Original author: Kaori, BlockBeats
Original translation: Jack, BlockBeats
The meme coin was cut in half, slashed to zero, or even gone to zero, and few investors would investigate why it went to zero; however, DEGEN fell from 0.06 to 0.005. This meme coin, which has to some extent become the Base and Farcaster index, "reversely went to 0", making many investors unwilling to believe why a good hand of cards turned into the current situation.
From the launch of Base at the beginning of the year to 1confirmation investment and the rise of Farcaster ecology, the price has also risen from 0.00002 US dollars to 0.06 US dollars in three months. DEGEN is undoubtedly a force that cannot be ignored in the meme craze of this cycle. Although the market conditions in the past two months have been bad, DEGEN has been unable to remain immune, but during this period, Degen has encountered a series of problems in project operations and expectation management, which has affected the market's confidence in DEGEN to a certain extent.
Since the first round of airdrops, the number of chips obtained through rewards has been greatly reduced. Therefore, although there are problems with Degen's distribution model, the sharp drop in the price of the coin is partly due to the symbolic departure caused by its deviation from the community-centric vision. Tomorrow, Degen will open a new round of airdrop distribution, and regardless of the effectiveness of the new incentive method, Degen has come a long way. As a community-driven project, Degen perfectly illustrates how grassroots entrepreneurs can promote the development of projects and win market recognition with limited resources. However, the complex relationship between Degen and Farcaster or Base also makes Degen destined to not become a simple meme coin.
Distribution model causes dissatisfaction
As a meme coin that started out as a fair game, it favors users who hold power in the community.
DEGEN was born out of Warpcast's Degen channel. Every user has the opportunity to receive token airdrops, the amount of which is determined by the reward value of other Farcaster users. The airdrop allocation amount does not depend on money, but good content is more likely to receive a considerable amount of rewards.
At that time, due to the small number of users on the Farcaster platform, this social capital had not yet solidified. Every user had the opportunity to obtain and give rewards. Even if they had no influence, they could obtain it through active participation. The bottom-up token distribution model and distribution standards were decentralized to the greatest extent, providing fair opportunities and space for all users on the Farcaster platform, and became the driving force to break the solidified crypto ecosystem or circle at that time.
But in June, Degen founder Jacek announced the use of data based on the OpenRank social graph to determine user activity levels and increase the reward amount for users with active badges, which undermined Degen's initial fair distribution mechanism. OpenRank is a profile reputation scoring system that addresses credibility in social networks. However, using OpenRank ranking as a reward amount standard will result in accounts that already have high content rankings having more reward amounts, while new users will not be able to participate equally in Degen's distribution. Power Badge is an account activity level mechanism of Warpcast. People with power badges are referred to as PB users. This social level mechanism has also been discussed within the Warpcast ecosystem because users who do not obtain badges will be subject to traffic restrictions.
Some time after Degen announced this decision, the price of DEGEN fell by more than 30%. In Degen's Telegram group, many community users expressed dissatisfaction with this approach. Some people said, "A project that only rewards old and top users cannot attract new users. 5 million DEGEN flows to these people (PB users) every month, and they reward each other, which does not help expand the Degen ecosystem."
In the eyes of some community members, Farcaster's crude Power Badge algorithm is a very lazy behavior, which has led to the loss of a large number of Farcaster users. For a project that claims to be a decentralized social protocol, especially a social media project that competes with Twitter, this way of prioritizing Power Badge is undoubtedly suicidal. "If you can't influence Farcaster's Power Badge decision, please at least don't support Power Badge in any way, especially not at the expense of degen tip" is the earnest request of community members.
The community's dissatisfaction was palpable, and the price of DEGEN coin fell. However, Jacek maintained active communication with the community during this period. In less than a week, the Degen team promptly adjusted the reward mechanism for "biased" senior users, but the subsequent new distribution mechanism still caused controversy in the community.
On June 18, Degen officially announced that it is developing a new incentive mechanism to encourage long-term holders. "The future system will require users to demonstrate their commitment to the Degen project by locking or staking, aiming to reward those who hold DEGEN tokens for a long time." The official also announced that the setting of increasing the reward amount for PB users will be abolished, and the reward amount will be determined based on the amount of DEGEN held.
On July 2, Jacek said that the new season of DEGEN airdrop rules will require DEGEN to be locked within a set period of time in order to receive the reward amount, and then released a vote on the length of the lock-up period. As of the time of writing, the most votes support a 3-month lock-up period, which is also the shortest option given.
However, some people are still dissatisfied with Degen's change from calculating the reward amount based on OpenRank to staking DEGEN to obtain the reward amount. They believe that this is not conducive to the long-term development of the Degen community, and will only gain a group of zombie users who stake for airdrops.
As a result, Degen’s new season airdrop was delayed again and again, from the end of June to July 4. On July 3, the official announced that the new round of distribution would be postponed to July 11.
The cancellation of the privileges of active badge holders has caused the price of DEGEN to rise to $0.01 in the short term, and the wavering airdrop rules have plunged the price of the currency into a quagmire. But the price is often just an appearance, and there are deeper reasons behind Degen's current situation.
Grassroots Founder
Jacek Trociński, the founder of Degen, was born in Santa Monica, California. His mother is Polish. Jacek grew up in a poor family, so having a stable job was particularly important. After graduation, Jacek worked at IBM, Credit Suisse and M-Bank in Poland. Although he achieved good results, Jacek always wanted to release his creativity. However, Jacek was always constrained by the pressure of real life, such as mortgages.
Last winter, Jacek decided to give it a go, quit his enviable and stable job, and devote himself to the crypto business. Before accidentally founding Degen, Jacek had tried several projects, including borrowing the FriendTech concept to try on Farcaster, but none of them succeeded. Until after POINTS, DEGEN, as a community meme, became a hit.
Jacek became friends with his boss Colton during his last job at Web2, and they founded Degen together. There is no fancy team. Apart from the name and code, DEGEN has almost no brand and market when it was launched. The top hat Emoji and Degentlemen culture were all built from scratch by community volunteers.
In the past six months of Degen's development, Jacek has been in charge of external communications, and there are no professional marketing and public relations personnel. Jacek can be seen answering community questions on Degen's official Twitter account, Warpcast, and Telegram groups. A few days ago, Jacek was glad that Degen was not in a hurry to expand and recruit, saying that "surviving with cash on hand may be better than rapid growth without a runway."
Left: In a Telegram group chat, a retail investor asked, "Can anyone summarize why degen has fallen more than the rest of the market? There is also a lot of smart money holding it, which is illogical?" Jacek replied, "There is a lot of FUD, and it is difficult to tell whether this is an organized attack. We may have been infiltrated by robots that spread FUD. Their goal may be to suppress projects and turn people to other projects, or to drive down prices so that they can buy cheaply." Right: Jacek posted on Warpcast that "M 1 money supply has increased fivefold. After such a large influx of cash, it is difficult to see interest rates falling. The economy may be difficult in the next few years. I'm glad that $DEGEN is not in a rush to hire. It may be better to survive with cash on hand than to grow rapidly without a runway."
For a project that originated from the community, a down-to-earth founder is a choice that fits the project's tone, but Jacek's pragmatic character makes Degen's development seem a little out of touch with this crazy market.
In February this year, Degen announced the completion of an angel round of financing of 490.5 ETH (equivalent to $1.47 million at the time), led by 1confirmation and participated by several Farcaster OGs. Although this part of the funds was used to develop the Degen ecosystem and community, this round of financing was more like a donation. The loose individual investors made DEGEN not have the control power like WIF, and the team still belonged to the "grassroots development" model.
At the end of last month, Jacek stated in the community and the official account of the Degen project that he would look for market makers for DEGEN. This may be the first step for Degen to begin its transformation.
The ceiling is lowered
The reason why DEGEN cannot become WIF may be that there is a ceiling on imagination, because WIF is just a pet dog wearing a woolen hat, while Degen is still a Layer 3.
On March 28, Degen announced the launch of the Layer 3 Degen Chain based on Base settlement, which is an L3 built by the Syndicate team and uses DEGEN as gas. Jacek likened Degen L3 to the blockchain version of Las Vegas, where users can enjoy various applications and games instead of focusing on serious big tech projects like other chains.
The L3 plan was the result of a discussion between Jacek and the Syndicate team at the ETHDenver conference in early March. Chain launch was not in Degen’s initial roadmap, or in other words, Degen did not have a roadmap at all.
A few days after the launch of L3, Degen broke through $0.06 and hit a new record high. In less than a week, Degen Chain had 13 million transactions, more than 700,000 wallets, and more than $60 million of funds were transferred on Degen's Bridge. However, as the market fluctuated, the price of DEGEN plummeted, and the performance of assets on Degen Chain was not satisfactory.
During this period, Degen also integrated many dApps of the Base ecosystem, which coincided with Base's vision of a consumer application chain. However, just as Layer 2 was once not favored, Layer 3 is still labeled with the same glass ceiling.
As the old saying goes - "The most frightening thing about meme coins is doing things", because doing things means losing imagination.
Market expectations are misaligned
"Degen is probably the best and worst thing that ever happened to Farcaster."
Farcaster announced financing, and DEGEN rose against the market. Farcaster issued a coin rumor, and DEGEN fell. In the eyes of investors, it has become a Farcaster sentiment indicator, but in the eyes of the Farcaster protocol core team, Degen is no different from other projects. If the market only hopes for this, is Degen's future sustainable?
There is no doubt that Degen and Farcaster have mutually beneficial relationships. Thanks to the rewards for posting and the DEGEN airdrop, Degen was once the most active channel on Warpcast. However, it was followed by a large number of spam posts and farmers seeking mutual connections. The lack of real user content made Dan, the founder of the Farcaster protocol, very distressed. He repeatedly said that the weight of Degen-related content should be reduced.
Above: Farcaster DAU; Below: DEGEN price trend chart | The two show a positive correlation, but the correlation between DEGEN price increase and Farcaster DAU decreases in the later period
The reason why DEGEN has fallen into such a crazy situation is that Farcaster or Base lacks investment targets that retail investors can pay for. Coupled with this year's meme craze, it is natural for DEGEN to become an index.
At the same time, Jacek often reinforces this point in his external publicity. He said that DEGEN is the most recognized token on Farcaster and the token on Base second only to USDC and WETH. Many investors obtain potential returns from Base and Farcaster by investing in Degen, because neither platform has its own token.
“Remember, we are the unofficial token of Base and Farcaster, providing services to those seeking these ecosystem benefit opportunities, and it is critical to maintain this consistency.”
Jacek responded to community user questions on Telegram and calmed investor sentiment | "It is not constructive to simplify market dynamics into specific events and blame them. Even Wall Street analysts find it difficult to do this. Degen is essentially a community, a proxy bet on Farcaster and Base, and a reward system. None of these core aspects have changed recently."
But this consistency Jacek mentions is quite ambiguous when it comes to Farcaster and even Base.
In the early days of Degen's launch, it made a great contribution to the user growth of Warpcast after its cold start. At that time, Dan was also happy to do something for Degen, such as designing the like symbol of content containing Degen into a gentleman's hat. However, as the Degen community grew, as mentioned above, this mutual achievement began to become an aspect that Dan wanted to restrain.
Dan’s attitude towards tokens can be said to be resistant. In a text AMA, someone directly asked him why he didn’t deploy a Farcaster token and whether DEGEN was an unofficial token of Farcaster. Dan’s answer was concise and powerful - what is the use of tokens?
Someone searched for DEGEN on Dan’s Twitter account and for BONSAI, the leading meme coin in the Lens ecosystem, on the Twitter account of Stani, the founder of another major decentralized social protocol Lens. The results showed that Dan did not actively mention the Degen token, and also made it clear that Farcaster is not equal to Degen. On the other hand, Stani directly made a clear call.
Jacek's role as an entrepreneur is very different from Dan's role as a founder, which can even be extended to the somewhat overused buzzword SocialFi. Farcaster is Social, Degen is Fi, and binding Degen and Farcaster together may create a growth flywheel in the short term, but in the long run, social growth is not transferred by economic incentives, and the process of converting financial capital into social capital is also full of challenges.
"Degen" means early stage and high uncertainty, but now Degen, as a serious project with a market value of 2 billion returning to 200 million, has entered a new stage of development. It should promote development in a more mature way of operation.
Or maybe the way to make DEGEN more Degen is to let it return to the essence of meme coin and become a spiritual totem. After all, only illusory things have room to play. But after so much analysis, it is better to say that meme coin is a product of luck, and it will be on the altar if the timing is right.
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