An in-depth interpretation of Memecoin: a product of ridicule, with a market value of hundreds of billions

Author: Coinspire

TL;DR

1. As the dust of the US election has settled, Bitcoin successfully exceeded 100,000 US dollars, and Meme ushered in the Sunmmer season;

2. Memecoin was not originally based on speculation. The birth of DOGE was the original intention of Meme: straightforward, humorous and grassroots, and mostly devoted to charity;

3. A new trend is that Memecoin has gradually become a carrier to express support and belief;

4. At this stage, with the continuous improvement of infrastructure, Memecoin is also showing a new two sides while its number is increasing;

5. Memecoin is a complex investment that requires comprehensive consideration of narrative, community, marketing, risk, market performance and smart money.

introduction

An animal image, an emoticon, and an ICON. Although Meme is everywhere in the Internet era, turning popularity into currency and assets, and leveraging huge increases of hundreds, thousands or even ten thousand times, is the unique scenery of Web3. In the year when Bitcoin unlocked 100,000 US dollars, Memecoin set off a grand symbol carnival in the currency market.

According to Artemis Terminal data, Memecoin has performed outstandingly since the beginning of 2024, with the Bechmark index rising from 1.2% at the beginning of the year to 372.9% on December 8, significantly leading other crypto tracks such as DeFi, BTC, and AI tokens; at the same time, Memecoin has The total market value of the track has also increased from tens of billions at the beginning of the year to over 139 billion US dollars currently. Memecoin has joined the US$1 billion market value club. The number increased to 10, and there seemed to be no limit to the growth of the top projects. Dogecoin took 1,487 days to reach $1 billion, and PNUT, released in November 2024, achieved it in 11 days.

The public chain ecology, the cornerstone of Web3, has also changed due to Memecoin.

According to Coingecko research data, Solana and Base accounted for half of the public chain ecosystem investor interest from January to November 2024, becoming the only public chains that surpassed Ethereum, and both of these are inseparable from the explosion of the Memecoin ecosystem. . Base has become a rising star in the Layer 2 public chain ecosystem in just a few months due to its Meme features. The number of weekly active addresses has increased 20 times compared with the beginning of the year, leading the way in TVL, transaction volume and user activity. Other L2 projects.

 Image source: growthepie.xyz 

Despite this, the controversy about Memecoin has never ended. It seems to represent the two vertices of the coordinate axis of the Web3 world. On the one hand, it is a simple and crude but extremely tempting wealth narrative and a totem of the rebellious spirit of encryption culture; on the other hand, it strengthens the stereotypes of the outside world: the theory of the uselessness of technology and a poke. The capital bubble burst.

In this regard, this article will briefly review the development stages of Memecoin and try to deconstruct its two sides.

Part.1 The development stage of Memecoin

By definition, Memecoin is a tokenized description of an Internet Meme or other humorous event or concept. They are native assets of the blockchain, are transferable, can be used in blockchain-based applications, and can also be traded on secondary markets such as DEXs. Looking back at the development history of Memecoin, hot projects are changing at an extremely fast pace, and have evolved in number, theme, and on-chain positions. This article is divided into three development stages accordingly:

The first stage: the black humor represented by DOGE

To talk about Meme, it must be inseparable from the earliest and currently highest market value Memecoin - DOGE. It can be said that the development of DOGE has laid the cultural background of Memecoin - straightforward, humorous and grassroots.

In 2013, Jackson Palmer, who worked in the marketing department of Adobe Systems, and Billy Markus, who worked as a software engineer at IBM, got together for fun and combined the two hottest topics on the Internet at that time: a Shiba Inu Internet emoticon package " doge " with cryptocurrency. Got up and created DOGE, affectionately called Dogecoin in the Chinese context.

Unlike other projects in the cryptocurrency ecosystem, Dogecoin does not rely on grand declarations about the future or major technological breakthroughs to attract attention. On the contrary, it has no new ideas and the network topology is very fragile, but it is frank and real. : Become the most interesting token in the world. This declaration became viral in the English forum Reddit community, and its tipping bot also became an early method of communication. Reddit users can earn Dogecoin by sharing it back and forth, and its followers have further expanded.

What really made Dogecoin famous was Musk, CEO of Tesla and SpaceX. In 2021, Musk tweeted: "Dogecoin may be my favorite cryptocurrency" and mentioned it frequently. Here With the huge appeal of people, Dogecoin became the best-performing asset that year and was deeply bound to it, which indirectly extended the life of Dogecoin. Since then, whenever Musk posts a tweet, the price of Dogecoin will follow suit. rise.

 Image source: Crowthepie.ch 

When the early Memecoin track has not yet taken shape, most Memecoins are following the original popular DOGE. Their common points are:

1. The theme revolves around animals, mostly dogs and cats.

2. Charity is the original intention of most Memecoins. In the first two years of DOGE’s initial development, the Dogecoin community sponsored dozens of charity events, including the Jamaican bobsled team’s participation in the Winter Olympics; Shiba Inu (SHIB) also donated 10% of its supply to India when it was first created COVID-crypto Relief Fund.

3. Abandoned the unpronounceable blockchain terminology, focused on its greatest advantage - black humor, and relied on widespread dissemination in the community.

4. The main position is Ethereum.

 Source: CoinGecko 

The second stage: the expression carrier of Web3 culture

If the initial stage of Memecoin was only about animals, then the types of Memecoin in the second stage have become more extensive, from the initial animal coins to Meme for everything, such as celebrity coins, political coins, and emojis. Coins and so on.

A new trend is that Memecoin has gradually become a vehicle to express support and belief, whether it is for a certain spirit or an ICON-style character.

At the same time, Solana has become Memecoin's main position due to its high throughput and lower gas fees.

▎Spiritual Memecoin

The dog-themed Memecoin BONK was launched on Solana shortly after the collapse of cryptocurrency exchange FTX in late 2022. BONK was originally intended to reignite interest in Solana and catalyze on-chain activity, by paying tribute to Solana developers, SAGA Mobile Users and NFT holders airdrop free Memecoin. And it's working. In addition to the massive price increase, since its launch, BONK has been integrated into the Solana ecosystem, including decentralized exchanges BonkSwap, BonkDex, non-custodial wallet BonkVault, and gamified fitness app Moonwalk, BONK Practicality is further improved.

BOME, which takes the image of the sad frog, is Memecoin created on Solana in March 2024. Its founder has a vision of making Memecoin immortal and claims to use decentralized storage solutions such as Arweave and IPFS to perpetuate Meme culture in the block. In the chain, exploring the intersection of Meme culture, blockchain technology and decentralized finance is regarded as an important step in the cultural preservation and digital expression of blockchain.

▎ICON style Memecoin

Most of the current categories of Memecoin include political coins and celebrity coins, which are collectively summarized here as ICON Meme.

In 2024, with the warm-up of the 60th quadrennial presidential election in the United States, political figures Memecoin also emerged and attracted attention, especially the Memecoin themed by Doland Tremp, which not only appeared in multiple versions: TRUMP, MAGA ,TREMP,STRUMP,FIGHT,MVP Etc., it has taken advantage of the popularity of related political events and its controversy on social media to become active in the cryptocurrency market; Memecoin, inspired by U.S. Vice President Kamala Harris, has also appeared in different versions: KAMA, MAWA.

As of the time of publishing this article, CoinGecko has listed 83 PolitiFi tokens on its platform, with a total market value of US$500 million (which has shrunk significantly from the general election period). This type of political Memecoin attracts specific people through its theme characters. Group audiences are increasingly seen as a vehicle to support political campaigns, crowdfunding activities, and attract voters through DeFi mechanisms.

Other representative ICONs are US stock retail trader Roaring Kitty and crypto KOL Murad. The former once led the "Retail Investors vs. Wall Street" myth that once caused the stock GME of GameStop, an old American game product retailer that has been losing money for many years, to rise dozens of times, destroying almost all Just because the short-selling institution posted on the X platform for the first time in three years, the related Memecoins KITTY and GME immediately It has achieved triple-digit increases every hour; the latter has become popular due to the speech video on Token2049, which has led to an increase in its recommended Memecoin list.

The third stage: Memecoin new mode

With the further increase in the value of Memecoin in the capital market and the birth of token launch platforms represented by Pump.fun, while the number of Memecoin has exploded, it has shown two completely different directions but with the same goal. One is It is an extremely sinking Memecoin wet market, and the other is a combination with new narratives, trying to give Memecoin application value.

▎Memecoin market is a mixed bag

Early token issuances were mostly costly and required technical skills to write or adjust contracts, issue tokens on the blockchain, and create liquidity pools on DEXs for people to trade. Pump.fun on Solana breaks this boundary by enabling anyone to generate their own tokens on the Solana network with extremely low issuance costs (only $2).

Once Memecoin is generated in the platform, it can be traded directly on the platform's internal market and faces two stages: automatically deployed to the Solana decentralized finance protocol Raydium after reaching a market capitalization of approximately $69,000; once market capitalization in the DEX MemeCoin, which is relatively high-profile, has an active community, has a relatively large transaction volume, and is highly topical, is expected to be listed on centralized exchanges such as Binance.

The direct impact of Pump is the increase in the number of Memecoin. Since March 2024, the total number of tokens deployed by Pump.fun has exceeded 4 million, making it the fastest Web3 application to achieve 100 million US dollars in revenue in the history of the entire encryption industry. But at the same time, because everyone on the chain can issue coins, many malicious fraud tokens and contract vulnerability tokens have emerged. Most of them end up rug or zero, and only a very small number of MemeCoin may enter the chain. After reaching DEX, very few people enter CEX.

Despite this, under the Pump effect, major public chain ecosystems followed suit, whether it was TRON's SunPump, BSC's Four.Meme, or Base's popular Virtuals, Clanker, etc., all of which provided the soil for Memecoin's explosive growth.

 Source: Dune 

▎Memecoin + Application

With the explosion of the number of Memecoin, the proliferation of similar tokens and the exhaustion of innovation, Memecoin needs a new story. The market realizes that in the long run, if Memecoin wants to live longer, it needs to have long-term appeal to a large enough consumer group. At this time, "application-based Memecoin" emerged as the times require, and the introduction of AI has injected power into Memecoin. New vitality.

┅ Memecoin application

For example, Meme DEGEN, the leader on the Base chain, initially emerged from the /degen channel on the decentralized social protocol Farcaster. Then the development team launched the L3 based on the Base chain - Degen Chain to realize the transformation from community Memecoin to having practical application value and The shift in market competitiveness of cryptoassets has, in time, extended their lifespan.

Floki also originally started as Memecoin and later transformed into a practical project with a fairly large project ecosystem. It’s involved in the 3D NFT Metaverse, DeFi, Real World Assets (RWA), and even prepaid cards.

┅ Application to make Memecoin

For example, two AI Agents, aethernet and clanker, collaborated to issue Memecoin LUM. And GOAT, which quickly became popular, was also an idea that the AI ​​Bot "Terminal of Truth" came up with while talking to itself.

Part.2 Two sides of Memecoin

Looking back at the development history of Memecoin, it is hard to imagine that the birth of a joke coin could develop to such a prosperous situation in the past 10 years and be officially accepted as an option for crypto assets. Behind this change, we can’t help but think about the reasons behind it: What exactly ignited the enthusiasm for Memecoin? And how we view the other shadow side of Memecoin.

Anti-seriousness, elimination of authority VS technological nihilism

In essence, Memecoin is the monetization of deconstruction. Behind it is the creative adaptation of popular culture and Internet culture, as well as the witty and humorous expression of news events, thereby creating uniquely charming Meme images and stories. : Dispel authority, absurdity, and anti-seriousness, and attract investors’ attention and participation through the market’s fanatical performance.

The Memecoin craze in 2024 will shift the goal of dispelling authority from Web2 to Web3 and make it concrete.

VC Token, which was regarded as a blue chip in the last bull market cycle, has now lost its appeal to secondary market investors. The increase in market access thresholds has brought the opportunity for retail investors to purchase pre-release tokens close to 0. High FDV (complete The current situation of low circulation (dilutive value) has also made inverted valuations and "the opening price is the peak" the norm. In addition, airdrop returns are not as good as expected. Retail investors urgently need the redistribution of rights and wealth, and the explosion of Memecoin is exactly the same. Being treated as a community for VCs An expression of resistance, that is, there is no bookmaker manipulating the odds and all participants have a fair and equal opportunity to profit.

However, as Memecoin absorbs most of the traffic and funds and becomes a staple food rather than a side dish, Web3 will inevitably fall into the hidden worry of technological nihilism. "I'm not against memes, but Memecoin has become a bit strange now. Let's build real applications with blockchain." I believe this is not just the voice of Binance founder CZ.

If the technical story fails and the cake is eaten away, will it reduce the enthusiasm for technology construction and innovative use case development in the Web3 industry?

In addition, Memecoin has eliminated the authority of bookmakers and invisibly crowned the authority of KOL opinion leaders. Under the psychological expectation that there is no market maker to control the market, is it also weakening the image of the underwater cable group?

Low cost and high return VS capital bubble

The enthusiasm for Memecoin largely stems from the wealth narrative of rapid doubling and the myth of hundreds and thousands of times. An example is that GMGN data on November 24 shows that a smart money invested 1 SOL in the early stage to buy memecoin Mustard, and has now made a profit of 4424 times. Becoming the protagonist of the next get-rich-quick story with the lowest investment cost is the biggest attraction of Memecoin. It is like a new type of crypto lottery, attacking the city in the bull market with abundant funds -a period where the FOMO mentality is greater than the narrative. Village.

But the other side of the myth of wealth is the sobering reality that most Memecoins have failed to sustain their initial momentum, leaving only a series of dashed hopes. Research from ChainPlay shows that 97% of Memecoins have died. The average lifespan of Memecoins is 1 year, which is one-third of the lifespan of ordinary encryption projects. In addition, malicious activities have seriously affected the Memecoin market, with more than half of Memecoins (55.24%) Considered malicious, nearly a third of investors (28%) reported losing money due to Memecoin scams.

Attention Economy VS Loss of Control and Transience

The essence of Memecoin is based on attention, and the components of attention include:

1. Symbolic communication form: The symbolic content form itself gives it outstanding communication advantages. An online emoticon package, a well-known animal or cartoon image is obviously a labor-saving medium that can establish a connection with the audience and promote natural participation. The live broadcast function once launched by Pump.fun on Solana is a maximized display of the attention economy. Through live broadcast, token issuers can display their creativity or behavior in real time, attract the audience's attention, and promote token transactions. .

2. Community-driven communication media: Memecoin’s communication is driven by the community. This decentralized communication method is both efficient and highly penetrating, such as reddit forums, 4chan, Twitter, and TG groups.

However, at the same time, attention is extremely unstable, and the rapid shift of market attention also means that the value of Memecoin may collapse in an instant. The average life cycle of many new projects is short and the success rate is extremely low. In addition, some Memecoins, such as political Memecoins, are time-sensitive. Once the event is over, the newsiness will weaken and the popularity will end.

Similarly, when there is no lower limit to hype and people do whatever it takes to get attention, the bottom line will become blurred or even disappear. When Pump.fun live broadcasters begin to compete for more extreme behaviors, from self-mutilation and suicide to animal abuse, there are even imitations. On the occasion of the Nazi's performance, the live broadcast function was turned off, and it was foreseeable that the related Memecoin's life would be short.

Part.3 How to identify high-quality Memecoin or shitcoin?

Although most Memecoins have short lifespans and high failure rates, they still attract a large number of investors due to their potential for quick profits, and detailed investigation is particularly important. It should be noted that the author is not an expert, but based on public research conclusions and community wisdom, I have summarized the following three factors of concern, hoping to provide some reference value for readers to exclude shitcoin.

1. Narrative

• The popularity of a Memecoin requires a supporting narrative of viral spread, such as news events, political themes, watchable stories or ICON characters.

• When the old narrative is saturated, it is also important to judge whether the new narrative has enough humor or satire, and whether it can lead the trend.

2. Community

• It is important to check the real activity of the Memecoin team’s social platforms, such as Twitter, Telegram, Reddit, Discord, etc. Memecoin relies heavily on the power of social media and online communities. The more attention it receives, the more likely it is to attract new investors. A Meme that is easy to spread and has good conversion effects can attract a lot of attention in a short period of time.

• Assessing community potential is also critical. Crypto KOL murad proposed the concept of "cult Meme", emphasizing that the ultimate form of Meme is the next religion, "so you need to hang out in their social space to see how much cult, passion and religious atmosphere there is in that community."

3. Marketing

• Marketing capabilities are different from community building. Marketing capabilities represent Memecoin's subsequent development capabilities. The publicity intensity reflected in the encrypted KOL matrix, Twitter discussion trends, Telegram transmission times, etc. can all be queried through relevant tools. For example, Twitter Premium can understand the number of related posts by searching for keywords and determine whether the overall trend is rising or declining. .

• Celebrity effect: If relevant celebrities such as Vitalik, Musk, and top KOLs are linked to it, the communication potential will be greater and it is expected to attract more attention and funds. It should be noted that the endorsement effect of crypto KOLs is limited and cannot be followed blindly.

4. Risk review

• Checking whether LP tokens have been destroyed can ensure that project developers cannot withdraw liquidity and abscond (rug pull).

• Checks whether the developer has given up ownership of the smart contract. This is reflected in whether Memecoin developers transfer the ownership of smart contracts to empty addresses. The surrender of ownership means that developers can no longer modify the supply of tokens or manipulate the code, ensuring that the risk of malicious changes and harm to investors is reduced.

5. Disk performance

• Expected market value: The estimate of narrative value determines the expected profit margin. If it is judged that the current market value of memecoin is still far from the market value of narrative value, then there is still room to obtain alpha. The estimated value needs to combine the three points mentioned above: narrative, community and marketing.

• Liquidity: High liquidity allows investors to enter and exit quickly without having a major impact on the price, which is reflected here in the depth and trading volume of Dex. It should be noted that there is also the possibility of fraud in transaction volume and depth, which can be compared with the degree of matching with FDV.

• Chip distribution: Use tools such as Dexscreen to check the proportion of topholders. Chips should not be concentrated in the hands of a few people. Ideally, the top 10 holders should hold at most 20% -30%, excluding addresses that provide liquidity (Binance, Raydium, etc.).

• Trends: Pay close attention to price trends and market fluctuations, which are a barometer of Memecoin risk and timing.

6. Smart money

• Through Memecoin on-chain data analysis platforms such as GMGX, or trading robots to track the actions of "smart money", we can gain insight into market trends, which is expected to increase the probability of successful transactions.

• It should be noted that not all smart money wallets are reliable, and some Memecoins specifically rely on smart money buy signals to rug retail investors.

In summary, the following principles should be followed when investing:

• Mastering the use of technical tools will get twice the result with half the effort, such as trading platforms, on-chain browsers, on-chain data analysis tools, and trading robots;

• Only invest what you can afford to lose and set a stop loss;

• Put eggs in multiple baskets and allocate assets based on risk appetite.

Conclusion

The Soviet thinker Bakhtin once got inspiration from the Western carnival and proposed one of the crystallizations of his thoughts - the carnival theory. Its broad and inclusive explanatory power can completely break through the limitations of time and space and be extrapolated to Memecoin. In its theory, it emphasizes the spiritual core of liberation and freedom. The core is universality and mockery of the sacred, that is, everyone is an active participant. In the carnival, people elect the king and uncrown him through laughter. Crowned.

Similarly, Memecoin is like a carnival ceremony in the crypto world. It was born out of banter, dispelled the unfamiliar blockchain terminology, pulled VCs off the altar, and became one of the forces that cannot be ignored in the crypto world with overwhelming momentum. The founder of DOGE once mocked the "bubble" market of cryptocurrency with his playful indifference, but he never expected to open up one of the largest "bubble" markets in cryptocurrency. Isn't it an interesting thing?

In the second half of 2024, we saw the potential of the combination of Memecoin and the Web3 ecosystem. The arrival of AI technology and the innovation of Web3 narratives have given Memecoin a new coat. We hope that Meme, in addition to its rebellious spirit, will no longer be satisfied with short-term speculative positioning and digital games in the asset market, and will bring new benefits to Web3. New look.