Author:@Web3Mario
Abstract: It's been a while since we last met. After a period of rest, my body and mind have been relaxed, and I will continue to learn and share. Recently, the market spotlight has been mainly on the Chinese stock market, and the crypto world has not reached the expected level before the rate cut, appearing somewhat dormant. However, there is one event that has caught my attention, and that is the classic MEME on Solana, the sloth image Slerf, which is experiencing a CTO (Community Take Over) dispute initiated by a Slerf community opinion leader in the Chinese region, and as a result, the price of Slerf has doubled rapidly within 5 days. Since I have previously lacked sufficient understanding and reflection on MEME, I think this event is a good learning opportunity. After researching for a while, I have some insights to share and discuss with you.
From a phenomenal MEME to being questioned by the community, what has Slerf experienced
First, let's briefly review the Slerf project. This is a MEME Coin with a sloth as the main image, released on Solana in March 2024 by grumpy@youlovegrumpy. At that time, the market was strongly influenced by the wealth effect of the phenomenal project BOME, which drove the boom of a batch of MEME projects with pre-sale and fair launch as the core selling points, and Slerf was one of them. It was agreed that 50% of the total token supply would be used for pre-sale, and after the pre-sale was successful, all the sales proceeds and another 50% would be injected into the DEX to provide liquidity for the corresponding trading pair, and the ownership of this part of the liquidity would be abandoned. During its pre-sale phase, it quickly raised about $10 million in SOL at a price of about $0.02. However, at the TGE, due to the developer's operational mistakes, the minting rights of the Slerf tokens were abandoned before the completion of the liquidity provision and the release of the pre-sale portion of Slerf, resulting in all pre-sale participants unable to obtain the corresponding Slerf, and the pre-sale proceeds were also locked in the liquidity pool and could not be refunded.
Relying on this event, Slerf quickly gained a lot of attention. On the one hand, because the project had essentially created a MEME Coin with a value floor of $0.02 and no circulation, this means that as long as you enter early enough, your cost basis will be the lowest, which is determined by the DEX's Bonding Curve. This caused a lot of user FOMO, and the price of Slerf soared from the initial $0.02 at launch to a high of $1.2, a nearly 60-fold increase. On the other hand, the group of pre-sale participants affected by this incident was broad enough, and the potential for future traffic capture was huge, which also quickly attracted the attention and support of various institutions or projects. Many institutions or major influencers have been using the method of helping to compensate the pre-sale participants to attract traffic, including exchanges and many star projects.
Subsequently, with the support of huge traffic, Slerf also started a donation and compensation activity for the pre-sale participants, which was organized by the exchange LBank, so I think the fundraising and repayment process should be fair. In addition, Slerf also raised funds by issuing new Non-Fungible Tokens, and through this, a total of 36,180 SOL was raised.
As of September 9, 2024, according to the data publicly disclosed by the official X account, a total of 25,444 pre-sale participating addresses have accumulated 53,377 SOL, and 25,194 addresses have been repaid a total of 40,940 SOL, with the remaining 250 addresses still owing 12,437 SOL, averaging about 60 SOL per address. This means that the repayment plan should have prioritized the small-amount participants. However, there is also a problem, that is, as the majority of small-amount participants are compensated, the legal risks faced by the founding team will be released as the scope of impact narrows, which means that their willingness and effort to repay will significantly decrease. The claims of large-amount participants will become increasingly difficult. And as attention continues to wane, Slerf holders will have to face the price decline caused by the lack of new buying power.
The recent CTO initiated by BillyWen@billywen_, a Chinese opinion leader in the Slerf community, is a response to this reality. For Billy, his fans prefer to call him "Scenery Brother", and I'm not too clear about the origins, but my research shows that the main factors that allow him to have a great influence in the Slerf community are: first, he holds 5 million Slerf (which may also be held by a token fund behind him), and claims not to have sold during the price decline; second, he has cumulatively donated 6,778 SOL, worth about $100,000, in the Slerf donation campaign. The on-chain data also verifies this figure. Therefore, it is appropriate to say that BillyWen is a key opinion leader in the Slerf community with high recognition and participation in Slerf.
The so-calledCTO, which stands forCommunity Take Over, refers to the community taking over the project. This mechanism is mainly to address the situation where the issuance cost ofMEMEhas been greatly reduced due to the popularization of someMEME Launchpad, and there are manyrugcases, where the founding team quickly dumps the tokens and ceases operations, or even directlyrug. However, there are also some projects that the community still has hope and recognition for, and the initiators hope to take over the project and restart it. This process is calledCTO. UnlikeDeFiprojects, since mostMEMEdo not have on-chain management requirements, the most critical part of the entireCTOprocess is the takeover of its most valuable social media accounts. TakingSlerfas an example, its officialXaccount has as many as166,000followers. AndBillyalso described in his content released onOctober 12that after theCTOwas denied by the officialSlerfteam, he will initiateFCTO, which is theCTObattle, and said he will donate another$1 millionfor the operation of theCTOteam. The specific implementation details have not been made public yet, but this has undoubtedly resonated with theSlerfcommunity and gained the support of relevant investors, and the price ofSlerfhas quickly risen from$0.14to$0.24.
TheSlerfofficial team, after being silent for a long time, also seemed to have posted a thought-provoking content to respond to this incident, explaining their efforts over the past period. However, the community does not seem to recognize their past three actions, which are that their founderGrumpyissued newMEMEor cryptocurrency projects (specifically$CUFF,$MEMECHAN and$OODLES), and used the influence ofSlerfto promote them, ultimately realizing profits, but the profits were not used to compensate and buildSlerf, and the community believes this is a betrayal.
The above is a simple review of the ins and outs of theSlerfincident. Regardless of how the incident turns out, I believe this is an attempt worth paying attention to, and it will have a significant impact on the operational paradigm ofMEMEprojects. At the same time, I also tried to abstract some observations on theMEMEtrack, hoping to discuss with everyone.
Opportunities and Current Challenges in the Development ofMEMEProjects
The entire observation is centered on two aspects. First, let's explore the deep reasons behind the smooth development of theMEMEtrack:
1. Equal opportunities brought by fair launch, and more reasonable risk-return ratio for secondary market investors compared toVCtokens: We know that the traditional criticism ofVCtokens is that manyVCscan obtain cheaper tokens in the primary market before theTokenis listed and circulated, which puts many secondary market participants at a natural disadvantage in terms of holding cost. Of course, this model is relatively normal in the traditional financial world, but in theCryptotrack, due to the lack of complete regulatory policies on primary market transactions, this makes it easier for traders to obtain conveniences. These will be unconsciously transformed into risks for secondary market investors. The benefit of fair launch is that there is equal opportunity for secondary market investors, and the risk-return ratio is more balanced. Whales may have higher potential gains, but due to their large principal, the trading friction or slippage during position building and clearing will also be relatively large. While for retail investors, although the potential returns are lower, their capital is lighter, and they are more flexible in buying and selling, if they can do well in the wave, the return rate is also quite objective.
2. Low cold start cost of the product: Due to the existence of a large number of launch platforms, the development cost of the product itself is very low, and professional teams have the ability to mass-produce it industrially with low risk. And the project operation methods are similar toNFT, which also helps to attract teams and users migrating from the coolingNFTtrack.
3. The valuation model of the track has not yet formed a fixed pattern: Unlike many utility or security projects, due to the cultural attributes ofMEMEproducts, it is difficult to form a definite paradigm in valuation, so they are not easily subject to the limitation of price-earnings ratio. The price fluctuations have elasticity, the distribution of holding costs is more uniform, and the trading is more active.
And combined with theCTOevent ofSlerf, I think theMEMEtrack also faces the following challenges:
1. How to provide sufficient and sustained incentives forMEMEfounders to ensure their long-term commitment: MostMEMEprojects are actually operated by the founding team, but for fair launch projects, the long-term revenue point of the founding team does not seem to be very clear. Except for the potential traffic and brand value, since there is no pre-allocated team portion, even if the token price rises sharply, the founding team cannot benefit from it in the short term, and all the pre-sale funds are used to provide liquidity. If this requirement is appropriately relaxed, such as allocating a certain team proportion, it may significantly affect the enthusiasm of traders to participate, after all, the startup cost ofMEMEis really low.
2. Is there a betterMEMEproject governance paradigm to help the project better cope with the trend of increasingly diluted liquidity: Due to the rapid emergence of a large number of similar projects, this will have a diluting effect on the liquidity of a certain popularMEME. This means thatMEMEprojects have higher maintenance costs compared to other tracks, and it is also because the startup threshold is low, the founding team may not even have strong marketing or commercialization capabilities, which is not enough to support the long-term development of the project. This puts higher demands on the ability of the actual operators of the project. However, the currentMEMEmarket has not seen a good governance paradigm to solve this problem, andCTOseems to be proposed for this, but since the core asset ofMEMEis traffic value, the on-chain part is relatively small, the traditionalDAOgovernance tools also seem unable to solve the credible migration process of relevant resources.
3. AssumingMEMEproject leadership is switchable, the question of who should lead is also an interesting one - the founding team, the whales, or theDAOdistributed governance? We have already discussed the founding team, and whale-led governance may also have some issues. Considering that the core benefit for the whales is still focused on speculative gains, this zero-sum game will put the operators and other users in an antagonistic relationship. At that time, relying on favorable news and chip advantages, the operators will face great temptation to sell for profits, which also poses some risks for other participants. WhileDAOdistributed governance is clearly an issue of execution efficiency.
