Memecoins, all fun and games
Each month, Jasper De Maere, Head of Research at Outlier Ventures, will zoom in on trends and events happening in cryptocurrency and the broader ecosystem across public and private markets.
Memecoins, tokens representing viral internet culture, are having their time in the sun. As they grow in popularity, we’re seeing more opinions both in favour of and against this movement. As they increasingly dominate the crypto narrative, we unpack some of the arguments.
Today, more than $60 billion or ~2.5% of the total digital asset market cap, has accumulated in memecoins across different ecosystems and chains. Looking back at the history of memecoins, it’s no surprise they are such a central part of the web3 ecosystem. Memecoins have been in circulation 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 celebrity, Dogecoin today sits at over $20 billion market cap. In the wake of its success, numerous other memecoins have been created, all leveraging popular culture to attract attention and new adopters. While memecoins are always part of each crypto cycle, it’s never been as prominent as today, with an estimated 5,300 new tokens launched daily, of which the majority are memecoins using launch platforms like pump.fun and others.
While many enjoy memecoins as a speculative asset tied to internet culture, there are growing concerns with memecoins. The biggest so far is the speculative nature of many of the tokens. Another is the “noisy neighbour” problem in which memecoins clog the blockchain, increasing transaction fees for more “economically viable” use cases. While all the 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. Dictating that blockchains can only be used for specific use cases goes against the technology’s core ethos, which leans into openness, decentralization and user autonomy.
That said, there is a lot of criticism about the speculative nature of memecoins. While many lack intrinsic value that justifies their marketcaps, price movement is driven by narrative, attention, and speculation. Whether memecoins are the right vehicle to gamble with, I’ll leave in the middle. Plenty of other avenues exist to place bets if people need to do it on-chain. However, the offensive nature some of these memecoins are taking is damaging. Similar to dark corners of the internet, where memes can take on a life of their own, with the increasing number of new memecoins, we’ve also seen an uprising in sexist, racist and other inappropriate topics underpinning some memecoins. This behaviour hurts the integrity of the broader memecoin movement and the web3 space more broadly. 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), there still needs to be a baseline code of conduct.
So, are they useful? I believe they hold way more potential than given credit for. Memecoins are turning traditional business logic on its head. Internet applications rely on network effects, the idea that the value of the product or service increases with every new user. Typically, a company builds a product or service and creates a community of users and enthusiasts around the product. Memecoins can turn this natural sequence on its head. Memecoins generate interest and build community even before anything functional is happening on a technology level other than being able to hold them in a web3 wallet. After the initial enthusiasm, the community can decide together what they want to do from a product perspective, moving from a meme into actual products and services. We’ve already seen this happening with some of the older generation memecoins.
While memecoins spark much debate, they are undeniably an interesting internet phenomenon we haven’t seen before. Millions of users globally engage 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 rally behind an idea or project. Despite the negative connotations associated with memecoins, it is worth watching closely as their narrative unfolds and they continue to defy traditional logic.