Memecoins can drive viral growth – as seen on the crypto market throughout 2024 – but they also often lead to pump-and-dump schemes.

For most of 2024, crypto market liquidity was maintained through memecoin trading. According to a CoinGecko report, memecoins were the most popular narrative in the second quarter of 2024, capturing a 14.3% market share. In the first quarter, the numbers were similar. These #Cryptocurrencies rely on fun communities and humor, known as memes, to attract users and traders. Through these memes, people from all walks of life come together for a common purpose of banter and jokes, with the promise of financial rewards through memecoin trading.

The Power of Meme-Inspired Communities

The market capitalization of #Memecoins🤑🤑 – over $50 billion as of October 8 – shows how large and fast meme-inspired communities can grow. The lack of centralization in this niche makes these communities unique advocates of blockchain technology. These communities, fueled by their representative tokens, can go viral in minutes, driven by hype. However, most of these tokens are traded internally, resulting in massive pump-and-dump cycles. As the hype fades, the communities start to quiet down.

Communities as a Catalyst for Success

In recent years, the influence of meme-inspired communities has grown rapidly, emphasizing the clear power of an active community behind a project. If a crypto project with real utility has a strong community, like those in the memecoin ecosystem, its chances of going viral are relatively high. The best crypto companies and projects should be built on the backs of communities and meme-inspired projects.

Leveraging Meme Hype for Growth

At the heart of meme-driven communities and their rapid expansion lies a mix of heavy humor, herd mentality, celebrity endorsements, and massive FOMO (Fear of Missing Out). Communities like Dogecoin ( #doge⚡ ), Shiba Inu ( #shiba⚡ ), and recently #pepe⚡ , have seen tremendous growth thanks to these elements. The fear of missing out on quick profits after a high-profile figure publicly endorses or highlights a memecoin often creates a widespread effect, where investors rush into the project. These endorsements add a layer of legitimacy and excitement, creating and sustaining meme-driven hype.

The Influence of Celebrities on Memecoin Growth

Influencers and celebrities often leverage their popularity on social media to pump the memecoins they are interested in. Elon Musk has repeatedly tweeted about Dogecoin, pushing its price to all-time highs. In February 2024, Elon tweeted, "Dogecoin is the people's crypto," causing the price to surge by 50%. This year, celebrities like Iggy Azalea, Jason Derulo, and Hulk Hogan have publicly spoken to their followers about MOTHER, JASON, and HULK. In most cases – like the ones mentioned – these memecoins end up as pump-and-dumps. For example, take the ORC coin, a memecoin backed by crypto celebrity Davinci Jeremie, widely known for his early support of Bitcoin when it was priced under $1 in 2011. ORC had a large community but lacked any substance – no utility, no real narrative. As a result, the project stagnated over time.

Turning Memecoin Communities into Strategic Launchpads via Vampire Attacks

I know the obvious question here is: What is a vampire attack?

A vampire attack is a technique where a new crypto project poaches users and liquidity from a dominant project in its niche. In most cases, the newer project is typically a fork of an existing project and attracts users by offering a better user experience, improved product/service, higher financial incentives, and better benefits. The attacking project can then develop growth strategies from a position of competitive advantage.

Examples of popular protocols that have faced vampire attacks include OpenSea, Uniswap, Cream Finance, etc. OpenSea was the leading NFT marketplace in 2022 when LooksRare, another NFT marketplace, started targeting its users. LooksRare airdropped over 120 million LOOKS tokens to active users, who had to migrate to LooksRare to claim the free tokens.

Uniswap experienced its vampire attack in September 2020 when Sushiswap forked Uniswap's open-source code to launch a Decentralized Exchange (DEX). To improve on what Uniswap had, Sushiswap introduced a revenue-sharing feature powered by its native SUSHI token. Before the attack, Uniswap had over $1.5 billion in locked assets, which dropped to around $400 million after the attack, with Sushiswap capturing $1.35 billion. This harmed Uniswap's position as the leading DEX so much that they had to launch their native token UNI, following Sushiswap's revenue-sharing model.

A version of this attack can be adapted to launch a new project by riding the momentum of an existing community – specifically memecoin communities. Instead of builders directly trying to create a crypto community for their project, they can create a memecoin and sell the meme. Once the community grows by all the necessary metrics, they can perform a vampire attack and launch a solid project based on that meme.

This way, they can maintain high market capitalization while attracting a massive community for their new project without building from scratch. It also gives memecoins a better long-term future and a way for new projects to quickly establish communities – almost as if they are ready-made.

Building a Sustainable Project Beyond the Hype

The following are ways you can build a sustainable project that goes beyond initial hype.

• The project should focus on real utility. It should have a compelling value proposition involving creating a unique user experience, solving a specific problem, or offering innovative features.

• The tokenomics should incentivize long-term participation while discouraging speculation. Factors such as utility, distribution, and deflationary mechanisms need to be considered.

• A transparent governance system should be implemented, giving community members the power to participate in project decision-making.

• A clear roadmap should be developed, outlining the project's milestones for the future. This action demonstrates commitment to the long-term success of the project.

Final Word

While meme-inspired strategies can be effective, it's important to consider the potential ethical implications, such as unfair marketing, misleading advertising, regulatory compliance, and the well-being of the community. By using meme-inspired strategies, builders can create communities and launch solid Web3 projects, leveraging the power of hype and community.

However, this must be balanced with a sustainable project built on real value and utility. By mitigating risks such as competition (the memecoin space is highly competitive) and over-reliance on hype, this strategy can ensure the long-term success of your project.

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