John Gilbert

Aptos led the January bull run with a 470% return for the month. With little on-chain activity and only $60 million in TVL, you may be asking why. 



Advocates argue that these gains were the result of ecosystem announcements. Critics point to its opaque token distribution as a sign of predatory tokenomics.



But what tokenomic clues signal predatory behavior? And why is it a common accusation?



Tokenomics turn predatory when project insiders use supply controls to artificially drive demand and take profits at the expense of others.



These insiders are like wolves in wolves clothing — a mixed bag of venture capitalists and angel investors. The flock, conditioned to follow the flow of smart venture capital, chase the momentum despite warnings.&nbsp;&nbsp;



Some find a distinct joy in arguing that all crypto tokens fall under this model. But the economic incentives, supply controls, utility and revenue sharing vary greatly between digital assets. Our previous <a href="https://blockworks.co/news/what-is-tokenomics">Investor&#8217;s Guide on Tokenomics</a> explains the different models in more detail. In this article, we will explain how some models are more prone to exploitation than others.



<h2>Tokenomics gone wrong</h2>



A project&#8217;s tokenomics is a blueprint that outlines the key characteristics and factors that influence its value and price. A token issuer, just like a house architect, may include exploits in its design.&nbsp;



But because the number and severity of these exploits exist on a spectrum, it is hard to pinpoint exactly when they turn predatory. Unfortunately, an accusation can only prove conclusive if someone makes it after project insiders use a design exploit. And even then, the charge still requires evidence of intent to qualify.&nbsp;



This article in no way makes such an accusation against the examples listed. And it should not be interpreted as investment advice. Instead, it explains the most recent concerns and extrapolates a list of red flags to avoid.&nbsp;&nbsp;&nbsp;



<h3>Flag 1: Misleading distribution disclosures</h3>



Token distribution disclosures are essential to understanding the risk of when, who and why insiders will take profits. An issuer with predatory intent may make the disclosure appear less risky to attract investors.



For example, many could perceive Aptos&#8217; supply schedule disclosure as misleading. The project started with a total of 1 billion tokens (none of which were made available through public sale). Here is how they distributed the total supply:



<figure class="wp-block-table"><table><tbody><tr><td>Community</td><td>51.02%</td><td>510,217,359.77</td></tr><tr><td>Core Contributors</td><td>19.00%</td><td>190,000,000.00</td></tr><tr><td>Foundation</td><td>16.50%</td><td>165,000,000.00</td></tr><tr><td>Investors</td><td>13.48%</td><td>134,782,640.23</td></tr></tbody></table></figure>



The <a href="https://aptosfoundation.org/currents/aptos-tokenomics-overview" target="_blank" rel="noreferrer noopener">post</a> stated, &#8220;All investors and current core contributors are subject to a four-year lock-up schedule with no <a href="https://blockworks.co/price/APT">APT</a> available for the first twelve months.&#8221; These two categories amount to 32.48% of the total supply.&nbsp;



The project made the distribution schedule of the other two categories vague. The post states that &#8220;these tokens are anticipated to be distributed over a ten-year period&#8221; and that after an immediate distribution of 130M tokens, 1/120 of the remainder &#8220;are anticipated to unlock each month.&#8221;&nbsp;&nbsp;



Using hedging language like &#8220;are anticipated&#8221; may seem irrelevant at first glance, but it creates ambiguity shielding the project from making a firm commitment not to sell.



It also stated that insiders across all categories were staking 82% of the supply. Consequently, popular sites have used the staked data to calculate a circulating supply of roughly 15% to 18% (currently 162,086,803).&nbsp;



This adds to the confusion because CoinGecko&#8217;s circulation supply definition states, &#8220;It is comparable to looking at shares readily available in the market (not held &amp; locked by insiders, governments).&#8221;



But according to Aptos co-founder <a href="https://twitter.com/moshaikhs/status/1582470822886637568?s=20&amp;t=RUz9LN39xHYMg6cyUA2mSQ" target="_blank" rel="noreferrer noopener">Mo Shaikh</a>, stakers can unlock tokens every 30 days.&nbsp;



This distribution is not evidence that the project intended to mislead investors. But, when combined with the supply schedule graph, one could argue that they made it appear as if 82% of the supply (the same percentage of tokens staked) can&#8217;t become available for at least a year, when in fact, only 32.48% is subject to an official 1-year lock-up.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh3.googleusercontent.com/2845Ltk40l29VnMfRtQyjIwyx84dbS8-j5S4ZgmZH9WCBm4xVWG7VxN82mCxosBTGIJZb2Z-d7P_na-eliYz_R1dr_C77w0mge05gHvSrESbjlMMrB_Jqz_LG7t5OujehYQq5mSmzF3vEOnyJwJvI_4" alt=""/></figure>



The tokenomics post did state that the schedule is an estimate and included a disclaimer stating that it is subject to change without notice. But this has not prevented investors from <a href="https://youtu.be/6oywqy5AMsk?t=147" target="_blank" rel="noreferrer noopener">using the graph</a> to share a popular investing thesis predicated on the belief that close to 8.5 million (85%) of APT is locked for a year.&nbsp;



The limited liquidity on exchanges and the massive supply at the disposal of project insiders have led some to make accusations of price manipulation.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Aptos dev team wallet has started feeding the Korean ducks, ~$20mm in spot sent to Binance in the last hour. $1b in inventory remains in the wallet. The tightly controlled supply has activated. <a href="https://t.co/Ll75mTX0TQ">pic.twitter.com/Ll75mTX0TQ</a>&mdash; light (@lightcrypto) <a href="https://twitter.com/lightcrypto/status/1619155047618850818?ref_src=twsrc%5Etfw">January 28, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



<h3>Flag 2: Lack of utility</h3>



A token&#8217;s utility is a crucial aspect in determining its value. If it has no utility, its price is purely the result of speculation, leaving it vulnerable to manipulation by early investors and insiders.



Some see the <a href="https://blockworks.co/price/dydx">dYdX governance token</a> as an example of broken utility. While the platform uses it to incentivize trading activity and provide liquidity on the dYdX platform, there is very little reason for investors to hold the token once earned. There is no revenue-sharing model or meaningful governance incentives. The protocol removed all previous staking opportunities. And now the only motivation left is trading fee discounts.&nbsp;&nbsp;



Read more on the <a href="https://www.blockworksresearch.com/assets/dydx/tokenomics" target="_blank" rel="noreferrer noopener">Blockworks Research analysis of dYdX tokenomics</a>.



&#8220;To me [the governance feature] is just disingenuous,” Jeff Dorman, chief investment officer at Arca, said of dYdX. “You can&#8217;t ever actually participate in governance, because six holders own 90% of the token.&#8221;



This lack of utility makes it easier for project insiders to potentially generate speculative demand by delaying insider token unlocks, leading to, as Dorman states, &#8220;time-based selling pressure rather than merit-based buying.&#8221;



DYdX is one of the tokens that made the leaderboard for top-performing tokens in January. It increased by 210% from the start of the year. But this bull run coincided with an <a href="https://twitter.com/dydxfoundation/status/1618302395603161114?s=20&amp;t=i81l9j2-VcC-hq0q9Yn_iQ" target="_blank" rel="noreferrer noopener">announcement</a> to &#8220;postpone the initial release date applicable to investor $DYDX tokens to Dec 1, 2023.&#8221;&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh6.googleusercontent.com/eQCh0m2qy8FPfovaLiF42dsaG_Pv1kxoD0z_A99FV4XgzaFWMxFH3Y3fwi-orV-TYhicZiJ6aWry_IXhNRnZN8GYKpsrJPWx97oabVvK_6Xg1uIS1LgRrswfNd777ic7O-rnIlTKlbg30rFOI9LFG0Q" alt=""/></figure>



While this correlation is not direct proof that the announcement drove the price, it supports the narrative that tokens with weak utility are vulnerable to this type of manipulation.&nbsp;



<h3>Flag 3: Conflicts of interest</h3>



How a project makes money and shares it with its investors is crucial in determining the alignment of incentives. In the unregulated world of cryptocurrency, many projects choose not to share revenue with token holders due to their close resemblance to a security. And, in some cases, such as dYdX, all revenue is directed to an <a href="https://www.ar.ca/blog/dydxs-broken-tokenomics-and-pointless-vc-unlocks" target="_blank" rel="noreferrer noopener">LLC</a>.&nbsp;



This arrangement can lead to a conflict of interest between token holders and inside investors. The lack of shareholder obligations makes project owners less incentivized to drive token demand.&nbsp;



Tokens that behave like commodities or currencies can fit this model. However, when there is no practical use or widespread adoption as a payment solution, the token acts more like an inflationary store of value. In dYdX&#8217;s case, the token saw an 82% decrease in value since its launch in September 2021.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh4.googleusercontent.com/nq3rEw7tvEP43qvAfxjYVwff5OVMwZrferaHl5z8q1xQd9vqmVPNM7QaGvUyG4i9EJBpqhi29FYO-UiyAL1zZVX0uBqqxpd2asmXDxnCRwZHiWUXa5u9SWf1AvgS5X5i0AhL1IklgHimG1JXZeTfMVU" alt=""/></figure>



Dorman explained that there are many creative ways to drive demand for the dYdX token.&nbsp;



&#8220;One is to feed some of those revenues back through the token, either in the form of buybacks, or in the form of building up the DAO treasury. They could have partnerships with other platforms or protocols where the dYdX token has some value within someone else&#8217;s ecosystem. What you can&#8217;t do is just assign zero value and just say it&#8217;s a governance token, where you can&#8217;t ever actually participate in governance.&#8221;



Though, when a project like dYdX has scheduled token unlocks, there is a real temptation to pull the postponing lever instead of implementing the changes Dorman listed.&nbsp;



He added: &#8220;In my opinion, we&#8217;d be better off if there were no unlocks. It doesn&#8217;t incentivize any parties, the investors nor the issuing company to do anything before you get to unlock that value. And two, it restricts and floats and the tradable asset in a way that artificially creates gains.&#8221;



<h2>Understanding the wolf of crypto</h2>



The common occurrence of predatory tokenomics has led many skeptics to claim that the problem is inherent to crypto. But if you take a closer look, the pattern reveals that the wolf behind the wolf mask isn&#8217;t necessarily coming from within the industry.&nbsp;



&#8220;Most of these projects in their early days are very reliant on venture capital money,” Daniel McAvoy, blockchain and funds attorney at Polsinelli, said. “You know, there isn&#8217;t really a great way to get off the ground without going that route.”



“So in addition to equity and a slug of tokens, the VCs also want a hand in helping determine what the tokenomics are even going to be.&#8221;



He said that the one-year locking period is &#8220;almost universal&#8221; in the token purchase agreements and that a big reason for that is, &#8220;Under Securities Act Rule 144, there&#8217;s potentially an ability to resell something without requiring registration of that resale — so long as there&#8217;s been a one year holding period with respect to the token.&#8221;



If based in the US, venture capital fund managers must take reasonable steps to comply with SEC guidelines. But in addition to staying compliant with rules on the offer, sale and resale of securities, McAvoy said, &#8220;there&#8217;s also the fiduciary responsibilities that the venture capital manager has to their clients.&#8221;



He added: &#8220;The venture managers have a duty of care and loyalty. One of the things that they&#8217;re supposed to try and do is maximize returns for their investors. And to do so in a manner that is as close to compliant as possible. So there&#8217;s a bit of a push and pull. The duties that you have to your investors don&#8217;t necessarily match up with your desire for a particular protocol to succeed.&#8221;



So if a venture capital fund has a hand in influencing a project&#8217;s bad tokenomics, it may benefit from exiting a major position in a way that avoids potential fallout. Their playbook is to argue that their sale of an unregistered security qualifies for exemption and is in the interest of their investors. The SEC regularly enforces and takes into account the fiduciary responsibility of these fund managers to their investors, but they do not provide token holders the same degree of protection.&nbsp;&nbsp;



The reliance on venture capital funding and uneven enforcement of securities law fuel this predatory behavior. It creates an environment where token issuers are afraid to work in the interest of token holders and venture capital funds are encouraged to take profits at token holders expense.&nbsp;



This sad reality is an extension of the hyper-financialization problem seen across markets – where powerful institutions use the concentration of capital to drive speculative bubbles and extract wealth from new participants.&nbsp;



<h2>Final thoughts</h2>



Crypto has a complicated relationship with the &#8216;wolf of trading&#8217; archetype. News about venture capital investment in a particular project can carry credibility for some and incite suspicion in others. This division combined with the inherent competition between projects makes it difficult to navigate for an uninformed newcomer.&nbsp;



And while there are many innovative projects with fair launch distribution and real world utility embedded in their tokenomics, they often get lost in the socially engineered hype of well connected and venture capital-backed tokens.



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When Tokenomics Turn Predatory, or How To Spot the Wolf

Sebastian Sinclair

They say a rising tide lifts all boats.



That certainly rings true for the altcoin market over the last 30 days, courtesy of strong momentum from leading majors like bitcoin and ether.



Ether’s dominance has inched up ever-so-slightly over 30 days to 17.8% while crypto assets such as <a href="https://blockworks.co/price/sol">solana</a>, <a href="https://blockworks.co/price/doge">dogecoin</a>, <a href="https://blockworks.co/price/xrp">XRP</a> and <a href="https://blockworks.co/price/ada">cardano</a> have seen a small decline of less than 1%.



Total market capitalization is now up 33% from $839 billion to $1.1 trillion since the new year, while the total value locked (TVL) in <a href="https://blockworks.co/category/defi">DeFi</a> has jumped 30% from $50 billion to $65 billion, DeFiLlama <a href="https://defillama.com/" target="_blank" rel="noreferrer noopener">data</a> show.



Of the top 50 altcoins with a market value above $200 million that Blockworks analyzed, <a href="https://blockworks.co/news/aptos-surge-mirrors-ripple-bull-run">aptos</a>, whose reported market cap tops $2.7 billion, remains the sector&#8217;s largest gainer this year.



Up more than <a href="https://blockworks.co/price/apt">350% over 30 days</a>, the protocol previously dubbed as an “<a href="https://blockworks.co/news/aptos-not-out-to-kill">Ethereum Killer</a>” has roughly <a href="https://tokenterminal.com/terminal/projects/aptos" target="_blank" rel="noreferrer noopener">50-60 active developers</a> — similar to non-Ethereum smart contract platforms such as Cosmos, but with far less established dapps and a TVL of <a href="https://defillama.com/chain/Aptos" target="_blank" rel="noreferrer noopener">$61.3 million</a>.



Skepticism from analysts centers around the true value of its <a href="https://blockworks.co/newsletter/issue/30389460">circulating supply</a> and eye-popping fully-diluted valuation just north of $17 billion — which puts it as the sixth most valuable cryptoasset (excluding stablecoins) on an FDV basis.



For the token to justify its market value, a few things need to happen: grow its user base and liquidity, according to a spokesperson at Asia-based crypto services firm First Digital.



“Aptos investor unlocks are not set to begin until [October] this year, I believe, and the extreme negative positioning precipitated a massive short-squeeze. This pushed the price up quickly,” they said.



Still, many other altcoins with a market cap above $200 million have experienced considerable growth year-to-date. Layer-1 protocol Fantom’s native token <a href="https://blockworks.co/price/ftm">FTM</a>, for instance, has almost quadrupled in value — up 180% YTD, while DeFi protocol Injective (<a href="https://www.coingecko.com/en/coins/injective">INJ</a>) closely follows suit at 174%.



And let’s not forget Ethereum rollups <a href="https://blockworks.co/tag/Optimism">Optimism</a> and <a href="https://blockworks.co/tag/Arbitrum">Arbitrum</a> whose transactions now exceed that of the Ethereum mainnet alongside both platforms witnessing an uptick in <a href="https://blockworks.co/news/arbitrum-optimism-exceed-ethereum">daily active users</a>.



<h2>Ether is “world’s best-performing asset”</h2>



But what’s driving the value of the altcoin market, and where are traders expecting prices to go next?



The rally in digital assets has been “broad-based,” with several altcoins — which were oversold in the December bloodbath of liquidations and year-end selling — having bounced back, BitOoda told Blockworks in an email.



When looking at the major bellwether crypto assets, ether is up 34% YTD to bitcoin’s 40% rise.



“This is counterintuitive, as ether has historically acted more as an altcoin and outperformed bitcoin during rallies,” a BitOoda spokesperson said. “One explanation for ETH’s underperformance could be the potential upcoming sell pressure overhang from staking withdrawal unlocks.”



That may be true this year, but when looking over a larger timeframe, the story appears different.



Analysis conducted by Galaxy Digital and <a href="https://www.galaxy.com/research/insights/top-stories-of-the-week-1-27-23/" target="_blank" rel="noreferrer noopener">published</a> last week found ether to be the world’s best-performing asset over a number of timeframes when viewing from a total return and risk-adjusted return lens.



The research took into account the seven, five and three-year returns as well as 2022 performances and a COVID low (March 2020) to present.



“Across every single time frame, except 5 years, ether is the best-performing asset against equity indices, major tech stocks, bonds, commodities and really anything else,” Galaxy said.



That’s despite industry windfalls last year, including several major bankruptcies, contagion woes and ecosystem failures that rocked prices across the board.



According to Australian digital asset trading and custody infrastructure firm Zerocap, altcoins largely act as high-beta assets to ether and their prices have been positively correlated with ether’s performance in recent weeks.



Arbitrum and Optimism have shown growth in on-chain metrics but are less stable in downward trends compared to ether, according to Zerocap analyst Sam Holman.



Their integration into crypto infrastructure is allowing for easier access to new apps on alternative chains, compared to non-EVM chains, due to their rapid growth and addressing the complexity of bridges and lack of liquidity, Holman said.&nbsp;



<blockquote class="wp-block-quote">
“This trend is expected to continue if the market remains strong.”
</blockquote>



A <a href="https://www.jpmorgan.com/solutions/cib/markets/etrading-trends" target="_blank" rel="noreferrer noopener">recent survey</a> of 835 institutional traders conducted by JPMorgan found crypto, commodities and credit are likely to have the biggest increases in electronic trading volumes over the coming year. 



Asked what percentage of their trading volumes would be through e-trading channels, the traders predict crypto will top the list, and have a 2% greater impact on those volumes than commodities.



That’s incongruous considering JPMorgan CEO Jamie Dimon recently called bitcoin a &#8220;<a href="https://twitter.com/SquawkCNBC/status/1616039056961323008" target="_blank" rel="noreferrer noopener">hyped up fraud</a>&#8221; and “pet rock” on CNBC’s Squawk Box during a sideline interview at the World Economic Forum in Davos, Switzerland.



Despite perennial skepticism from the head of the world’s largest multinational bank, the performance of ether and bitcoin continue to drive the entire digital asset market forward.



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Where’s the Non-Bitcoin Market Headed Over Coming Months?

Shalini Nagarajan

Venture capital-backed, layer-1 blockchain Aptos saw huge price growth in January, with its value surging over 400% in the last month.



Native token <a href="https://blockworks.co/price/apt" target="_blank" rel="noreferrer noopener">APT</a> traded at just $3.59 last month, but last traded at $18.37. Its nearly $3 billion market cap has now surpassed Stellar and Bitcoin Cash and is approaching that of Ethereum Classic and Monero.



When you consider the fully diluted value, Aptos is currently the fourth-largest chain at $18 billion. But interest in the network has <a href="https://blockworks.co/newsletter/issue/30389460" target="_blank" rel="noreferrer noopener">raised some eyebrows</a>, largely because it has a low user and developer base.&nbsp;


<div class="wp-block-image">
<figure class="alignright size-medium"><img decoding="async" loading="lazy" width="300" height="279" src="https://blockworks-co.imgix.net/wp-content/uploads/2023/01/Screen-Shot-2023-01-30-at-11.02.32-AM-300x279.png" alt="" class="wp-image-44970" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2023/01/Screen-Shot-2023-01-30-at-11.02.32-AM-300x279.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2023/01/Screen-Shot-2023-01-30-at-11.02.32-AM-300x279.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2023/01/Screen-Shot-2023-01-30-at-11.02.32-AM-300x279.png?w=276 276w, https://blockworks-co.imgix.net/wp-content/uploads/2023/01/Screen-Shot-2023-01-30-at-11.02.32-AM-300x279.png?w=281 281w, https://blockworks-co.imgix.net/wp-content/uploads/2023/01/Screen-Shot-2023-01-30-at-11.02.32-AM-300x279.png?w=236 236w, https://blockworks-co.imgix.net/wp-content/uploads/2023/01/Screen-Shot-2023-01-30-at-11.02.32-AM-300x279.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2023/01/Screen-Shot-2023-01-30-at-11.02.32-AM-300x279.png?w=966 966w" sizes="(max-width: 300px) 100vw, 300px" /><figcaption class="wp-element-caption">Aptos co-founder Avery Ching</figcaption></figure></div>


“That is pure insanity for a chain with near zero users and applications; what are investors pricing in? Aptos was shamed for its poor token allocation that favored insiders and investors, which allowed them to stake vesting tokens to earn liquid rewards,” said <a href="https://www.blockworksresearch.com" target="_blank" rel="noreferrer noopener">Blockworks Research</a> Senior Analyst <a href="https://twitter.com/smyyguy" target="_blank" rel="noreferrer noopener">Dan Smith</a>.



Blockworks spoke with Aptos co-founder and Chief Technology Officer Avery Ching, who broke down the network’s development, insight on its user base and why he thinks it’s gaining traction right now.



<h3>Confidence in a tech-bro team</h3>



Ching worked at Meta, formerly Facebook, for about a decade. His focus was data infrastructure and scaling systems to support insights and analytics for products within Meta.&nbsp;



Three years into working there, he joined the Diem (or Libra) team, where the mission was to build an innovative financial infrastructure for Facebook’s billions of daily active users.&nbsp;



The project ultimately didn’t work out, and Ching left, along with co-founder Mo Shaikh, to work on a related project, now known as Aptos.



The duo’s experience at the social networking site “allowed us to build this technology in a way that would be even more open and more permissionless than within the boundaries of something that happened at Meta,” Ching said.



Aptos currently has a team of more than 100 people, and there are no plans to grow too fast. The network has people based around the world including Palo Alto, New York, Seattle, Florida, Israel and Asia, which Ching credits as having “fueled the rise of Aptos.”



“And some of them come from other backgrounds like myself that know how to operate machines at scale in large production environments for supporting goods for customers,” Ching said.



<h3>As impactful as cloud computing infrastructure?&nbsp;</h3>



Ching said the main goal for Aptos is to be for decentralized applications what cloud computing is for Web2.



“Think about what Netflix relies on, or Dropbox, or Amazon, or Meta? These products rely on millions of machines running in data centres across the world, they can scale up and scale down at a minute’s notice so that they can have a tremendous amount of volume to support their products.”



But the Web3 industry is still far from being the decentralized internet for everyone, and Aptos wants to be around for the long term.



“There&#8217;s just a ton of things to solve before we can make this more mainstream. So that&#8217;s our mission. That&#8217;s our purpose,” he said.



<h3>But what’s driving the buzz behind Aptos?</h3>



The network claims its mainnet launch had 10,000 full nodes and more than 30 projects, which, according to Ching, is the highest number of projects a blockchain ever counted at launch.



Aptos’ <a href="https://github.com/aptos-foundation/ecosystem-projects" target="_blank" rel="noreferrer noopener">Github</a> page shows a number of projects built in gaming, DeFi, infrastructure, marketplaces, NFT tooling and bridges.



Aptos proponents <a href="https://twitter.com/Aptosians__/status/1618572239791878146" target="_blank" rel="noreferrer noopener">tout</a> an increase in total value locked (TVL) in recent weeks with respect to DeFi protocols, such as decentralized exchange PancakeSwap — a DEX which originated on Binance Chain. But a TVL measured in US dollar terms is misleading when much of a chain’s DeFi activity is taking place in volatile tokens.



When tracking the Aptos TVL in APT terms, there is a downward trend since late 2022.



&#8220;Looking at this data, I don&#8217;t see a meaningful TVL change,&#8221; Smith said.



<figure class="wp-block-image"><img decoding="async" src="https://lh4.googleusercontent.com/1fEZlxrNiuw31AJJ7xglSBQrBM_znle3l8LalaYPXbPtonY8f0tna-_MG2-nXW6Lld0jpO9bXNaUcoIWFaymiMU8o6kCbPPji6RXuwxYjLqsi_K5R_vJX2rnG4NIk1U9Vwg2hqyTQZo1yndzLD1igQb23IHb-G_RMRpdDyumriXvgCS4ardh_VEOxmD4eg" alt=""/></figure>



The network’s market cap to TVL ratio, shows it attracting <a href="https://twitter.com/henriquecentiei/status/1619898913816981504">many multiples</a> of the ratio for Ethereum at the current APT price.



Ching doesn’t care for the tired ‘Ethereum-killer’ trope.



“We&#8217;re not here to kill anybody,” Ching said, noting, “I think Ethereum is a great technology. In fact, we&#8217;re inspired by many of the things that Ethereum had done.”



The core team’s 19% token allocation is locked for 12 months, <a href="https://aptosfoundation.org/currents/aptos-tokenomics-overview" target="_blank" rel="noreferrer noopener">according to</a> the Aptos Foundation’s tokenomics breakdown, however, the full APT allocation is available for staking <a href="https://research.thetie.io/aptos-vs-sui/" target="_blank" rel="noreferrer noopener">even while unvested</a>, meaning that the team, the foundation and investors can all profit from selling daily staking rewards into the surging market.



Ching declined to comment on the price of the token.



&#8220;I can&#8217;t speak to the token specifically, I can just speak about what our mission is and kind of what we&#8217;re doing and why we think it&#8217;s getting traction now,&#8221; he said.



<h3>Early NFT foray and other activity</h3>



Aptos reports having added over 5,000 NFT collections, with the top ones being Aptos Monkeys, Aptosmingos and Bruh Bears, according to a press release.



Aptos Monkeys shows about 1,700 APT in traded volume (about $30,000) over the past 24 hours on the leading Aptos NFT market <a href="https://www.topaz.so/" target="_blank" rel="noreferrer noopener">Topaz</a>.



OpenSea’s <a href="https://opensea.io/rankings" target="_blank" rel="noreferrer noopener">currently</a> top-ranked BAYC Sewer Pass traded 907 ETH ($1.4 million) over the same time period.



The network’s native wallets have over 1.4 million downloads, the release notes, however daily active accounts have remained stagnant in the past month, ranging from about 25,000 to 30,000.



<figure class="wp-block-image"><img decoding="async" src="https://lh3.googleusercontent.com/DspyF2uSYcSJr4zTQvPaw26oBEqaK-_thcmLVo2eBiz5dAFAiYrO7PydczcUCTxi80WS8vpYXAytc4BVtMXcku8FGH7pwW7qpJ7PFVJpOhe-D7trvYr3eYq1K0r36GUAbY13dpmE4jSvse48svieKXC3vQEatAfMNNfRzPzRkh9gxwDKYrp-8lBYXhY6Ng" alt=""/><figcaption class="wp-element-caption">Source: <a href="https://explorer.aptoslabs.com/analytics" target="_blank" rel="noreferrer noopener">explorer.aptoslabs.com/analytics</a></figcaption></figure>



The network’s developer and user base is <a href="https://blockworks.co/newsletter/issue/30389460">considered</a> low compared to other major blockchains.



But Aptos told Blockworks that by the end of 2022, it counted 2.85 million cumulative unique addresses and 60.6 million user transactions.



“For a network that’s just like a little more than three months old, this is pretty tremendous,” Ching said.



Another point of interest for the network is some of its recent partnerships, including Seoul-based gaming studio Megapixel, which is set to announce its first Web3 game on Aptos.



Korean interest has largely been <a href="https://blockworks.co/news/aptos-surge-mirrors-ripple-bull-run">driving the APT price</a> rally, Blockworks previously reported. Aptos pointed to its <a href="https://aptosfoundation.org/currents/aptos-world-tour-hackathon-coming-2023" target="_blank" rel="noreferrer noopener">world tour hackathon</a> starting next week, with the first stop in Seoul.



<h3>A rough time for the industry</h3>



Aptos had a <a href="https://blockworks.co/news/aptos-mainnet-launch-draws-criticism">rocky launch</a> in October, with observers noting that it didn’t actually live up to its promised transactional speed. However, Blockworks’ Dan Smith said the chaos was to be expected because “launching a layer-1 is a multi-year undertaking.”



Ching said many people would say the network’s launch happened at possibly the worst period, given the bearish environment around the industry.&nbsp;



“But for us, we were not really focused on a lot of the exterior things like that,” he said.&nbsp;



“Hundreds of projects had been waiting for us to launch and asking us to get going on the technology stack and wanted to build, and we felt like serving those builders was more important than anything else at that time.”



Ching notes a focus on four verticals: gaming, social, finance and immediate entertainment.



Social seems like an obvious choice for Ching, given his experience at Meta and the fact that this is a great way to attract people to blockchain. Aptos expects to soon make an announcement in this space.



Macauley Peterson contributed reporting.



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Aptos ‘Not Here To Kill’ Any Blockchain: Co-founder

Bessie Liu

Layer-1 Aptos has seen the price of its token, APT, soar by 460% since the start of the year.



Previously dubbed the ‘Solana Killer,’ proof-of-stake network Aptos promised to create a fast and cheap blockchain that would enable NFTs, DAOs and DeFi activity but <a href="https://blockworks.co/news/aptos-mainnet-launch-draws-criticism">fell short</a> when it launched in October last year.&nbsp;



Only 50 active developers are currently active on Aptos, according to data from <a href="https://tokenterminal.com/terminal/projects/aptos" target="_blank" rel="noreferrer noopener">TokenTerminal</a>. Its number of daily active users currently sits around <a href="https://explorer.aptoslabs.com/analytics" target="_blank" rel="noreferrer noopener">31,000</a>.&nbsp;



Despite these numbers, Aptos’ fully diluted valuation (FDV) is significantly greater than that of other blockchains, including Avalanche, Solana, Polygon, and Optimism, <a href="https://www.blockworksresearch.com/?ref=blockworks.co" target="_blank" rel="noreferrer noopener">Blockworks Research</a> Senior Analyst <a href="https://twitter.com/smyyguy" target="_blank" rel="noreferrer noopener">Dan Smith</a> said.



<a href="https://blockworks.co/price/APT" target="_blank" rel="noreferrer noopener">Aptos’ recent price surge</a> correlated with the deployment of the decentralized exchange (DEX) PancakeSwap on its blockchain two weeks ago&nbsp; — the DEX makes up a total of $33.26 million in TVL on Aptos — almost 60% of the entire Aptos TVL, <a href="https://defillama.com/chain/Aptos" target="_blank" rel="noreferrer noopener">according to DefiLama</a>.



“The lack of development is obvious in the on-chain liquidity, which mostly resides on a non-native DEX — PancakeSwap — in the form of non-native tokens such as USDC, BUSD, WETH,” Smith said.&nbsp;



Projects often run a series of testnets with developers who are building on their network before mainnet launches. That “creates a community of developers and users before the token launch, which is undeniably a more ethical process,” Smith added. Aptos ran four testnets in 2022 before launching on mainnet.



So why is the network with few users and developers seeing such a huge increase in its token’s price?



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/12567570/embed#?secret=2wIq28QupR" data-secret="2wIq28QupR" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">Nearly 400 articles about Aptos were published in the weeks leading up to its 460% rally | Chart by David Canellis</figcaption></figure>



<h3>The South Korean market&nbsp;</h3>



The price rally of Aptos parallels the beginning of “Xangle Blockchain Foundation Week” in South Korea, where the project has been heavily promoted.



In fact, Aptos’ focus on the South Korean market has always been intentional. A Twitter user who goes by the pseudonym DataaRocks noted in a series of <a href="https://twitter.com/DataaRocks/status/1618915057374748673" target="_blank" rel="noreferrer noopener">tweets</a> that the company had released a Korean language <a href="https://aptos.dev/aptos-white-paper/aptos-white-paper-in-korean/" target="_blank" rel="noreferrer noopener">version</a> of its white paper and partnered with local gaming company Npixel in November last year to launch METAPIXEL.&nbsp;



It is also preparing to launch its world tour hackathon in Seoul, DataaRocks said.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Additionally, Aptos is preparing to launch the Aptos World Tour Hackathon in 2023, with a total of four cities. Aptos put their first stop in Seoul, for 3 days from 1 &#8211; 3 Feb. 5/ <a href="https://t.co/GE8UUVPrJU">pic.twitter.com/GE8UUVPrJU</a>&mdash; Rock 🪨 (@DataaRocks) <a href="https://twitter.com/DataaRocks/status/1618915057374748673?ref_src=twsrc%5Etfw">January 27, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



This momentum, however, is reminiscent of Ripple’s run in 2017, Markus Thielen, head of research and strategy at Matrixport, said in a report.



“This reminds ‘Matrix on Target’ of XRP Ripple, which had 50% of [its] trading volume driven by Korean retail investors during the 2017 peak when the token went 10x in a matter of weeks,” Thielen said in a report.



<h3>Short positions</h3>



It is also likely that many traders are looking to short APT, Thielen said, noting that over the past 48 hours, price movements have been driven by two large short squeezes.



“By far, the largest volume comes from ByBit for Aptos, which is estimated to have its web traffic source from Russia [at] 19% and Korea [at] 14%,” he said.



Funding rates for APT perpetual futures have also been trading negatively, indicative of heavy short interest. According to information on <a href="https://coinalyze.net/aptos/funding-rate/" target="_blank" rel="noreferrer noopener">Coinalyze</a>, Aptos’ funding rate fell sharply on Jan. 25 and Jan. 26, before leveling out once the price spiked.



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Aptos Surge Triggers Flashbacks of Ripple’s 2017 Bull Run

<div id="highlights-block_634f11a2c7164" class="highlights">
 <ul>
 <li>Prominent investors in the blockchain include FTX Ventures, Jump Crypto and a16z</li>
 <li>Trading is set to begin on major exchanges, even as key details of the tokenomics remain hazy</li>
 </ul>
 
</div>



Aptos, a blockchain startup founded by ex-Meta employees, launched its mainnet yesterday, but it has been falling short of expectations, according to some prominent crypto traders.



Before its launch, Aptos was dubbed a potential “Solana killer” and made promises to make transactions faster and cheaper on a blockchain that supports NFTs, DAOs and DeFi activity.&nbsp;



The layer-1 proof-of-stake blockchain is the brainchild of Mo Shaikh and Avery Chin, who had previously worked on Facebook’s abandoned cryptocurrency project Diem.



Their Palo Alto-based company raised over <a href="https://cms.blockworks.co/funding-roundup-some-300-million-poured-into-crypto-projects-last-week/" target="_blank" rel="noreferrer noopener">$150 million</a> dollars in a Series A funding round in July led by FTX Ventures with participation from prominent venture capital firms such as Jump Crypto and a16z. The company previously raised a $200 million strategic round in March. 



After its summer fundraise, Aptos was valued at over $1 billion dollars, giving it unicorn status. But despite 4 years of work and the team&#8217;s vaunted treasury, the rollout has been rocky.



Aptos claimed that its network could handle up to 130,000 transactions per second (TPS) during its tests, more than existing layer-1s such as Ethereum and Solana.



In a Twitter thread, pseudonymous developer ParadigmEngineer420 said he observed activity <a href="https://twitter.com/ParadigmEng420/status/1582121416601673729" target="_blank" rel="noreferrer noopener">amounting to just 4 TPS</a>, and that a “majority of these transactions are not actual transactions, they are merely validators communicating and setting block checkpoints and writing metadata to the blockchain.”



However, Blockworks Research Analyst Dan Smith was unfazed that there are not yet multitudes executing transactions on the first day of the blockchain’s launch.&nbsp;



“Launching an layer-1 is a multi-year undertaking,” Smith said. “We need to remember how fresh this technology is and understand that there will be bumps in the road. If you bridge to a new chain, you are trailblazing and undertaking the maximum amount of risk possible; expect chaos.”



<h3>Aptos tokenomics unclear</h3>



Throughput claims aside, Smith does, however, raise concerns about Aptos’ tokenomics, noting that both unlocked and locked tokens can be staked.



That means “investors and core team members can use their locked allocations to earn staking rewards that are eligible to be sold at will,” Smith said.



Of the total supply of about 1 billion Aptos (APT), around 820 million are currently staked, ParadigmEng420 <a href="https://twitter.com/ParadigmEng420/status/1582121438202372096" target="_blank" rel="noreferrer noopener">tweeted</a>.



“This means that a bit over 80% of the token supply is controlled by the team and investors, as there was no airdrop nor other method as to earn mainnet Aptos tokens,” they said. “There was never a public sale or another method where users could have earned tokens,” he said.



That estimate is contradicted by the tokenomics documentation <a href="https://aptosfoundation.org/currents/aptos-tokenomics-overview" target="_blank" rel="noreferrer noopener">provided by the Aptos Foundation</a>, which puts the “Core Contributors” and “Investors” allocation at around 32.5%, which a majority of tokens earmarked for the “Community.”



Aptos did not immediately respond to Blockworks request for comment.



Paul Fidika, a Solana developer who worked on the development of Aptos staking, also <a href="https://twitter.com/paulfidika/status/1582386282386235392?s=46&amp;t=OJAZ_brx9qnBlHmPBPUXkA" target="_blank" rel="noreferrer noopener">tweeted</a> that Aptos tokens which will be going on sale tomorrow on <a href="https://twitter.com/ftx_official/status/1582420110400454656?s=46&amp;t=5VWoZf-SFzwqgAY1kAJ3kA" target="_blank" rel="noreferrer noopener">FTX</a>, <a href="https://www.coinbase.com/blog/coinbase-provides-day-1-support-of-aptos-through-custody-staking-and" target="_blank" rel="noreferrer noopener">Coinbase</a> and <a href="https://www.binance.com/en/support/announcement/f9df5bba5e1c4f1e9289240d0f9344e2" target="_blank" rel="noreferrer noopener">Binance</a>, are not going to come from public supply of the token, but rather from insiders. He suggested his personal involvement experience as a developer led him to become disillusioned with the project.



In <a href="https://youtu.be/1X3NGYr0zho" target="_blank" rel="noreferrer noopener">a separate review</a> of the project, tech investing veteran Anders &#8220;CTO&#8221; Larsson, said he repeatedly inquired with project representatives via Discord as to the initial circulating supply, but was stonewalled.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">It&#39;s not great that FTX/Binance etc are all listing Aptos without any tokenomics transparency at all. Surely it should be a prerequisite to listing something that users can have the basic information on what they&#39;re buying lol&mdash; Cobie (@cobie) <a href="https://twitter.com/cobie/status/1582208726639206400?ref_src=twsrc%5Etfw">October 18, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Smith sees parallels to applications built on Solana.



“Many Solana DeFi projects were launched this way and have suffered a down-only fate,” Smith said. “I am wary about Aptos, but in the end state of crypto, I believe there is room for a blockchain that optimizes for throughput. Will it be Solana, Aptos, or the yet-to-launch <a href="https://cms.blockworks.co/mysten-labs-launches-blockchain-platform-sui/" target="_blank" rel="noreferrer noopener">Sui</a>? I will be watching.”



Macauley Peterson contributed reporting.



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