There is a big divide between memecoin fans and those who hate that memes are undermining cryptocurrency’s ideals and public image.
When Satoshi Nakamoto invented Bitcoin (BTC), the anonymous cryptographer envisioned a world in which people would be free from the iron shackles of banks and repressive governments.
What he probably didn’t expect, however, is that the crypto industry is littered with poorly drawn frog, cat, and dog tokens, as well as some racist memes.
With coverage of the fourth Bitcoin halving being overshadowed by the speculative frenzy surrounding memecoins — including the Bitcoin network itself — it’s no surprise to see a heated debate over their value to the crypto industry.
What are Memecoins? The “Crypto Dumpster”
Many outspoken critics, including popular anonymous crypto commentator Polynya, have expressed disappointment and anger over the recent surge in meme tokens, arguing that they have no place in the crypto ecosystem.
In his last blog post on Medium, Polynya expressed his anger at quitting cryptocurrencies, denouncing Meme Coin as “just a tool to transfer wealth from the many to the most annoying people on the planet.”
By 2024, things have reached a whole new low: racist, sexist, and otherwise stupid memecoin.”
“At this point, this evil in crypto is banal and normalized. It’s become the identity of crypto — sure, there are some useful things, but most of it is just filled with scams and absolute depravity,”
Meme coins are also rife with pulls, scams, and malicious taxation, and are generally run by incompetent founders who have no idea what they are doing.
According to BlockAid, more than 50% of pre-sale tokens launched on Solana between November and February were malicious
Has the recent meme coin degradation caused real builders to abandon the industry? The view that “everything is meaningless” carries a fair degree of “financial nihilism.” Regardless, everything in crypto is a meme, and it’s the “middle of the curve” that supports real purposeful projects.
“Memecash has led to a greater level of disillusionment/exodus among crypto developers than even the bear market of the past few years,” said Michael Dempsey, managing partner at New York venture capital firm Compound.
“Building something of lasting value is a long emotional journey, and it may be difficult to restore curiosity about crypto after a two-year bear market where the main energy vacuum is gambling.”
Another venture capital executive, Andreessen Horowitz CTO Eddy Lazzarin, said memecoins are “destroying the long-term vision of cryptocurrency” that keeps many people in the space.
Are Memecoins worth the attention and users?
But ignoring the racist tokens, rug pulls, and scams, memecoins aren’t all bad. Some argue that the attention brought by memecoins is still a net gain for cryptocurrencies. As traders compete to buy and sell tokens, it’s a net gain for blockchain networks. Solana, Base, and BNB Chain in particular have benefited from the influx of memecoin sites looking for cheap ways to trade.
Over the past few months, first-layer blockchains BNB Chain and Avalanche have launched multi-million dollar funds in an attempt to bring the magic of meme coins to their networks in order to drive growth.
A community proposal for Ethereum layer 2 network Arbitrum was also seeking a massive $3.3 billion to open the proverbial floodgates for memecoins. As is often the case with memecoin proposals asking for billions of dollars, it was hammered out within an hour.
“Every day we see headlines about how the Solana Meme Token went from 0 to 100M+ FDV in a matter of days,” said 0xkawz, who created the proposal for the Meme Token Fund.
They added: “There’s no reason why the Arbitrum DAO shouldn’t at least try to stimulate the memecoin initiative [...] It’s hard to argue that Solana and more recently BASE have gotten all the attention.”
Solana meme coin craze drives adoption
In mid-March, Solana’s network activity briefly surpassed Ethereum’s as traders looked to capitalize on the success of the next runaway memecoin. Transaction volume reached $3.5 billion on March 15, more than $1.1 billion more than its older and slower competitor, DefiLlama reported.
The frenzy of activity tested the network’s scaling limits and found them to be suboptimal, with as many as three-quarters of transactions failing at one point. This was addressed in a patch a month later.
BNB Chain, the speculative degenerate blockchain of choice in the last cycle, is also targeting the same market. The chain announced that as part of its “Meme Innovation Campaign,” it will distribute up to $1 million throughout April to reward developers with more than $2 billion in 30-day transaction volume on the network.
“When there’s a clear signal from the community that something is important to them, we work to make it happen,” a BNB Chain spokesperson said, adding that meme coins have the potential to bring more users into the cryptocurrency space, regardless of whether they end up being just “noise in the crypto market.”
Austin Federa, Solana’s head of strategy, said memecoins are gaining traction on Solana in large part because the tokens have become “fairly strict representations of online culture and communities.”
“For example, certain memecoins, like BONK, have brought communities together and built vibrant ecosystems that resonate within the broader crypto space.”
Some meme coins are based entirely on misspelled celebrity names.
Meme Coins Have Millions Addicted to Base
Coinbase’s Base Network has also been a huge winner in the recent meme token craze, with the total value locked on its Layer 2 network recently surpassing $5 billion according to L2Beat data.
“There’s a lot of energy in Base,” said Base founder Jesse Pollak in a talk at the April 20 New York hackathon that was re-recorded and posted on X.
The Base founder said that while speculation drives the event, one of the aspects of memes he’s most bullish about is the creative ways the meme community is trying to attract new fans.
“It’s creating a Cambrian explosion of experimentation in onboarding, where people are constantly shooting at the target and saying, ‘How do we get more people to own our culture,’ ” Pollack said.
“What we believe even more strongly is that in the next few years we’re actually going to see these memes bring millions of people to the base — they’re going to be one of the biggest drivers because they’re constantly doing this work to engage more and more people in a really creative way.”
“Base’s mission is to bring the next billion users on-chain, and we’re encouraged by the recent influx of activity on Base,” a Coinbase spokesperson told the magazine.
Vitalik Buterin believes memecoins can be used for public good
Ethereum co-founder Vitalik Buterin wrote in a recent blog post on his website that while he has “zero enthusiasm” for tokens named after “totalitarian political movements, scams, rug pulls,” he sees potential in tokens that could fund important public projects and even allow people from low-income countries to earn a living.
“If people value fun, and financialized games seem to provide fun at least sometimes, is there a corrected and revised version of the whole concept?” he said.
The theme of this meme coin is a commentator who loves gold and hates Bitcoin.
As we all know, one of Buterin’s most successful investments of all time was turning $25,000 into $4.3 million through Dogecoin, which he bought in 2016 and sold in 2020.
A meme coin with real-world utility
Thomas Tang, vice president of investments at crypto venture capital firm Ryze Labs, told the magazine he believes memecoins can serve as a “go-to-market strategy” for entities or businesses — turning tokens into rallying points for communities.
Tang cited DEGEN on Base as a recent example. It started out as a tipping token for users on Farcaster’s Degen channel to reward others for good posts, but has since evolved into its own layer 3 chain.
“You’ve accumulated this whole community of people tipping in this token…it’s gained huge mass popularity because everyone is tipping each other and everyone is holding it,” Tang said.
“So they built Layer 3 on top of that.”
The DEGEN chain was launched at the end of March as a layer 3 network built on Base and uses DEGEN as its native Gas token.
Developers say the new chain will enable experiments in tipping, community rewards, payments, and gaming. So far, it has been used primarily for meme coin speculation, but Degen reached 37.12 transactions per second during an event on April 18, making it the fastest protocol in the Ethereum ecosystem. Demand is a big driver of TPS for scaling solutions, not pure technical capability.
Dogecoin and Memecoin Community
CK Cheng, co-founder and chief investment officer of ZX Squared Capital, sees memecoins as a product of the attention economy and believes Dogecoin ( DOGE ) is a “good example” of the memecoin story going right.
At first, no one knew how Dogecoin would be used.”
“But if you have a large network of people with the same interests and build a community […] things will happen. The coin is purely a platform,” Zheng said.
Some even go so far as to argue that all cryptocurrencies are meme-driven, including projects that claim to actually do something.
Dogecoin was launched in December 2013 by software engineers Billy Markus and Jackson Palmer, who created it to mock the rampant cryptocurrency speculation at the time.
The cryptocurrency currently has a market cap of $26.7 billion, making it the eighth most valuable cryptocurrency, behind only USD Coin ( USDC ), which has approximately 4.6 million non-zero addresses, according to BitInfoCharts.
Elon Musk’s Tesla accepts it as a form of payment for its wares, and there are signs that users will one day be able to buy entire vehicles with it.
Zheng said something similar happened thousands of years ago when merchants from ancient Rome and China traded along the ancient Silk Road.
“There was no dollar then; there was no renminbi,” Zheng said, adding that through “generation after generation of exchange, gold became ingrained as a means of exchange.
“The same thing is true with Dogecoin. If you have 7 or 10 million people using Dogecoin, that becomes a community [...] It’s a snowball effect, and when you have more and more people, the value of the underlying (asset) increases.”
There is also a large group of people who don’t really like memecoins, but are prepared to put up with them because one of the core ideals of cryptocurrency is openness and permissionlessness.
What is a memecoin without the freedom to trade?
Solana co-founder Raj Gokal was among them, calling out venture capital firms for arguing that memecoins are scaring off “serious builders.”
"If you're vulnerable enough to be scared by the way young people are choosing to use permissionless systems for entertainment, then you simply can't survive here," he said.
“I value people’s desire to have fun, and I would rather the crypto space move with the tide in some way rather than against it,” Buterin added in his blog post.
However, Zheng said he ultimately sees memecoin as just a “sideshow.”
“There’s a certain level of hype in every cycle, and people use the cycle to test new things,” Zheng said, noting that NFTs became extremely popular during the last bull run.
