Analyze the current meme craze from the perspective of community and economic performance

Original Title: A Social and Financial Study of Memecoins

Original Author: Andrew Hong

Original Compilation: 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 sourced from a dataset specifically compiled 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 aims to provide a more scientific assessment and classification of these tokens, thereby offering decision-making support for investors and analysts.

Introduction

Every market cycle is accompanied by the emergence of meme coins. If you're unfamiliar with the concept, think of the 2021 reddit forum driving the AMC stock price surge. A group of people rallies around a meme, pushing the price of a certain asset up in the short term (ranging from a day to several months). This has become a popular market strategy in the crypto space from the blockchain layer to the application layer, as what people are driving is not just the price, but also the attention of an ecosystem. Some projects, like Avalanche, have even created an official foundation for meme coins to go further.

The distinction between meme coins and any other tokens may not be very clear, but generally, there is nothing supporting the token other than the meme image itself. For example, DOGE as a token is really only supported by the Shiba Inu image, which is different from ETH protected by the Ethereum blockchain, UNI backed by a complete Uniswap protocol, or MKR supported by a fully collateralized stablecoin service.

Farcaster meme coins (like DEGEN) are the latest trend, with their main advantage being their community's public accessibility. Therefore, I want to conduct some basic analysis by combining community and financial data.

How to Evaluate a Meme Coin

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

The chart divides into five main areas:

· Extreme Risk: Meme coins with low liquidity and trading volume are very dangerous and prone to RUG pulls, as there are too few liquidity providers.

· Bot Arena: Most meme coins will never break out of the war, as thousands of coins, including many with the same or similar token names, compete for community and asset attention.

· Volatile Growth: Those meme coins that break through the initial period need to maintain their momentum and growth. During this period, price fluctuations of 100-500% may be observed, whether the fluctuations are upward or downward, with many KOLs starting to latch onto this meme.

· Well Established: Leaders in the meme coin market will occupy a high position in community attention and financial value for a period, creating a significant gap with other competitors. This leading status may manifest as smaller price fluctuations, showing a kind of stability, as the number of new investors interested in the meme coin balances with the number of exiting investors, thus maintaining ongoing attention to the meme coin.

· Sleeping Giant: Meme coins that have significant growth in both community and funding and have not suffered a "RUG" may temporarily fall silent. It is likely that a DAO has formed, and they begin to launch minting or products while dealing with community chaos, hoping to regain attention.

Most meme coins should be stuck in the "Bot Arena," while some eye-catching meme coins are in the "Volatile Growth" section, and perhaps one or two meme coins can become "Well Established." In this process, some may lose community strength and turn into "Sleeping Giants," while others may lose liquidity and thus become "Extreme Risk."

A successful meme coin's roadmap should look like this:

Many meme coins may be highly promoted by bots or KOLs, gaining significant media attention, but in reality, their liquidity may not be strong, which could expose investors to the risk of being "RUG'd," meaning that if the project team suddenly withdraws liquidity, investors would suffer losses.

After extensive data analysis, I created charts related to Farcaster meme coins on Dune:

This aligns very well with my expectations; you can see DEGEN at the farthest point in the upper right, followed by other coins like ENJOY, HIGHER, TN100 X, and EVERY in the middle. Other meme coins are stuck on the left side, competing for attention and liquidity.

It is worth noting that I have not filtered out Sybil attacks or bots here, so some community scores for meme coins may be biased. This is a direction for future improvement.

Now, let's explain how these two scores are generated from this final chart. I will also pose further research questions and detail my logic for those who want to dig deeper.

There are also some icons I have not listed in this article; those interested can find them here.

Community Score

Each score consists of a "base" part and a "growth" part. For the community score, we first measure the delivery and engagement of token mentions. Therefore, by this method, "$ DEGEN" would be counted, but "DEGEN" would not. Symbols related to the token, such as degen hat, higher arrow, tn100 x ham, will also be included in the total.

This provides us with five main metrics:

· Deliverers: The number of people delivering to a specific token.

· Percentage of Receivers: The percentage of these deliverers who have previously received the token.

· Number of Deliveries: The number of deliveries containing the specific token.

· Number of Channels: The number of channels that have made deliveries containing the specific token.

· Activity Level: Engagement (likes + replies) plus the cube root of the number of deliveries multiplied by the cube root of the number of deliverers.

The overall community score is calculated by multiplying the "base" activity level by a "growth" multiplier based on weekly unique deliverers and receivers' changes. Essentially, if we see more and more people delivering to a token and these people are finding ways to own these tokens, that is definitely a very healthy signal.

Overall, it looks like this in the table:

Financial Score

Here are several financial metrics:

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

· Price: The latest price based on DEX trading.

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

· Liquidity: This liquidity refers to non-token liquidity, meaning for a DEGEN - WETH (Ethereum) liquidity pool, we only calculate the WETH portion. This provides us with a more stable signal indicating how much good liquidity a given token has.

· Trading Volume: DEX trading volume over the past 30 days.

· Transfer Volume: The number of ERC20 transfers in the past 30 days.

· Total Transaction Volume: The dollar trading volume on DEX over the past 7 days.

The "base" part of the financial score is determined by its non-token liquidity and DEX trading volume, while the "growth" part is calculated based on week-over-week changes in liquidity. Overall, it looks like this in the table:

Follow-Up Questions

Here are some questions I hope to explore further from here:

· How can we score "deliverers" for Sybil attacks or bot behavior based on the value of tokens held in their wallets?

· Can we grade "deliverers" based on their relationships with known groups or communities?

· How can we classify the stages of community and financial growth? What correlations exist between them? Is there a time lag or interdependence?

· Are there similar crowds or types of people driving the initial growth phase? What characteristics do those who join a meme first, right on time, and last have? How does this relate to user levels?

· What are the driving factors when a meme shifts from one hotspot to another?

· How can a person's level of interest be assessed based on their investment in community or finance? Do people change their "delivery" behavior after buying or selling a specific token?

· What is the average lifecycle of a meme in terms of community and financial aspects?

Data Query Guidance

While all outputs here may seem to come from a single dataset, the underlying data is somewhat complex. You can query relevant data based on the following guidance:

· dune.neynar…… "The dataset is uploaded by Neynar's team, which indexes all Farcaster data. If you're unfamiliar with the concept of Farcaster data, start with my beginner's guide. Generally, if you see "dataset" in the tab name, it means it was uploaded by the team name displayed after the "dune." prefix.

· As long as you see "result" in the table name, it is a matview. I created the "erc20 token summary table" to obtain all transaction, price, liquidity, and transfer data for specific tokens. This summary table is further broken down in subqueries, so the final query runtime is only 3 minutes. The total runtime for all queries is about 60-70 minutes.

· If you see table names that do not follow the above prefixes (and are not raw tables or decoded tables), then they are likely from the spellbook. Therefore, tokens.erc20 provides me with all tokens with symbols or decimals, dex.trades gives me all DEX trades on the blockchain, etc. You can search the table namespace or table name (like "dex" or "trades") in the GitHub repository to find the logic of the tables.

Conclusion

Meme coins, as a unique type of cryptocurrency, often have their market performance strongly influenced by community media and dynamics. Beyond proposing a systematic framework for evaluating meme coins, the data analysis built on the Dune platform allows us to monitor and predict the performance of these tokens more accurately.

Despite certain challenges, such as the potential risks of Sybil attacks or bot manipulation, continuous monitoring and technological improvements can make meme coin analysis more precise and practical. Future research may further deepen the understanding of these complex factors and bring new insights to the broader field of cryptocurrency.