Original author: Paul Veradittakit, Partner at Pantera Capital
Original compilation: Luffy, Foresight News
Meme is defined as a unit that transmits cultural ideas between people. Meme has been deeply intertwined with crypto culture over the past 10 years.
The first Memecoin (Dogecoin) was launched in 2014 as a fun derivative of Bitcoin, and it reached a peak market value of $75 billion during the 2021 bull market.
The Memecoin market has exploded recently. In less than a year, the market value of the ERC-20 token surrounding Pepe The Frog (PEPE) surged 400%, reaching $2 billion. Another Memecoin (DEGEN) depicting a purple top hat launched on the decentralized social network Farcaster has a market capitalization of over $1 billion, exceeding Farcasters own valuation. Finally, there’s the dog wearing a knitted hat meme (WIF), which rose to viral fame on crypto Twitter and has seen its price soar more than 20-fold since the beginning of the year and now has a market capitalization of around $4 billion .
Memecoin is here to stay, and this article will explore why. We will provide a framework to better understand Memecoins, examine the infrastructure that supports their ongoing development, and discuss how they can significantly enhance network participation.
Memecoin relies on attention
A key realization is that Memecoin thrives on attention. In the world of Memecoin, attention is everything. Attention drives community behavior, hype, and Memecoin price movements.
You will often find comment sections on Twitter filled with people promoting Memecoin. This behavior stems from a simple fact: Memecoin’s price ultimately depends on the amount of attention it receives. The more attention Memecoin gets, the more potential buyers it gets. If the relevant meme is interesting, these potential buyers are more likely to purchase.
Community members promote memes to draw attention to Memecoin
In addition to sharing memes on social media, Memecoin enthusiasts have also come up with creative ways to draw attention to their coins. For example, the WIF community raised $700,000 for a campaign to have their memes displayed on the iconic Las Vegas Globe. As a result, the token’s value surged by 25% in anticipation of the buzz this publicity stunt would create.
Sometimes memecoins will capitalize on existing attention rather than generate attention themselves. For example, while prediction markets such as PredictIt and Polymarket allow users to bet on the outcome of the presidential election, the attention-based “Politifi” meme coins developed around presidential candidates were developed to speculate on public interest in the candidates. As the 2024 election approaches, speculation and prices for these “Politifi” meme coins have surged.
So which Memecoins are performing well? The answer is which coins people think will attract the most attention.
importance of distribution
When evaluating Memecoin, token distribution is a key factor for many potential buyers.
Some Memecoin projects decide to reserve tokens for teams and other initiatives. In addition to airdropping community members and developers, many projects choose to set aside a portion of their tokens for marketing initiatives, teams, and DAOs.
Setting aside part of the supply creates stronger incentives and improves the chances of long-term success. By allocating themselves vested tokens, teams have an incentive to become more involved in the project and ensure the tokens success in the long term. Second, DAOs can be used to fund large-scale initiatives.
Memecoin DAO governance initiatives
Other Memecoins such as WIF may be considered more organic. While this strategy may mean that funding schemes and project marketing are more difficult, fair distribution remains a key factor in the popularity of many Memecoins.
Memecoin trading creates huge new market opportunities
The Memecoin market is getting huge. Currently, the top 10 Memecoins have a combined market value of over $50 billion. Memecoins on-chain transaction volume is very large, with more than $1 billion in daily transaction volume on Solana mainly driven by Memecoin.
Memecoin accounts for a large portion of the top 10 coins by daily trading volume. Source: Dexscreener
Therefore, there are valuable market opportunities for developers. Tools and applications that cater to the process of creating and trading Memecoin have gained a lot of traction. For example, Bonkbot is a simple Telegram trading bot that can easily trade Memecoin on Solana. In just 5 months, its revenue has exceeded $23 million.
Platforms like Bonkbot are not only making it increasingly easier to trade Memecoin, but they are also building infrastructure to simplify the process of launching Memecoin. To launch Memecoin, one typically creates a token, uses their funds to set up a liquidity pool on a decentralized exchange like Uniswap or Raydium, and markets the project.
Pump.fun is a platform that allows users to launch Memecoins with one click, and thousands of users have used their platform to launch and find the latest Memecoins. It currently earns hundreds of thousands of dollars per day through transaction fees.
Pump.fun Daily Earnings, Source: DefiLlama
Memecoin Super Distribution
Memecoin combines the fun of sharing memes with financial incentives to encourage purchases, turning ordinary memes into super memes. The community behind the first Memecoin was motivated by token ownership, elevating the Doge meme into a movement that attracted the attention of figures like Elon Musk. Understanding and applying the incentivized mass distribution properties of Memecoin can not only enhance the meme, but also advance other areas of cryptocurrency.
Memecoin accelerates the spread of Meme through incentives
One area where Memecoins properties can be leveraged is NFTs. Currently, most NFTs perform poorly during the bull market. Why? Because they have distribution problems.
While the scarcity of NFT collectibles makes them an excellent luxury asset, only a limited number of participants have the incentive to increase the visibility of the collectible. Collectible avatars like Cryptopunks have a supply cap of 10,000 and can serve as prestigious status symbols. However, that same cap limits the fanbase to a maximum of 10,000 people, limiting the wider engagement and visibility that Memecoin enjoys.
Memecoin is a fungible token, so there is no limit to the number of its holders
A creative solution to the NFT distribution problem is provided by the introduction of ERC-404, a new standard that facilitates fractional ownership of NFTs. Projects like Pandora, DN-404, and Asterix are pioneering this space, allowing NFTs to be split into multiple shares (Memecoins, if you will). This means that a single NFT that is traditionally owned by one person can choose to be divided into multiple parts. This division expands access to a wider audience, incentivizing them to create more visibility for the collectible while maintaining the exclusivity of holding the entire NFT.
Memecoin enhances activity on blockchains and applications
In November 2022, following the collapse of FTX, Solana’s ecosystem activity dropped sharply. Many teams just lost funds in FTX, and FTX itself was closely tied to Solana, which reduced community confidence and activity. However, on December 25, 2022, a Memecoin depicting a playful orange Shiba Inu was airdropped to existing developers and users on the Solana network as a way to reward and reinvigorate the Solana community.
The strategy worked. The Memecoin became a rallying point for the Solana community, quickly integrating into hundreds of DeFi protocols and applications on the platform. Users discovered that they could earn on Memecoin, use Memecoin as collateral, and even spend Memecoin in Solana-based games. As activity and price around Memecoin surged, so did community enthusiasm, bolstering developer activity and keeping Solana afloat during the bear market.
These stories are not isolated incidents, Memecoin plays a crucial role in spurring activity on the network. Take DEGEN, which has a market capitalization of US$1 billion, as an example. It originated from Farcaster as a way to reward users for their posts. Its launch provided an additional incentive for people to post, giving a significant boost to Farcasters activity. Memecoin has the ability to empower communities and stimulate interaction within the platform.
Farcaster Memecoin plays an important role in motivating Farcaster activity
Memecoin is increasingly recognized as a tool to stimulate online activity. For example, blockchain Avalanche has established a $100 million culture fund, and Blast uses Blast Gold to reward users who use Memecoin. Social platforms such as short-term video platform Drakula have integrated Farcaster DEGEN to drive user activity. I believe more networks and platforms should consider how Memecoin can be used to enhance activity.
Final Thoughts: Trojan Horses Disguised as Toys
The following are my main opinions on Memecoin.
First of all, it is clear to me that Memecoin is not going away. I see the next generation seeing Memecoin as a very fun social activity. Our current Gen Z Pantera interns are having a great time with their friends using the newly launched Memecoin for simple and fun ways to socialize, connect, and experience the pros and cons together.
Secondly, Memecoin greatly enhances the platform and applications. While they are an incentive mechanism that helps spread memes, Memecoins can greatly enhance NFT projects, social protocols, and the blockchain industry as a whole.
Ethereum founder Vitalik Buterin presented interesting ideas about the uses of Memecoin in his recent article, focusing on its use in philanthropy and Robin Hood-style games.
I would say that Memecoin does much more than that. Ultimately, while Memecoin looks like a toy, it is a cryptocurrency Trojan horse. They are the easiest way for the next generation to experience the latest DeFi applications and bring them to Web3.
