Key Takeaways:
- Sonic chain’s activity rebounded sharply in February after a slow start in January.
- A 200M S token airdrop has driven massive engagement and TVL growth.
- The chain’s long-term traction remains uncertain beyond the incentive phase.
SonicLabs, also known as Fantom, picked up speed with its launch in December with the Sonic chain. Transactions initially increased before dropping as much as 50% in late January. The last two weeks, however, experienced a dramatic turn with on-chain activity spiking once again.
This aligns with the network’s aggressive inducements. In January, the team conducted a $200 million Sonic token airdrop that is linked with a points-based reward system.
Participants are awarded points from a range of activities, which involve holding whitelisted tokens, investing in DeFi, as well as transacting with select decentralized apps. The airdrop campaign experienced a high level of participation as users rush to earn points in a bid to claim a slice of the airdrop.
Sonic TVL Growth Driven by Incentive Farming
The impact of the network’s incentive program is evident in its DeFi ecosystem. The chain’s largest decentralized apps (dApps) have seen a surge in total value locked (TVL), largely due to users’ farming points. The top three apps, Beets.fi, SiloFinance, and ShadowOnSonic, have developed a synergistic relationship for point farming.
Users are locking in S tokens as stS on Beets.fi, lending out stS as S on SiloFinance, as well as providing liquidity in the S/stS on ShadowOnSonic. The strategy is fueling a massive increase in liquidity. ShadowOnSonic alone experienced a 10x growth in TVL in February as Sonic gained more adoption.
One key contributor in that surge is high multiple points on a few liquidity pools. The two highest paying pools, i.e., scETH/WETH (12x) and USDC.e/scUSD (22x), have experienced a massive amount of money flowing into them.
This increased liquidity also fuelled Sonic’s price appreciation, with over 50% appreciation in S token in the last 30 days. The appreciation in S token in turn supported TVL in USD, which worked towards growing the network footprint in DeFi.
Uncertainty Over Long-Term Adoption
While growth is impressive, whether its momentum can be sustained is in doubt. A high amount of recent activity is due to the airdrop campaign, and whether users will continue once these are no longer in play is uncertain. The same trend is observed in other ecosystems, as activity declines once reward programs are shut down.
Also, more optimistic sentiment in the overall market will have likely increased Sonic’s success. The recent altcoin spike in prices will have encouraged users towards speculation on new possibilities. In case market conditions reverse or reward decreases, the network will likely have a tough time in maintaining its position.
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