Written by: Kaori, BlockBeats

Edited by: Jack, BlockBeats

When meme coins are cut in half, cut to zero, or even go to zero, few investors will investigate why they go to zero; however, DEGEN has fallen from 0.06 to 0.005, which has become the meme coin of Base and Farcaster index to some extent, and "reverses to 0", making a group of investors unwilling to believe why a good hand has become the current situation.

From the launch of Base at the beginning of the year to the investment in 1confirmation and the rise of the Farcaster ecosystem, 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 has been bad in the past two months, DEGEN is unlikely to be immune to the impact. However, Degen has encountered a series of problems in project operations and expectation management during this period, which has affected the market's confidence in DEGEN.

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 currency is partly due to its symbolic departure 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 actually 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 means that Degen is destined to not be a simple meme coin.

Dissatisfaction with the distribution model

As a meme coin that started with fairness, 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, and the number is determined by the reward value of other Farcaster users. The airdrop allocation amount does not rely on money, but good content is more likely to receive a considerable number of rewards.

At that time, due to the small number of users on the Farcaster platform, this kind of social capital had not yet solidified. Every user had the opportunity to obtain and give rewards. Even if they did not have 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, undermining 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 receive 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 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 rough 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 is beyond words, and the price of DEGEN has also been sluggish. However, Jacek has been actively communicating with the community during this period. In less than a week, the Degen team promptly adjusted the reward mechanism that "biased" senior users, but the subsequent new distribution mechanism still caused controversy in the community.

On June 18, Degen officially announced that it was 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 stated 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 be to lock DEGEN within a set time to get 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 get the reward amount. They believe that this is not conducive to the long-term construction of the Degen community, and will only harvest a group of zombie users who stake for airdrops.

Therefore, the new season of Degen airdrops was delayed again and again, from the end of June to July 4, and 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 caused the DEGEN price to rise to $0.01 in the short term, and the wavering airdrop rules made the price of the currency fall into the quagmire again. But the price is often just an appearance, and there are deeper reasons behind Degen's current situation.

Grassroots founder

The person who created Degen, Jacek Trociński, was born in Santa Monica, California. His mother is Polish. Jacek's family was not well-off since he was a child, so it was particularly important to have a stable job. After graduation, Jacek worked at IBM, Credit Suisse, and M-Bank in Poland. Despite good grades, Jacek was always eager to unleash his creativity, but he was always constrained by the pressures of real life, such as mortgages.

Last winter, Jacek decided to give it a go, quit his enviable 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 DEGEN, a community meme, became a hit after POINTS.

Jacek became friends with his boss Colton during his last job at Web2, and then they founded Degen together. There is no gorgeous team. In addition to the name and code, DEGEN had almost no brand and market when it was launched. The top hat Emoji and Degentlemen culture were all built from scratch by community volunteers.

During the past six months of Degen's development, Jacek was almost always in charge of external communications, and there were no professional marketing and public relations personnel. Jacek could be seen on Degen's official Twitter account, Warpcast, and Telegram groups, answering community questions at the forefront. A few days ago, Jacek was glad that Degen was not in a hurry to expand recruitment, saying that "surviving with cash on hand may be better than rapid growth without a runway."

Left: In the 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. This is illogical?" Jacek replied, "There is a lot of FUD. It is difficult to judge 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 lower prices so that they can buy cheaply."

Right: Jacek posted on Warpcast that "M1 money supply has increased 5 times. After such a large influx of cash, it is difficult to see that interest rates will fall. The economy may be difficult in the next few years. I am very happy that $DEGEN There is no rush to recruit, and having cash on hand to survive may be better than rapid growth without a runway. "

For a project that started in the community, the founder's down-to-earth approach is a choice that fits the project's tone, but Jacek's pragmatic character makes Degen's development always seem a little different from this crazy market.

In February of this year, Degen announced the completion of an angel round of financing of 490.5 ETH (about 1.47 million US dollars 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 financing is more like a donation. The loose individual investors make DEGEN not have the control power like WIF, and the team still belongs to the "grassroots development" model.

At the end of last month, Jacek said in the community and the official account of the Degen project that he would look for market makers for DEGEN, which may be the first step for Degen to start its transformation.

The ceiling is lowered

The reason why DEGEN cannot become WIF may be that it has a ceiling of imagination, because WIF is just a pet dog with a woolen hat, and Degen is still a Layer3.

On March 28, Degen announced the launch of Layer3 Degen Chain based on Base settlement. This is an L3 built by the Syndicate team using DEGEN as gas. Jacek likened Degen L3 to the blockchain version of Las Vegas, where users can enjoy various applications and games, rather than focusing on serious big tech projects like other chains.

The L3 plan was the result of a collision between Jacek and the Syndicate team at the ETHDenver conference in early March. The launch of the chain was not in Degen's initial roadmap, or in other words, Degen had no roadmap at all.

A few days after the launch of L3, Degen broke through $0.06 and set a new record high again. In less than a week, Degen Chain had 13 million transactions and more than 700,000 wallets, and Degen's Bridge had more than $60 million in funds transferred. However, as the market fluctuated, the price of DEGEN plummeted, and the performance of assets on the 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, but just as Layer2 was not optimistic about it, Layer3 is still labeled with the same glass ceiling.

As the old saying goes - "I am most afraid of meme coins doing things", because doing things means losing imagination.

Market expectations are misplaced

"Degen may be the best and worst thing that has ever happened to Farcaster."

Farcaster announced financing, DEGEN rose against the market, Farcaster issued a coin rumor, DEGEN fell, and it has become a Farcaster sentiment indicator in the eyes of investors, 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?

The mutually beneficial relationship between Degen and Farcaster is undoubted. Thanks to the rewards for posting and obtaining DEGEN airdrops, Degen was once the most active channel on Warpcast. What followed was 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, and he repeatedly said that the weight of Degen-related content should be reduced.

Top: Farcaster DAU; Bottom: DEGEN price 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 get potential returns from Base and Farcaster by investing in Degen, because neither platform has its own token.

"Remember that we are the unofficial token of Base and Farcaster, providing services to those who seek these ecological 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. These core aspects have not changed recently."

But the consistency mentioned by Jacek is very ambiguous in terms of Farcaster and even Base.

In the early days of Degen's launch, it made a great contribution to the user growth of Warpcast after the cold start. At that time, Dan was also happy to do something for Degen, such as designing the like logo of content containing Degen into a gentleman's hat. But 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 the 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 searched for Lens’s leading meme coin BONSAI on the Twitter of Stani, the founder of another 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, while Stani directly shouted orders.

Jacek’s identity as an entrepreneur is completely different from Dan’s identity as a founder, which can even be extended to the popular term SocialFi, which has been somewhat patinaed. Farcaster is Social, Degen is Fi, and binding Degen and Farcaster together may have a growth flywheel in the short term, but in the long run, social increments are 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 and a return 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 for development. But after so much analysis, it is better to say that meme coin is a product of fate determined by luck, and it will be on the altar if the timing is right.

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