Barrier of Relatability: A Case for Memecoins
Fomo Fix Weekly RoundUp #28
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Introduction
In the vast world of cryptocurrencies, memecoins have emerged as a unique phenomenon, capturing the interest and imagination of both seasoned investors and newcomers. While some view them as a whimsical offshoot of the more serious cryptocurrency market, memecoins like Dogecoin, Shiba Inu, Pepe, and more recently, WIF (Dogwifhat) have demonstrated significant staying power.
This article explores the concept of memecoins, the barriers of relatability they address, and why they matter in the broader financial ecosystem.
What are memecoins?
Memecoins are cryptocurrencies inspired by internet memes, often created as a joke or for fun. Unlike Bitcoin or Ethereum, which aim to solve serious financial or technological issues, memecoins leverage the power of community and cultural relevance. The most notable examples include Dogecoin, which features the Shiba Inu dog from the "Doge" meme, and Shiba Inu coin, another token that plays on the popularity of Dogecoin. One of the defining characteristics of memecoins is their ability to connect with people on a fundamental level.
By leveraging popular memes and cultural references, memecoins create a sense of familiarity and relatability that traditional cryptocurrencies often lack. This approachable nature is crucial in a landscape where the technical jargon and perceived complexity of blockchain technology can be a significant hurdle for newcomers.
Moreover, memecoins foster a vibrant community culture that encourages active participation and engagement. The shared sense of humor and collective identity that surrounds memecoins creates a welcoming environment for individuals from diverse backgrounds to explore and learn about the world of digital assets. This community-driven aspect is not only crucial for the success of meme coin projects but also contributes to the overall growth and adoption of blockchain technology.
What’s the case for memecoins?
Li Jin of Variant Fund has written extensively about how memecoins, NFTs, and tokens form a new class of assets; attention assets, assets whose economic value are solely tied to their current attention level and potential for increased virality or utility in the future.
This is what makes memecoins interesting; they are formed around ‘something’ that many people find relatable. There are memecoins dedicated to cute/funny animals like WIF & DOGE, and memecoins around the political meta in the US elections like $BODEN & TRUMP.
Much of crypto isn’t accessible to the average person without a significant time investment, so having a vehicle for funneling the general public’s attention to crypto is a good thing. But how do we make the model of memes less zero-sum and broaden the understanding of the ecosystem beyond the casino angle:
Keep Attention Flowing: One of the problems with the speculative nature of memes is that often the devs who launch memecoins and the initial buyers are just looking to make a quick buck, so following buy-in by a broader user base, they proceed to start dumping their tokens on the market and call it a day with profits taken. Also, there are memecoins where the early community pretty much just stops doing anything to drive more attention after experiencing an initial growth spurt.
These are non-ideal. A goal for meme communities should be to keep the wave of attention flowing by evolving into cultural tokens or scenecoins where there is a steady inflow of capital because people are buying into the coin for what it culturally represents.
An example is HIGHER, a memecoin launched on Base. The rallying cry around HIGHER is, well, going HIGHER ↑, living an optimistic lifestyle, and supporting builders, creators, and everyone to go HIGHER in their personal endeavors. Following initial growth, the meme has stayed relevant through efforts of the community to kickstart or align with projects that fit the HIGHER ethos such that holding the HIGHER token is tending more towards being a statement of your personal beliefs rather than just idle speculation.
Builders Should Leverage Memecoins: Memecoins have the potential to help a lot of builders in crypto solve the early stage problem of finding users. Building a product that leverages the community around an already existing meme can be a great acquisition model for new projects.
A great example here is recently launched video-sharing app Drakula, think of it as TikTok on-chain. Upon launch, Drakula integrated DEGEN, a memecoin on Base as its primary token within the app, and an effect of that was that it benefited from the general attention DEGEN was getting in that moment and contributed to its initial user growth. In that way, builders can solve for top-of-the-funnel efforts like awareness and acquisition by leveraging the mindshare of memes.Crypto Needs To Deliver: In marketing, acquisition and retention are viewed as separate stages of the growth funnel with the understanding that it’s not what gets people to try out your product that makes them stay. It’s the product experience you offer that helps you retain users, and the same holds true for crypto.
Memecoins work great for onboarding regular folks, but to meaningfully retain them, crypto needs to start delivering product experiences that are comparatively better than web-2 experiences. It means building more exciting and relevant consumer apps on top of existing infrastructure to create a richer ecosystem.
Some of the things we’re excited for in this regard are Base’s Onchain Summer; a call for creators and builders around the world to create new experiences built onchain, Farcaster’s innovation with Frames that allows for headless marketplaces, and Coinbase’s smart wallet among many others.
Case Studies
1. Dogecoin: From Joke to Juggernaut
Dogecoin started as a joke, yet it quickly grew into a serious cryptocurrency with a market cap in the billions. Its success can be attributed to its strong community, high-profile endorsements, and widespread media coverage. It serves as a prime example of how relatability and community can drive financial value.
2. Shiba Inu: Riding the Meme Wave
Inspired by Dogecoin, Shiba Inu coin leveraged the existing meme culture to create a substantial following. It positioned itself as the "Dogecoin killer" and built a decentralized ecosystem around the token, showing how memecoins can evolve from mere jokes to complex financial instruments.
Comparing NFT Mania and the Explosion of Memecoins
The cryptocurrency market is known for its cyclical nature, where different trends dominate during each bull run. In the last cycle, Non-Fungible Tokens (NFTs) took center stage, while in the current cycle, memecoins have captured the spotlight. This section explores the similarities and differences between these two phenomena, highlighting their impact on the market and their underlying drivers.
Similarities
1. Cultural Integration and Mainstream Attention
Both NFTs and memecoins have successfully integrated themselves into popular culture, attracting mainstream media attention and participation from celebrities and influencers. This has helped to drive widespread adoption and interest in both trends.
2. Speculative Frenzy
Each phenomenon has seen periods of intense speculation, with prices of NFTs and memecoins skyrocketing based on hype and social media buzz. This speculative behavior has led to rapid price increases, followed by significant corrections.
3. Community-Driven Growth
The growth of both NFTs and memecoins has been largely community-driven. Enthusiastic communities have formed around specific projects, driving awareness and participation. These communities often engage in promotional activities, contributing to the viral nature of the trends.
4. Low Barrier to Entry
Both NFTs and memecoins offer relatively low barriers to entry compared to more traditional investments. NFTs can be created and sold by anyone, while memecoins are often inexpensive to purchase, making them accessible to a wide audience.
Differences
1. Underlying Technology and Use Cases
- NFTs: NFTs represent ownership of unique digital assets, such as art, music, virtual real estate, and collectibles. They are built on blockchain technology that ensures the provenance and scarcity of digital items. NFTs have practical applications in digital art, gaming, and virtual worlds.
- Memecoins: Memecoins, on the other hand, typically lack intrinsic technological innovations or unique use cases. Their primary value proposition lies in their meme origin, community engagement, and social media presence rather than utility.
2. Market Participants and Influencers
- NFTs: The NFT market has attracted artists, musicians, and creators looking to monetize their digital works. High-profile sales and collaborations with celebrities have brought additional legitimacy to the space.
- Memecoins: The memecoin market has been driven more by retail investors and internet communities. High-profile endorsements from influencers like Elon Musk have played a significant role in driving interest and prices.
3. Longevity and Sustainability
- NFTs: NFTs have demonstrated potential for long-term sustainability due to their various use cases and the ability to tokenize unique digital assets. The development of NFT marketplaces and integration into existing digital ecosystems suggests ongoing growth.
- Memecoins: Memecoins often face questions about their long-term viability. While some, like Dogecoin, have maintained relevance, many memecoins are seen as speculative and may struggle to sustain interest once the initial hype fades.
4. Economic Impact
- NFTs: The NFT boom has had a notable economic impact on the art and entertainment industries, providing new revenue streams for creators. It has also spurred innovation in digital ownership and rights management.
- Memecoins: The economic impact of memecoins is less clear. While they have generated significant wealth for early adopters and created market activity, their lack of fundamental value raises concerns about the sustainability of their economic contributions.
The extreme financial speculative nature of memecoins will never fully go away because that’s what it means to have a permissionless prediction market for assets, but there’s a gap where we can shoot for more positive-sum outcomes rather than negative:
Meme communities aligning with real-world projects.
More building around memes.
Offering a new range of social and financial experiences that allow us to better retain users discovering crypto through memes.
To paraphrase Vitalik, we need more good memecoins than bad memecoins.
The Rise of Accessible Token Creation Platforms
The emergence of platforms like Pump.fun and Moonshot has significantly lowered the barriers to launching new tokens, contributing to the rapid proliferation of meme coins and other personalized digital assets.
Ease of Token Creation: These platforms have streamlined the token deployment process, allowing users to create their own tokens with minimal technical expertise and financial resources. On Pump.fun, for example, users can launch a new token for as little as 0.02 SOL (approximately $3) and have it instantly available for trading on the platform's bonding curve model. This low-cost and user-friendly approach has opened the door for a wide range of individuals and projects to experiment with their own token ideas, from community-driven meme coins to utility-focused digital assets. The ability to quickly deploy a token has fueled the growth of the memecoin phenomenon, as enthusiasts can easily create and promote their own viral tokens.
Expanding Blockchain Options: While Pump.fun initially focused on the Solana blockchain, the platform has since expanded to support other networks, such as Base and Blast. This multi-blockchain approach offers users more flexibility and choice when launching their tokens, allowing them to leverage the unique features and advantages of different blockchain ecosystems.The rise of Moonshot, a platform that also supports multiple blockchains, further demonstrates the industry's shift towards providing accessible token creation tools across various blockchain networks. This diversification caters to the needs of a broader user base, enabling more individuals and projects to participate in the token economy.
Implications for the Crypto Landscape
The ease of token creation facilitated by platforms like Pump.fun and Moonshot has had significant implications for the broader cryptocurrency landscape. The lowered barriers have led to a proliferation of new tokens, contributing to the overall growth and diversification of the digital asset ecosystem. However, this rapid expansion also raises concerns about the potential for scams, market manipulation, and the overall sustainability of the token economy. Regulators and industry stakeholders will need to address these challenges to ensure the long-term health and integrity of the cryptocurrency market.
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None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.
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