Memecoins
Memecoin, all fun and games
Monday 17 June 2024 06:07
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Memecoins, tokens that represent viral internet culture, are having their time in the sun.
Every month, Jasper De Maere, Head of Research at Anomalous businesseswill focus on trends and events happening in cryptocurrency and the broader ecosystem in public and private markets.
Memecoins, tokens that represent viral internet culture, are having their time in the sun. As they grow in popularity, we see more opinions both for and against this movement. As they increasingly dominate the crypto narrative, let’s break down some of the topics.
Today, more than $60 billion, or about 2.5% of the total market capitalization of digital assets, has accumulated in memecoins across different ecosystems and chains. Looking back at the history of memecoins, it is no surprise that they are such a central part of the web3 ecosystem. Memecoins have been around since 2013, with the creation of Dogecoin in 2013, inspired by the then-popular meme about Kabosu, a Shiba Inu dog. Fueled by internet culture and celebrities, Dogecoin today has a market capitalization of over $20 billion. In the wake of its success, numerous other memecoins have been created, all leveraging popular culture to attract attention and new users. While memecoins are always part of every crypto cycle, they have never been more important than today, with around 5,300 new tokens launching every day, of which the majority are memecoins using launch platforms like pump.fun and other.
While many value memecoins as a speculative asset tied to internet culture, there are growing concerns about memecoins. The biggest one so far is the speculative nature of many tokens. Another is the “noisy neighbor” problem where memecoins clog the blockchain, increasing transaction fees for more “economically viable” use cases. While all concerns are understandable, it’s important to remember that blockchains are inherently permissionless, censorship-resistant, and open source. This also means that everyone can use them as they see fit. Mandating that blockchains can only be used for specific use cases goes against the fundamental ethos of the technology, which relies on openness, decentralization and user autonomy.
That said, there is a lot of criticism about the speculative nature of memecoins. While many do not have intrinsic value to justify their market capitalization, price movement is driven by narrative, attention and speculation. Whether memecoins are the right vehicle to bet with, I’ll leave it half done. There are many other avenues for placing bets if people need to do so on-chain. However, the offensive nature that some of these memecoins are taking on is harmful. Similar to the dark corners of the internet, where memes can take on a life of their own, with the growing number of new memecoins, we have also seen an uprising of sexist, racist, and other inappropriate arguments underlying some memecoins. This behavior damages the integrity of the broader memecoin movement and the web3 space in general. Despite the open source nature of the technology and the fact that we’re dealing with memes that are supposed to be funny (I get it), a basic code of conduct is still necessary.
So, are they useful? I believe they have much greater potential than people realize. Memecoins are turning traditional business logic on its head. Internet applications are based on network effects, the idea that the value of the product or service increases with each new user. Typically, a company creates a product or service and builds a community of users and enthusiasts around the product. Memecoins can reverse this natural sequence. Memecoins generate interest and build communities even before anything technologically functional happens other than the ability to hold them in a web3 wallet. After the initial enthusiasm, the community can decide together what they want to do product-wise, moving from a meme to real products and services. We have already seen this happen with some of the older generation memecoins.
While memecoins spark a lot of debate, they are undeniably an interesting internet phenomenon that we have never seen before. Millions of users around the world interact with these memecoins for various reasons, ranging from community and memes to irrationality. Historically, we have seen how decisive collective action can be when people unite behind an idea or project. Despite the negative connotations associated with memecoins, they are worth watching carefully as their narrative develops and they continue to defy traditional logic.
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