Original title: A Social and Financial Study of Memecoins

Original author: Andrew Hong

Original translation: Ladyfinger, blockbeats

Editor's note:

This article delves into the behavior and impact of meme coins in the current market, revealing the diverse performance and investment potential of this type of cryptocurrency through a detailed analytical framework. The data and charts in the article are derived from a data set compiled specifically for Farcaster meme coins, providing a comprehensive perspective to help readers understand the community and financial performance of meme coins. By combining community data with financial data, the author attempts to make a more scientific assessment and classification of this type of token, thereby providing decision support for investors and analysts.

Introduction

Every market cycle is accompanied by the emergence of meme coins. If the concept is unfamiliar, think of the 2021 reddit-driven AMC stock surge. A group of people rallied around a meme and drove the price of an asset higher in a short period of time, from a day to a few months. This has become a popular market strategy in the crypto space from the blockchain layer to the application layer, as people push not only the price but also the attention of an ecosystem. Some projects like Avalanche even went so far as to create an official foundation for meme coins.

The distinction between a meme coin and any other token may not be very clear, but usually, there is nothing backing the token other than the meme image itself. For example, DOGE is a token that is really backed by a Shiba Inu image, unlike ETH which is secured by the Ethereum blockchain, UNI which has the full Uniswap protocol behind it, or MKR which has the full collateral stablecoin service behind it.

Farcaster meme coins such as DEGEN are the latest trend and their main advantage is that their community is publicly accessible. Therefore, I wanted to do some basic analysis combining community and financial data.

How to evaluate a meme coin

We can use the following chart to divide all meme coins:

There are five main areas divided in the above chart:

· Extreme Risk: Meme coins with low liquidity and trading volume are very dangerous and easy to be RUG because there are too few liquidity providers

· Bot Arena: Most meme coins will never break out of the war because thousands of currencies, even many meme coins with the same or similar token names are competing for the attention of the community and assets

· Volatile Growth: Those meme coins that break through the initial period need to maintain their momentum and growth. During this period, you may see price fluctuations of 100-500%, and whether the fluctuation is upward or downward, many KOLs will begin to catch the meme.

· Well Established: The leader in the meme coin market will occupy a high position in community attention and financial value for a period of time, forming a clear gap with other competitors. This leading state may be manifested as smaller price fluctuations, showing a kind of stability, because the number of new investors interested in the meme coin reaches a balance with the number of investors exiting, thereby maintaining continued attention on the meme coin.

· Sleeping Giant: A meme coin that has had a lot of growth in both community and funding and has not suffered from "RUG" may go dormant for a while. It is very likely that a DAO has been formed and they are starting to launch minting or products and deal with the chaos in the community while hoping to be noticed again.

Most meme coins should be trapped in the "Bot Arena", some high-profile meme coins are in the "Volatile Growth" section, and perhaps one or two meme coins can become "Well Established". In the process, some may lose community strength and become "Sleeping Giant", while others may lose liquidity and become "Extreme Risk".

And the roadmap of a successful meme coin should be like this:

You may see many meme coins get a lot of media attention because of the promotion of bots or KOLs, but in fact their liquidity is not strong, which may put investors at risk of being "RUG", that is, if the project party suddenly withdraws liquidity, investors will suffer losses.

After a lot of data analysis, I made a chart related to the Farcaster meme coin on Dune:

This is actually very consistent with my expectations. You can see that DEGEN is at the far end of the upper right corner, and then some others like ENJOY, HIGHER, TN100X and EVERY are in the middle. The other meme coins are all stuck on the left side, competing for attention and liquidity.

It’s worth noting that I haven’t filtered out Sybil attacks or bots here, so the community scores for some meme coins may be biased. This is an area that could be improved in the future.

Now, let’s explain how these two scores came about from this final chart. I’ll also ask further research questions and explain my logic in detail for those who want to dig deeper.

There are also some icons that I didn’t list in this article, which can be found here.

Community Score

Each score consists of a "base" component and a "growth" component. For the community score, we first measure the delivery and participation of token mentions. Therefore, following this method, "$DEGEN" will be counted, but "DEGEN" will not. Symbols related to the token, such as degen hat, higher arrow, tn100x ham, will also be counted in the total.

This gives us five main metrics:

· Senders: The number of people who have spun a particular token

· Receivers: The percentage of those spunters who have previously received that token

· Number of Shots: The number of shots that have contained a particular token

· Number of Channels: The number of channels that have had shots containing a particular token

· Activity Level: Engagement (Likes + Replies) plus the number of shots times the cube root of the number of shooters times the cube root of the number of channels.

The overall community score is calculated by taking the “base” activity level and a “growth” multiplier based on the weekly change in unique shooters and receivers. Essentially, if we see more and more people spun a token, and those people are finding ways to own those tokens, that’s definitely a very healthy sign.

Overall, it looks like this in a table:

Funding Fraction

Here are a few financial metrics:

· Fully Diluted Value (FDV): Fully diluted price, total supply x price

· Price: Latest price based on DEX transactions

· Daily, Weekly, Monthly Price Change Percent: Percentage change in price on a daily, weekly, and monthly basis

· Liquidity: This liquidity refers to non-token liquidity, meaning that for a DEGEN-WETH (Ethereum) pool, we only count the WETH portion of it. Doing this gives us a more stable signal of how much good liquidity a given token has.

· Volume: DEX transaction volume in the past 30 days

· Transfer Volume: Number of ERC20 transfers in the past 30 days

· Total Volume: USD volume traded on DEXs in the past 7 days

The “base” portion of the financial score is determined by its non-token liquidity and DEX volume, while the “growth” portion is calculated based on the week-over-week change in liquidity. All in all, it looks like this in a table:

Follow-up Questions

Here are some questions I’d like to dig deeper into from here:

· How can a “sender” be scored for Sybil attacks or bot behavior based on the value of tokens held in their wallet?

· Can “senders” be graded based on their relationships with known groups or communities?

· How are the stages of community and financial growth categorized? How are they related? Is there a time lag or interdependence?

· Are the same groups of people or types of people driving the initial growth stages? What are the characteristics of those who join a meme first, just in time, and last? How does this relate to the level of users?

· What are the driving factors behind a meme as it moves from one hot spot to another?

· How is a person's level of interest assessed based on their investment in the community or finances? Do people change their "investment" behavior after buying or selling a particular token?

· What is the average lifespan of a meme at the community and financial levels?

Data Query Guide

While all the output here looks like it comes from a single dataset, the data behind the scenes is actually a bit more complex. You can query the data using the following guides: dune.neynar...... "The dataset was uploaded by Neynar's team, which indexes all Farcaster data. If you are not familiar with the concept of Farcaster data, start with my beginner's guide. Generally speaking, if you see "dataset" in the tab name, it means it was uploaded by the team name shown after the "dune." prefix.

· Whenever you see "result" in a table name, it is a matview. I created an "erc20 token summary table" to get all the trades, prices, liquidity, and transfer data for a specific token. This summary table was further broken down in subqueries so that the final query only took 3 minutes to run. The total run time for all queries took about 60-70 minutes.

· If you see a table name that doesn't follow the above prefix (and isn't either the raw table or the decoded table), then it's most likely from the spellbook. So tokens.erc20 gives me all tokens with a symbol or decimal, dex.trades gives me all DEX trades on all blockchains, etc. You can find the table logic by searching the table namespace or table name (such as "dex" or "trades") in the github code repository.

Summary

As a unique type of cryptocurrency, the market performance of meme coins is often strongly influenced by community media and community dynamics. In addition to proposing a systematic framework for evaluating meme coins in the article, through data analysis built on the Dune platform, we can more accurately monitor and predict the performance of these tokens.

Although there are certain challenges, such as the potential risk of Sybil attacks or Bot manipulation, the analysis of meme coins can be more precise and practical through continuous monitoring and technical improvements. Future research may further deepen the understanding of these complex factors and bring new insights to the broad field of cryptocurrency.

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