In-depth Interpretation of Memecoin: A Product of Mockery with a Market Value of Hundreds of Billions

Author: Coinspire

TL;DR

1. With the dust settling from the U.S. elections, Bitcoin successfully broke through $100,000, and Memes usher in the Summer season;

2. The initial intention of Memecoins was not primarily speculation; the birth of DOGE embodies the essence of Memes: straightforwardness, humor, and grassroots involvement, with most funds directed towards charitable causes;

3. A new trend is that Memecoins are gradually becoming a medium for expressing support and belief;

4. At this stage, with the continuous improvement of infrastructure, while the number of Memecoins is surging, they also present a new duality;

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

Introduction

An animal image, a meme, an ICON; although Memes are ubiquitous in the internet age, turning popularity into currency and assets, and leveraging massive increases of hundreds, thousands, or even tens of thousands of times, is a unique landscape of Web3. In the year Bitcoin unlocked $100,000, Memecoins sparked a grand symbolic carnival in the cryptocurrency market.

According to data from Artemis Terminal, Memecoins have performed exceptionally well from the beginning of 2024 to the present, with the Benchmark index rising from 1.2% at the beginning of the year to 372.9% on December 8, significantly outperforming other crypto sectors like DeFi, BTC, and AI tokens; meanwhile, the total market capitalization of the Memecoin sector has grown from tens of billions at the beginning of the year to over $139 billion now, with the number of Memecoins joining the billion-dollar market cap club increasing to 10. The growth of leading projects seems limitless; Dogecoin took 1,487 days to reach a billion dollars, while PNUT, launched in November 2024, achieved it in just 11 days.

The cornerstone of Web3—the public chain ecosystem—has also undergone changes due to Memecoins.

According to research data from Coingecko, from January to November 2024, Solana and Base captured half of the investor interest in the public chain ecosystem, becoming the only two public chains surpassing Ethereum, largely due to the explosion of the Memecoin ecosystem. Base, in particular, has rapidly emerged as a new player in the Layer 2 public chain ecosystem, achieving a 20-fold increase in the number of active addresses per week compared to the beginning of the year, leading other L2 projects in TVL, trading volume, and user activity.

Image source: growthepie.xyz

Despite this, controversies surrounding Memecoins have never ceased. They seem to represent two poles of the Web3 world: one side is the straightforward yet highly tempting narrative of wealth and a totem of the rebellious spirit of crypto culture; the other side reinforces external stereotypes: the argument of technological uselessness and the easily burst financial bubble.

In this regard, this article will provide a brief overview of the development stages of Memecoins and attempt to deconstruct their duality.

Part 1: Development Stages of Memecoins

By definition, Memecoins are the tokenized representation of internet Memes or other humorous events or concepts. They are native assets of the blockchain, transferable, usable in blockchain-based applications, and tradable on secondary markets like DEX. Looking back at the development of Memecoins, the speed of changing hot projects is extremely fast, evolving in quantity, themes, and on-chain positions. This article divides them into three development stages:

Stage One: The Dark Humor Represented by DOGE

To discuss Memes, one cannot overlook the earliest and currently the highest market cap Memecoin—DOGE. The development of DOGE has laid the cultural foundation of Memecoins—straightforwardness, humor, and grassroots involvement.

In 2013, Jackson Palmer, who worked in the marketing department of Adobe Systems, and Billy Markus, a software engineer at IBM, connected through humor, combining the two hottest topics on the internet at the time: the Shiba Inu meme "doge" and cryptocurrency, creating DOGE, affectionately known as Dogecoin in Chinese contexts.

Unlike other projects in the cryptocurrency ecosystem, Dogecoin did not attract attention through grand declarations about the future or significant technological breakthroughs; instead, it was refreshingly honest: it aimed to be the most interesting token in the world. This declaration gained viral spread within the English forum Reddit community, and its tipping bot became an early means of dissemination, allowing Reddit users to share and earn Dogecoin, further expanding its followers.

What truly catapulted Dogecoin into fame was Elon Musk, CEO of Tesla and SpaceX. In 2021, Musk tweeted, "Dogecoin might be my favorite cryptocurrency," frequently mentioning it. Under his immense influence, Dogecoin became the best-performing asset of the year, deeply intertwined with him, and its price would rise whenever Musk tweeted.

Image source: Crowthepie.ch

In the early days before the Memecoin sector took shape, most Memecoins looked up to the original hit DOGE, sharing common traits:

1. Thematic focus on animals, predominantly dogs and cats.

2. Charity was the original intention of most Memecoins. In the first two years of its development, the Dogecoin community sponsored dozens of charitable activities, including supporting the Jamaican bobsled team at the Winter Olympics; Shiba Inu (SHIB) also donated 10% of its supply to the India COVID-crypto relief fund at its inception.

3. They avoided convoluted blockchain jargon, focusing on their greatest advantage—dark humor—and relied on widespread community dissemination.

4. The main battlefield was Ethereum.

Image source: CoinGecko

Stage Two: A Medium for Expressing Web3 Culture

If the initial stage of Memecoins focused heavily on animals, the second stage saw a broader variety of Memecoin types, evolving from animal coins to everything that could be Memed, such as celebrity coins, political coins, emoji coins, and more.

A new trend is that Memecoins are gradually becoming a medium for expressing support and belief, whether for a certain spirit or for iconic figures.

Meanwhile, Solana, with its high throughput and lower gas fees, has become the main battlefield for Memecoins.

▎Spiritual Memecoins

The dog-themed Memecoin BONK was launched on Solana shortly after the collapse of the cryptocurrency exchange FTX at the end of 2022. BONK was initially created to reignite interest in Solana and catalyze on-chain activity by airdropping free Memecoins to Solana developers, SAGA phone users, and NFT holders. It indeed served its purpose; aside from a significant price increase, BONK has integrated into the Solana ecosystem, including decentralized exchanges like BonkSwap, BonkDex, non-custodial wallets like BonkVault, and gamified fitness applications like Moonwalk, further enhancing BONK's utility.

The sad frog-themed BOME was created on Solana in March 2024, with its founder having a vision to immortalize Memecoins by utilizing decentralized storage solutions like Arweave and IPFS to preserve Meme culture on the blockchain, exploring the intersection of Meme culture, blockchain technology, and decentralized finance, seen as an important step for cultural preservation and digital expression on the blockchain.

▎ICONic Memecoins

Most current classifications of Memecoins include political coins and celebrity coins, which can be collectively referred to as ICONic Memes.

In 2024, as the 60th quadrennial presidential election year in the U.S. heats up, political Memecoins have emerged and gained attention, especially those themed around Doland Tremp, which have appeared in multiple versions: TRUMP, MAGA, TREMP, STRUMP, FIGHT, MVP, etc. They leverage the heat of related political events and their controversy on social media to perform actively in the cryptocurrency market; similarly, Memecoins inspired by U.S. Vice President Kamala Harris have also appeared in different versions: KAMA, MAWA.

As of the time of writing, CoinGecko has listed 83 PolitiFi tokens on its platform, with a total market cap of $500 million (significantly reduced compared to the total during the election period). These political Memecoins attract specific audience groups through their thematic figures and are increasingly viewed as vehicles for supporting political movements, crowdfunding activities, and attracting voters through DeFi mechanisms.

Other representative ICONs include retail trader Roaring Kitty and crypto KOL Murad. The former led the "retail battle against Wall Street" myth, causing the long-struggling American game retailer GameStop's stock (GME) to surge several times, destroying nearly all short-selling institutions. Just because he posted on X platform after three years, the related Memecoins KITTY and GME both achieved triple-digit increases within 24 hours; the latter gained popularity due to a speech video at Token2049, leading to a rise in all Memecoins he recommended.

Stage Three: New Modalities of Memecoins

As the value of Memecoins in the financial market further increases, and with the emergence of token launch platforms like Pump.fun, Memecoins are experiencing explosive growth in quantity while presenting two distinctly different yet converging paths: one is a deeply sinking Memecoin market, and the other is a combination with new narratives, attempting to endow Memecoins with application value.

▎A Chaotic Memecoin Market

In the early days, issuing tokens often required high costs and technical skills to write or adjust contracts, issue tokens on the blockchain, and create liquidity pools on DEX for trading. However, Pump.fun on Solana, with its extremely low issuance cost (only $2), allows anyone to generate their own tokens on the Solana network, breaking this boundary.

Once a Memecoin is generated on the platform, it can be traded directly in the platform's internal market, facing two phases: after reaching a market cap of about $69,000, it is automatically deployed to the Solana decentralized finance protocol Raydium; once a MemeCoin achieves a relatively high market cap, an active community, significant trading volume, and high topicality on DEX, it may be listed on centralized exchanges like Binance.

The direct impact of Pump is the surge in the number of Memecoins. Since March 2024, Pump.fun has deployed over 4 million tokens, making it the fastest Web3 application in the entire crypto industry history to achieve $100 million in revenue. However, at the same time, due to the ability for anyone on-chain to issue tokens, many malicious scam tokens and contract vulnerability tokens have emerged, with the vast majority ending in rug pulls or going to zero, and only a few MemeCoins may advance to DEX, with even fewer making it to CEX.

Nevertheless, under the Pump effect, major public chain ecosystems have followed suit, whether it’s TRON's SunPump, BSC's Four.Meme, or Base's frequently emerging Virtuals and Clanker, all providing fertile ground for the explosive growth of Memecoins.

Image source: Dune

▎Memecoins + Applications

With the explosion in the number of Memecoins, the current oversaturation of similar tokens and exhaustion of innovation, Memecoins need new stories. The market has realized that, in the long run, for Memecoins to have longevity, they need to have long-term appeal to a sufficiently large consumer base, leading to the emergence of "application-based Memecoins," with the introduction of AI injecting new vitality into Memecoins.

┅ Memecoins as Applications

For instance, the leading Meme DEGEN on the Base chain initially emerged from the /degen channel on the decentralized social protocol Farcaster, and the development team later launched the L3—Degen Chain based on the Base chain to transform community Memecoins into crypto assets with actual application value and market competitiveness, thereby extending their lifespan.

Floki also started as a Memecoin but later transformed into a practical project with a substantial ecosystem. It has ventured into 3D NFT Metaverse, DeFi, real-world assets (RWA), and even prepaid cards.

┅ Applications as Memecoins

For example, the Memecoin LUM, collaboratively issued by two AI Agents, aethernet and clanker. Additionally, the rapidly popular GOAT was a concept generated by the AI Bot "Terminal of Truth" in its musings.

Part 2: The Duality of Memecoins

Looking back at the development of Memecoins, it is hard to imagine that the birth of a joke coin could evolve into such a prosperous situation in nearly a decade, officially being accepted as a choice of crypto assets. Behind this transformation, we cannot help but ponder the reasons behind the enthusiasm for Memecoins: what ignited the passion for Memecoins? And how do we view the shadow side of Memecoins?

Anti-Seriousness, Dissolving Authority VS Technological Nihilism

Essentially, Memecoins are the monetization of deconstructionism, created through creative adaptations of popular culture and internet culture, as well as humorous and satirical expressions of news events, thus generating unique Meme images and stories: dissolving authority, absurdity, anti-seriousness, and attracting investors' attention and participation through market frenzy.

The Memecoin craze of 2024 has shifted the goal of dissolving authority from Web2 to Web3 and has materialized it.

In the last bull market cycle, VC Tokens were viewed as blue chips, but they have now lost their appeal to secondary market investors. The increased market entry barriers have made it nearly impossible for retail investors to purchase pre-issued tokens, and the high FDV (Fully Diluted Valuation) and low circulation have led to inverted valuations, with "opening price being the peak" becoming the norm. Coupled with airdrop returns falling short of expectations, retail investors urgently need a redistribution of rights and wealth, and the explosive popularity of Memecoins is seen as a community expression of resistance against VCs, indicating that there are no manipulators controlling the odds, and all participants have a fair and equal opportunity to profit.

However, as Memecoins absorb most of the traffic and funds, becoming a staple rather than a side dish, it inevitably raises concerns about technological nihilism in Web3. "I don't oppose memes, but Memecoins have become a bit strange now; let's build real applications with blockchain," reflects not just the sentiment of Binance founder CZ.

When technological narratives fail, and the cake is eaten away, will this diminish the enthusiasm for technological development and innovative use cases in the Web3 industry?

Moreover, while Memecoins dissolve the authority of manipulators, they inadvertently crown the authority of KOL opinion leaders. In the absence of manipulators, does this also weaken the image of the underground cable groups?

Low Cost, High Return VS Financial Bubble

The enthusiasm for Memecoins largely stems from the wealth narrative of rapid doubling and the myth of hundreds or thousands of times returns. One example is GMGN, which showed on November 24 that a smart money investor early on bought memecoin Mustard for 1 SOL and is now up 4,424 times. With the lowest investment cost, becoming the protagonist of the next get-rich story is the greatest appeal of Memecoins; it acts like a new type of crypto lottery, conquering during a capital-rich bull market—a period where FOMO mentality outweighs narrative.

However, the other side of the wealth myth is the sobering reality that most Memecoins fail to maintain their initial momentum, leaving behind a series of shattered hopes. Research from ChainPlay shows that 97% of Memecoins have perished, with an average lifespan of 1 year, which is one-third that of ordinary crypto projects; additionally, malicious activities have severely impacted the Memecoin market, with over half of Memecoins (55.24%) deemed malicious, and nearly one-third of investors (28%) reporting losses due to scam Memecoins.

Attention Economy VS Loss of Control and Transience

The essence of Memecoins is based on attention, which consists of:

1. Symbolic forms of dissemination: The symbolic content form itself grants it outstanding dissemination advantages; a meme, a well-known animal, or an anime character is clearly an effortless medium that can connect with the audience and promote natural participation. The live streaming feature once launched by Pump.fun on Solana is the maximum manifestation of the attention economy, allowing token issuers to showcase their creativity or actions in real-time, attracting audience attention and driving token trading.

2. Community-driven dissemination media: The dissemination of Memecoins is community-driven, and this decentralized dissemination method is both efficient and highly penetrating, such as on 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 Memecoins may collapse in an instant. Many new projects have short average lifecycles and extremely low success rates. Additionally, some Memecoins, like political Memecoins, have temporal relevance; once events conclude and newsworthiness diminishes, their popularity also ends.

Similarly, when hype knows no bounds, and people resort to any means for attention, the bottom line can become blurred or even disappear. When Pump.fun live streamers begin to compete for more extreme behaviors, from self-harm and suicide to animal abuse, and even mimic Nazi performances, the closure of the live streaming feature and the short lifespan of related Memecoins become foreseeable.

Part 3: How to Distinguish Quality Memecoins from Shitcoins?

Although most Memecoins have short lifespans and high failure rates, their potential for quick profits still attracts a large number of investors, making thorough investigation particularly important. It should be noted that the author is not an expert, but based on publicly available research conclusions and community wisdom, the following three factors are summarized to help readers filter out shitcoins.

1. Narrative

• A Memecoin's popularity requires supportive narratives that can go viral, such as news events, political themes, watchable stories, or ICON figures.

• When old narratives become saturated, it is also important to assess whether new narratives possess sufficient humor or irony and whether they can attract trends.

2. Community

• Checking the real activity level of the Memecoin team's social platforms, such as Twitter, Telegram, Reddit, and Discord, is crucial. Memecoins heavily rely on the power of social media and online communities; the more attention they receive, the more likely they are to attract new investors. A meme that is easy to disseminate and converts well can attract a large amount of attention in a short time.

• Evaluating community potential is also key. Crypto KOL Murad proposed the concept of "cult Meme," emphasizing that the ultimate form of a Meme is the next religion, "therefore, one needs to hang around their social spaces to see how much cult, passion, and religious atmosphere that community has."

3. Marketing

• Marketing ability differs from community building; it represents the subsequent development capability of the Memecoin. This is reflected in the promotional strength of the crypto KOL matrix, discussion trends on Twitter, and the number of shares on Telegram, all of which can be checked through relevant tools. For example, Twitter's advanced version can search for keywords to understand the number of related posts and determine whether the overall trend is rising or falling.

• Celebrity effect: If relevant celebrities like Vitalik, Musk, or leading KOLs are involved, the dissemination potential is greater, likely attracting more attention and funds. It is important to note that the endorsement effect of crypto KOLs is limited and should not be blindly followed.

4. Risk Audit

• Check whether LP tokens have been burned, which can ensure that project developers cannot withdraw liquidity and run away (rug pull).

• Check whether developers have relinquished ownership of the smart contract. This is reflected in whether Memecoin developers have transferred ownership of the smart contract to a null address. The relinquishment of ownership means that developers can no longer modify the token supply or manipulate the code, reducing the risk of malicious changes that could harm investors.

5. Market Performance

• Expected Market Cap: The estimated narrative value determines the expected profit space. If it is judged that the current market cap of the Memecoin is still far from the value of the narrative, then there is still space to obtain alpha. The estimated value needs to be combined with the three points mentioned above: narrative, community, and marketing.

• Liquidity: High liquidity allows investors to enter and exit quickly without significantly impacting the price, reflected here as the depth and trading volume of DEX. It should be noted that trading volume and depth can also be subject to manipulation, which can be assessed by comparing it with FDV.

• Token Distribution: Use tools like Dexscreen to check the proportion of top holders; tokens should not be concentrated in the hands of a few individuals. Ideally, aside from excluding addresses providing liquidity (like Binance, Raydium, etc.), the top 10 holders should hold a maximum of 20%-30%.

• Trends: Closely monitor price trends and market fluctuations, as they are barometers for assessing the risks and timing of Memecoins.

6. Smart Money

• Use on-chain data analysis platforms like GMGX or trading bots to track the actions of "smart money" to gain insights into market trends, which may improve the chances of successful trades.

• It is important to note that not all smart money wallets are reliable; 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 yield better results, such as trading platforms, on-chain browsers, on-chain data analysis tools, and trading bots;

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

• Diversify your investments according to your risk preferences.

Conclusion

Soviet thinker Bakhtin drew inspiration from Western carnivals to propose one of the crystallizations of his thought—the carnival theory. Its broad and inclusive explanatory power can transcend temporal and spatial limitations, extending to Memecoins. In his theory, he emphasizes the spirit of liberation and freedom, with the core being universality and the mockery of the sacred, meaning that everyone is an active participant, and during the carnival, people humorously elevate the king, crowning him anew.

Similarly, Memecoins serve as a carnival ritual in the crypto world, born from mockery, demystifying complex blockchain terminology, and bringing VCs down from their pedestals, becoming one of the undeniable forces in the crypto world. The founder of DOGE once playfully mocked the "bubble" market of cryptocurrencies, not realizing that he would inadvertently open up one of the largest "bubble" markets in crypto, which is indeed an interesting phenomenon.

In the second half of 2024, we see the potential for Memecoins to integrate with the Web3 ecosystem. The arrival of AI technology and the innovation of Web3 narratives have both given Memecoins a new guise. We look forward to Memes, beyond their rebellious spirit, no longer being satisfied with short-term speculative positioning and digital games in the asset market, but rather bringing a new face to Web3.