Operators MEV bots used loans from the public pool of NFTX to claim ApeCoin (APE) tokens of the BAYC project. Coupled with liquidity shortages after trading commenced, this led to anomalous spikes in the asset’s price.
The project team presented an ecosystem-related token on March 17. Its issuance will total 1 billion coins and remain fixed. Among BAYC NFT holders, as well as derivative assets MAYC and NAKC, 150 million APE will be distributed.
As of writing, the tokens have been claimed by 12,121 addresses (over 79% of those eligible for the airdrop).
Parsec Finance founder Will Sheehan noted that in the wake of the distribution, the NFTX pool was literally rinsed by MEV bot operators.
Bored Ape NFTX vault atomically rinsed by an MEVor
buys vault token -> redeems entire pool -> claims airdrop of 60k APE -> re-supply’s the poolhttps://t.co/X83URmgyBK
— Will Sheehan (@wilburforce_) March 17, 2022
Direct interaction with NFTX’s smart contracts gives users the ability to use the flash loans (Flash Loans) function. In analogy with the flash loans (Flash Loans), it enables borrowing assets without collateral and repaying them within a single transaction.
Under normal circumstances this would not have yielded the operator anything beyond transaction costs. However, in the case of the APE airdrop, he stood to earn substantial profits. To do so:
- The user deposited the BAYC NFT into the platform’s liquidity pool;
- used the assets to claim rewards in APE;
- sold all APE;
- returned the NFT to the pool.
This earnings method is likely no longer available — NFTX pools are unlikely to still contain BAYC that have not yet participated in the airdrop.
i doubt theres any left unclaimed in those pools so probably not.
— Wazz (@WazzCrypto) March 17, 2022
APE tokens were sold primarily on decentralized platforms such as Uniswap v2 and SushiSwap. On the latter, price surges of the asset — which at one point exceeded $440 on SushiSwap — consistently coincided with large sales.
Abnormal price surges are the result of MEV bot activity, in particular the practice of sandwich attacks.
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The viral txn of an MEV bot «selling 2.4 $APE for 946 ETH»
A few people asked me how this happened. In short, it didnt happen.
Seems like a lot of people that got hooked on NFTs weren’t around during DeFi Summer in 2020 and arent familiar with MEV bots. Let me try to explain 🙂 pic.twitter.com/CnQSWljguP
— 0xBeans.eth (@0x_Beans) March 19, 2022
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The airdrop was not without other mishaps either. Some users, by mistake, sent APE to a smart-contract address, thereby locking access to the assets.
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Yep that was me. First time I ever not double checked the address🤷
— Jason Stone (@Mill_Mentor) March 18, 2022
In March 2022, the company behind BAYC, Yuga Labs, acquired intellectual property rights to the CryptoPunks and Meebits NFT collections from Larva Labs.