Original title: A Social and Financial Study of Memecoins
Written by Andrew Hong
Compiled by: Chris, Techub News
Meme tokens emerge with every market cycle. A group of people rally around a meme and temporarily drive up the price of an asset (from a day to a few months). This has become a popular market strategy in the cryptocurrency space, covering everything from the blockchain layer to the application layer, because it not only drives up the price, but also draws attention to the ecosystem. Some projects, such as Avalanche, have even gone a step further and created dedicated meme token funds.
The line between meme tokens and other types of cryptocurrencies may not be very clear, but usually the value of meme tokens is mainly supported by the meme culture associated with them, rather than actual economic activities or technical support. For example, DOGE is mainly supported by images and related concepts of Shiba Inu. In contrast, tokens such as ETH, UNI or MKR are supported by more complex technical and economic mechanisms, such as Ethereum, Uniswap protocol or mortgage minting stablecoin services.
Farcaster's Meme tokens (such as DEGEN) are the latest style of tokens, and their main advantage is that social media information and community discussions are completely open. Therefore, I would like to use some basic data to analyze social media information, community discussion and financial data.
1. Measuring Memes
I’ll start by assuming we can compare the financial and social status of all memes in one chart:
I have categorized five main areas in this chart:
Extreme Risk: Meme tokens with low liquidity and trading volume are very risky and vulnerable to sell-offs (as there may be only a few people providing liquidity);
Bot Arena: Most meme tokens never make it out of this phase, where thousands of coins (many with the same token name/variants) compete for community and funding attention.
Volatile Growth: Meme tokens that break out of their initial circle must now maintain their momentum and growth. You might see prices fluctuate 100-500% in a day, all in different directions, and a bunch of KOLs start paying attention to this meme.
Well Established: Leaders will be at the top of social media platforms and funding for a long time and clearly differentiated from other meme tokens. Weekly numbers may not fluctuate much, and attention is sustained as people flow in and out of the token to reach a balance.
Sleeping Giants: Meme tokens that have grown rapidly in community and funding, but have not suffered a sell-off, may languish in this corner for a while. A DAO may have been formed, and they started and dealt with the community chaos. In the meantime, they hope to be in the spotlight again.
Most meme tokens should be stuck in the "bot arena", with a few attractive meme tokens in the "volatility growth" segment, and maybe one or two that reach "established". In the process, some may lose social power and become "sleeping giants", while others may lose financial support (liquidity) and become "very high risk".
I believe that a successful meme token will typically go through the following stages:
You may see a lot of Meme tokens being pushed by bots/KOLs, resulting in high social scores but low funding scores (liquidity), leading to sell-offs.
After a lot of data collection and collation, I created this chart about the FarcasterMeme token on Dune:
It actually matches my expectations pretty well, you can see DEGEN is way up in the top right, and then there are a few others like ENJOY, HIGHER, TN 10 0X, and EVERY in the middle. Everyone else is stuck on the left, competing for attention and liquidity.
It’s worth noting that I haven’t filtered out bots here, so the social scores of some Meme Tokens may be skewed. This is something that we can improve in the future!
Now, let’s work backwards from the final graph to explain how these two scores were created. I will also pose further research questions and detail the origins of my inquiry for those who wish to dig deeper.
Dune’s dashboard can be found here , along with a few charts I didn’t cover in this post.
2. Social Score
Each score consists of a "base" component and a "growth" component. For the social score, we first measured casts (posts) and engagement of the coin mentions. So in this approach, "$DEGEN" counts, but "DEGEN" does not.
The above provides our five main columns:
Published by: The number of people who have been published to a fixed category
Receivers: The percentage of senders who have previously received the token
Number of throws: The number of times a fixed category is thrown
Channel: The number of channels that have been advertised for a fixed category
Activity level: Engagement (likes + replies) plus the number of impressions multiplied by the cube root of the number of channels.
Activity level: Engagement (likes + replies) plus the number of casts times the cube root of the caster times the cube root of the channel.
The overall social score is a "base" of activity levels, with a "growth" multiplier based on the week-over-week change in the amount of tokens sent and received. The idea here is that if you see a big increase in the number of people sending to a fixed category and those people buying/acquiring tokens, that's an extremely healthy sign.
Overall, it looks like this in a table:
3. Financial Rating
The following are the main financial indicators:
FDV: Total Supply times Price
Price: Latest price based on DEX transactions
Daily, Weekly, Monthly Price Change: The percentage change in price on a daily, weekly, and monthly basis
Liquidity: This is non-token liquidity, meaning that for the DEGEN-WETH pool, we only count the WETH portion of it. This gives us a more stable indication of how much good liquidity there is for a given token.
Transactions: Number of DEX transactions in the past 30 days
Transfers: The number of ERC-20 token transfers in the past 30 days
Total volume: USD volume of DEX transactions over the past 7 days
The “foundation” of the financial score is its non-token liquidity and DEX trading volume, and the “growth” part is based on changes in liquidity.
Overall, it looks like this in a table:
