AlfaFrens Mechanics 101

Corrections (09/05/24):

ALFA Channel Level Distribution Equation

The percentage determined by staking percentage was previously stated to be 0.69, but it is actually 0.75. :(

The percentage determined by subscription percentage was previously stated to be 0.31, but it is actually 0.25.

Multiplier

The multiplier is actually 3x over 6 months, not 2x over 2 weeks.

gm

We will be going over the AlfaFrens mechanics.

We hope to answer some of these common questions: "but...where does $ALFA come from?", "what determines how much $ALFA I receive", "what determines how much cashback I receive?" and more.

NOTE: This is purely for educational purposes and not financial advice. Opinions and decisions are fully my own and not anyone associated with me.

Before diving in, lets break AlfaFrens down to first principles.

But before that, please follow me on Farcaster and Twitter, it's free to do and will actually make my day 😄.

In AlfaFrens, there are two tokens:

1. $DEGEN - used for subscribing to Channels (input) and is the cashback token (output)

2. $ALFA (output) - non-transferrable and is accrued over 24hrs and capped to be claimed and can be staked

and 5 actions (inputs):

1. Subscribe - grants access to Channel messages and starts accrual of $ALFA from Channel

2. Unsubscribe - revokes access from Channel messages and stops accrual of $ALFA from Channel

3. Stake - grants you a portion of subscription revenue of a Channel (cashback)

4. Unstake - revokes subscription revenue of a Channel

5. Claim - receive accrued $ALFA

Now that we have a base understanding of the system, we can go over how the AlfaFrens system works at three levels:

• the Global level: all Channels

• the Channel level: a single Channel

• the User level: a single User/Channel member

"Global $ALFA rewards are a 1-to-1 relationship with the sum of all Channel inflow rates."

Global $ALFA rewards = Sum of all Channel inflow rates

$ALFA emission begins when a single User subscribes to a Channel, and thus $ALFA emissions are directly linked to the total $DEGEN inflow rate to Channels.

The takeaway here is total $DEGEN flow rate is 1-to-1 with the daily $ALFA emissions:

IF $DEGENx Flow Rate = 420,690 THEN Daily $ALFA Emissions = 420,690.

Note that during the first week of AlfaFrens, early Users were awarded with a 2x boost which went down to 1x over this week.

This begs the question: "how do I calculate the $ALFA my Channel is allocated?"

"Channel $ALFA rewards are a function of three things: 1. Global $ALFA rewards, 2. the Channels share of staked $ALFA vs. all Channels and 3. the Channels share of subscription flows vs. all Channels."

Now that we know how $ALFA emissions work at a Global level, we will take a look at how this is distribute to each Channel.

Global $ALFA rewards = GR

Channel Flow Rate Proportion (CFRP) = Channel inflow rate / Sum of all Channel inflow rates

Channel Stake Proportion (CSP) = Channel staked amount / Sum of all Channel stake amounts

Channel $ALFA rewards = (GR * 0.25 * CFRP) + (GR * 0.75 * CSP)

We can actually simplify the first part of this equation, credits to ser @surewhatever for bringing this to my attention:

= GR * 0.25 * CFRP

= GR * 0.25 * Channel inflow rate / Sum of all Channel inflow rates

= 0.25 * Channel inflow rate

Uff, a lot of equations and acronyms, but let's simply break down what each one means.

Global $ALFA rewards - this is what we went over above, the Global $ALFA rewards.

Channel Flow Rate Proportion (CFRP) - this is the proportion of the Channels flow rate vs. the Global flow rate (sum of all Channel flow rates), that is, if a Channel has a flow rate of 100 and the Global flow rate is 200, then the Channel accounts for 50% of the Global flow rate and CFRP = 0.5.

Channel Stake Proportion (CSP) - this is similar to the above except instead of flow rate, it is looking at staked balance. That is, the amount staked to a Channel divided by the amount staked by all Channels.

So now that we have all the parts, what does this big equation mean:

Channel $ALFA rewards = (GR * 0.25 * CFRP) + (GR * 0.75 * CSP)

A Channel's $ALFA rewards is the sum of two parts:

• 25% of the Global $ALFA rewards multiplied by the proportion of the Channels' flow rate vs. sum of all Channel flow rates

• 75%, hehe, of the Global $ALFA rewards multiplied by the proportion of the Channels' stake vs. sum of all Channels' stakes

The takeaway here is that 75%, (no more teehee, thought it was 69%), of the $ALFA allocated to your Channel is determined by the proportion of stake to your Channel vs. the total stake and 25% of the $ALFA allocated to your channel is determined by the proportion of the inflow to our Channel vs. the total inflow.

But, how is cashback distributed at the Channel level?

When a User subscribes to a Channel, their inflow is split in three:

• 70% is cashback to Users who have staked to the Channel

• 25% goes to the Channel creator

• 5% goes to the protocol as a fee

Finally, we will look at how $ALFA is rewarded to individual Users and how cashback is rewarded to a User.x

"User $ALFA rewards are a function of the Channel $ALFA rewards divided by the number of subscribers."

We've gone over how $ALFA is emitted at a Global level as well as how much of these Global emissions are allocated to a Channel. But how do you know how much $ALFA you will receive?

User $ALFA rewards = Channel $ALFA rewards * (User inflow rate / Total Channel inflow rate)

A simpler equation! Essentially, we multiply the Channel $ALFA rewards retrieved in the previous section and divide this by the proportion of your flow rate vs. all other flow rates in the Channel, currently you cannot select your flow rate, so this is the same as the number of Users in the Channel.

A simplification of the equation:

User $ALFA rewards = Channel $ALFA rewards / Number of subscribers

The takeaway here is that as the amount of $ALFA staked to a Channel goes up, the amount allocated to a Channel goes up and the amount allocated to a User goes up.

On the other hand, when a User joins a Channel, the amount of $ALFA allocated to a Channel also goes up, but the amount allocated to a User may not always go up as it is also slightly diluted by an additional subscriber.

Note: There is a max daily limit on the amount of $ALFA to claim, so make sure to come back each day to claim more $ALFA.

This is all fine and dandy, but what about cashback, how do I know how much cashback I am entitled to?

"The amount of cashback a User receives is determined by their share of the staked amount vs. the total staked amount in the Channel."

User cashback allocation = Channel cashback * (User staked amount / Channel staked amount)

Another simple equation! A Users share of the cashback amount is their share of the staked $ALFA in a Channel. Sweet and simple.

The takeaway here is the greater your staked amount vs. others in a Channel, the greater your cashback proportion.

Now you should have a fairly solid understanding of the AlfaFrens system from a first principles perspective, looking at the different inputs and outputs and how the system is built on top of these base building blocks.

Let's see what the overarching implications and some possible flywheels that occur as a result.

Given what we know now, the question then becomes: "what is the optimal strategy?" and the answer is it depends. It depends on what you are using AlfaFrens for and your personal edge. We will go over the coveted Blue Elefant strategy which aims to take advantage of a flywheel effect.

One important question to ask is whether to optimize your own Channel to have more subscribers or stake. You kinda need both, but once you have some of both, it is probably best to primarily focus on staked amount as this is more within your control. Unless you are able to easily garner attention/subscriptions.

This is the highest leverage edge to have. More attention => likely higher # of subscribers => more incentive to stake => higher # of subscribers / more attention => ...

With a larger audience it is easier to get a lot of subscribers/stakers quickly and this will generally lead to Pareto Principle dynamics.

It is important to engage and provide some sort of value in your Channel messages whether it be good vibes, strategy, feet pics, etc. otherwise your subscribers will drop off over a long enough time.

You've just opened up AlfaFrens and you're thinking: "wat do?" or you're already going HAM and wondering "how optimize?".

Well, fret no more, we introduce Le Blue Elefant Strategy.

Firstly, subcribe to your own Channel. As your Channel grows in subs/stakes, you will accrue more $ALFA as a result and be incentivized to grow your Channel and engage with your audience.

Secondly, look in the explore tab for Channels which will yield you the most $ALFA per DEGENx streamed, this generally means a Channel with low subs to high staked amount ratio. This is for farming $ALFA.

Now, you will be earning $ALFA! What now? Well, you can take your rewards and stake to your own Channel or stake to Channels which yield high cashback or a combination of the two depending on your goal, strategy and edge.

Why stake to your own Channel/blue elefant? Because as you stake to your own Channel, more

$ALFA will be allocated to your Channel, which will incentivize Users to subscribe to your Channel because $ALFA earned per $DEGENx streamed is higher now which incentivizes more people to stake because they want that sweet, sweet cashback.

Boom, it really is that simple.

So what are you waiting for anon...?

If you've made it this far, congrats, your attention span is not completely washed!

If you found this helpful and are interested in crypto, AI and more, follow me on Farcaster and Twitter, it's free and will make me a happy boy 🙂.