How unequal is the crypto economy? A data analysis on the ApeCoin DAO.
Crypto is often portrayed as a tool to free people from the oppression of governments and create a fairer, more equal society. While this can be philosophically true, is it also what happens in practice?
I decided to try answering this question by scraping data from a policy votation within the ApeCoin ecosystem and running an analysis. What we’ll be looking at are the votes from the ApeCoin DAO to move ApeCoin out of the Ethereum blockchain after the gas fees surge caused by the ApeCoin mint.
OK, that last sentence was a mouthful for a lot of people, so let me explain what the hell I just said. If you know your crypto stuff, feel free to skip this explanation and go straight to the analysis.
A quick explanation of what we’re looking at for non-crypto experts
- What is ApeCoin? ApeCoin is a cryptocurrency issued by Yuga Labs
- What is Yuga Labs? It’s the company that became famous for creating the Bored Ape Yacht Club NFTs, the weird monkeys that sold for 6 figures and are owned by famous people like Snoop Dogg, Eminem, Taylor Swift, and more.
- What’s a DAO? It’s a Decentralized autonomous organization, constructed by rules encoded in the blockchain, and controlled by the organization’s members
- What are they voting for? ApeCoin holders are voting to move ApeCoin from Ethereum to another blockchain
- Why are they voting? Because when Yuga Labs started selling virtual land for their metaverse (called Otherside), so many people wanted to buy them that they “overloaded” the Ethereum network, and transactions became more expensive than the virtual land itself (in form of “gas fees” — the price you pay to do stuff on the Ethereum blockchain). The proposal would move the ecosystem to a more scalable technology.
- How are they voting? Basically the more ApeCoin you have the more your vote matters.
So here’s what we’re looking at today: how people with a lot of crypto influence the outcome of a public vote to take a major decision in a crypto organization.
Analysis
I scraped the data from Snapshot, a multi-governance tool for crypto projects to poll their user bases and run some analysis with Python. If anyone is interested in the code, ask and I’ll publish it on Github.
For starters: the outcome of the vote was in favor of moving ApeCoin out of Ethereum, with 53.6% of the votes.
People’s votes were weighted by how much ApeCoin they had. Basically, each ApeCoin was one vote. If we ignore the wallet size and imagine that every person’s vote counted the same, we’d get the same outcome but with a very different distribution:
This means that the people against the proposal are very few, but they have lots of ApeCoin. So much that even though they are just 13.3% of the population, they almost won with 46.7% of the votes (remember: every coin you have has a weight).
Let’s look a little bit deeper at the wealth difference between these two groups.
So basically the median wallet of people in favor of the change had 9.5 APE, while people against had 1016.5 APE, more than 100x more.
This confirms that people against the change are much richer than the people in favor of it. This makes sense, as Ethereum fees hit more people with less money.
But let’s zoom out for a moment. There’s for sure a big difference between people in favor and people against, but what happens when we look at the overall ApeCoin economy? In other words, how many whales (rich people) are there in the overall group of voters?
The median wallet has 16 ApeCoin, the biggest 1.25 million. The top 9 wallets have the same amount of ApeCoin (and therefore the same voting power) of the other 792 voters.
It looks like a pretty unequal economy. But how unequal? A common measure of inequality is the Gini coefficient: a number between 0 and 100 that represents how unequal an economy is (0 is a perfectly equal economy where everyone is the same, and 100 is when only one person has all the income and all others have none).
I’ll report some data from the world bank to give you a perception of these values:
- the USA has a Gini coefficient of 41.5
- the lowest Gini coefficient is in the Slovak Republic, 23.2.
- The highest Gini coefficient in world countries is in South Africa, 63.
What’s the Gini coefficient of the ApeCoin economy? More or less than the most unequal country in the world? Way more: I calculated a Gini coefficient of 92.
Conclusions
I often talk about the disconnect between the stories we tell each other about crypto (freedom! equality! decentralization!) and what’s actually happening.
DAOs are philosophically amazing. They could allow organizations to be run in an entirely decentralized way, with proposals and decisions coming from the people of the community. Theoretically.
Practically, the exponential growth of the crypto economy means that those who got in early (the few) have exponentially more power than those who got in late (the majority).
This means that practically, power is focused in the hands of very few, creating de facto a much more centralized and unequal society than what already exists in the world. This is not a problem limited to ApeCoin, but of the crypto economy overall (95% of Bitcoin is in the hands of 2% of people)
Now, the big question is: does it mean that crypto is evil and we should ditch it altogether?
Hell no, I still believe that there are features of crypto that are valuable and can bring a positive impact. I just think that we are not sure yet which crypto features belong to that class.
For sure crypto isn’t always great for equality and decentralized decision making, but maybe its transparency it’s enough to justify using it (how cool is it that I could run this analysis without asking anyone?).
Again, we don’t know yet what space crypto will take in society. But I can’t wait to see the future unfold, study it, and find that out.
