks, the company promoted the fact that each Ape was “unique and programmatically generated from 172 possible traits, stored as ERC721 tokens on the Ethereum blockchain” opening up for presales a few days later on April 23rd.

Though it took several days for the pieces to catch on, aside from the unique aesthetic collectors began to be drawn into the drop because of its unique membership ‘club benefits’:

“Your Bored Ape doubles as your Yacht Club membership card and grants access to members-only benefits, the first of which is access to THE BATHROOM, a collaborative graffiti board.” The Bathroom “contains a canvas accessible only to wallets containing at least one ape. Like any good dive bar bathroom, this is the place to draw, scrawl, or write expletives. Each ape-holder will be able to paint a pixel on the bathroom wall every fifteen minutes. Think of it as a collaborative art experiment for the crypto sphere. A members-only canvas for the discerning minds of crypto Twitter.” 

This is just one of the many examples of the unlockable content that come along with these particular NFTs.  Others include the ability to join a private “club,” access to exclusive drops, and (most significantly) the rights to use the images of the apes one buys commercially in perpetuity.  This is quite a rare offer in the NFT space and has been something that many artists have been drawn to, with NFT staples such as JR Artspace, Taylor Wtf, and many others pumping out several popular artistic remixes of their own apes over the past few days.

However the momentum really picked up between the 24th of April and culminating in May first when @Pranksy and @J1mmy.eth collectively bought over 250 apes.  From that moment alone, the Bored Ape Yacht Club went from 500 pieces minted to entirely sold out in less than 10 hours…

According to investor Mike Damazo: “It definitely went crazy when @Pranksy picked up 250 before secondary.  Then Farokh came in at the secondary market. “  From there, “someone tweeted at Gary V which led him to the discord. Then “3LAU held two giveaways in his discord group.” 3LAU doing this giveaway referenced one of his own earliest NFT related stunts.  Several years ago he famously gave away free NFTs at various music festivals by way of a QR code he would have physically with him on his personal cellphone.

But, celebrity associations aside, why did initial investors bite?  According to a conversation we had with @J1mmy.eth: “the pricing was fair and approachable and the narrative of the site and being a part of the club drew me in. The community has been great as the project has started to pick up steam!”  This low and consistent pricing was very important to the Bored Ape Yacht Club team, often cited as calling popular NFT pricing systems such as ‘bonding curves’ quite pointed names such as “Ponzi schemes.” But the incentive to buy went far beyond this. According to @J1mmy.eth: “bored apes make great personal profile pictures.” Jimmy also wished that the collection was “on-chain” but still insists that the apes that he bought “still captured my attention despite that deficiency.”

It seems as if the issue of the apes being minted on open sea, and not an “on-chain” platform, such as Rarible with integrated IPFS, or an equivalent.  Though the Bored Ape Yacht Club did include an IPFS certificate with each ape included in their unlockable content, this still wasn’t enough for many staunch collectors.  To quote an analysis on HackMD: “the company/entity minting is paying Google [for hosting] those server-less functions to service the actual JSON metadata.” Calling this a “huge single point of failure.”

Despite this, all Apes sold out in the primary market We asked @Pranksy about his monumental purchase of Apes and he also mentioned that “They were fairly priced, unlike recent projects using FOMO price curves, and the art for me passed the ‘profile picture’ test.” It is interesting how much collectors both resonated with the stable, and relatively low, initial price; as well as the ‘profile-picture-ability’ of the collection. Similar to Cruptopunks, Cryptokitties, Poklamons, or other popular collectables – most buyers, in the initial market at least, simply seemed drawn to to the Apes they liked the best aesthetically.  Wanting to use them as profile pictures, add them to virtual art galleries, and more. Because they were relatively cheap people could mint many multiples until they got the one they aesthetically liked the most or match their profile. On top of that buying into a club and the promise of all of the unlockable content, this seems to be a major driving factor in the minds of buyers.  However, it would be a shame not to analyse some of those cool features that was released throughout the sale.

Since all of the pieces are now in the secondary market, it’s also worth going through the Bored Ape team’s landmark incentives.  At 20% sold, they released “the Caged Apes tokens held back from the initial sale which [were] airdropped to random Apeholders.”  At 40% sold, BAYC launched “its own YouTube channel, BAYC LoFi Radio.”  At 60% sold, a “Member-Exclusive BAYC Merch Store got unlocked, featuring Limited Edition tees, hoodies, and other goodies.”  At 80% sold, “The clubhouse image [became] interactive and the ‘Mysterious Note’ [became] legible, beginning their treasure hunt.”  According to the Bored Ape Yacht Club team: “The first to solve the mystery will be rewarded 5 ETH and a Bored Ape.” At 90% sold, The Bored Ape team initiated their own liquidity pool.  And finally, when the collection sold out 100%, “The Mutant Ape (NFT Breeding) Arcade Machine gets fixed” thus allowing owners to “cook up new ways to ape with our friends.” At this point all of these incentives have been released, making the secondary market for these pieces quite volatile.

So what is the future of these apes? Well as of today (May 3rd, 2021), one of these Apes has been sold for an incredible 21 ETH ($69,080.76 USD).  According to Kevin Wu, This makes this ape sale on par with some low-priced Cryptopunks, a staple in the NFT collectable community.  Despite this momentous secondary sale, it seems as if things aren’t slowing down, with owners reporting bots constantly attempting to buy their apes!  It will be interesting to see how these collectables continue to grow in the coming days and weeks.

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