Author: Min Jung
Compiled by: TechFlow
Summary
On Solana, the rise of Memecoins has been greatly fueled by the popularity of platforms like pump.fun, Bonkbot, and Photon, which allow people without programming skills to trade and create tokens. In May alone, 455,000 new Memecoins were created on Solana, attracting a large amount of daily trading activity, and platforms like pump.fun have generated millions in fee income.
Memecoins have prospered because of their high return potential, serving as an easy entry point into the crypto market for regular people, and the ability to build strong communities, which is critical for any business.
However, the Memecoins market remains subject to manipulation by influential insiders, a situation made worse by the lack of regulation on decentralized exchanges.
Figure 1: Celebrity Memecoins
Source: Twitter
Love them or hate them, memecoins are one of the hottest areas in both crypto and traditional finance. GameStop has seen another massive surge with the return of Roaring Kitty, whose livestream attracted nearly a million viewers, easily surpassing the FOMC’s audience. In the crypto space, countless memecoins have been created, from celebrity memecoins like $JENNER to $RNT, with some reaching $1 billion market caps in a matter of days. With that in mind, this article aims to outline the current state of memecoins and explore why they may, in fact, be here to stay.
Current Status
With tools like pump.fun, Bonkbot, and Photon, trading Memecoins has become easier and more convenient. Platforms like pump.fun allow people without any programming knowledge to create tokens without having to worry about providing their own funds to liquidity pools (LPs). Various bots, including Bonkbot and Trojanbot, make it easy for people to trade Memecoins through their mobile phones.
Due to low gas fees and fast transaction confirmation speeds, 455,000 Memecoins were created on Solana in May alone, attracting 600,000 daily DEX traders and generating 10 million DEX transactions per day. With more Memecoins created, Pump.fun generated $3.3 million in revenue through fees in seven days, exceeding Uniswap's weekly revenue. Even blockchain foundations are starting to pay attention to Memecoins, recognizing that they are now an important part of their ecosystem. For example, the Avalanche Foundation announced their Memecoin Fund in March, while Base founder Jesse Pollak is promoting $BRETT, recognizing that Memecoins are becoming key to the Layer ecosystem.
With tons of Memecoins being created every day, market trends are constantly evolving. The hottest trend right now is celebrity Memecoins, which started with Caitlyn Jenner and Iggy Azalea. There was a time when the "~ on Sol" trend was very popular (e.g., $BTC on Sol, $ETH on Sol), and last week alone, there were over 1,000 Memecoins featuring Andrew Tate. Of course, most of these tokens will eventually go to zero, leading to a new phenomenon called "CTO (Community Takeover)", where developers abandon a project and the remaining community members take over its development.
Figure 2: Solana Memecoins Statistics
Source: Dune
Why Memecoins May Be Here for the Long Term
Return Potential
In today's world, what product can reach a market cap of $250 million or even $1 billion in a week, starting from scratch? Probably just Memecoins. Regardless of whether Memecoins have any practical use, from a pure investment perspective they provide a compelling addition to a portfolio. At Consensus 2024, Asymmetric Capital CEO Joe McCann suggested allocating 2-3% of your portfolio to Memecoins, which could provide significant upside, at least in the current market. In the Memecoins space, 100x returns are common, and whether looking at it from a positive or negative perspective, Memecoin is undoubtedly a product that investors and portfolio managers should consider adding to their portfolios.
Figure 3: Returns overview of Memecoins
Source: DEX Screener
Entrance for ordinary people
Even for those who are new to cryptocurrencies, they have probably heard of Dogecoin and Shiba Inu. For many, Dogecoin will likely be their first purchase into the crypto market, rather than opting for more complex options like ZKSync and learning what a ZK rollup is. While this may seem silly, Memecoins actually provide an entry point for newcomers into the crypto space, driving mass adoption. For example, Elon Musk tweeting about Dogecoin and discussing it on SNL has brought a ton of attention to the entire asset class. Additionally, Memecoins have actively promoted the mass adoption process through sports partnerships (like $FLOKI) and raising advertising funds on platforms (like $WIF). This is partly because Memecoins are “cute and funny.” If Elon Musk mentioned a ZK rollup project on SNL, would it attract the same attention?
The power of community
The most important factor for Memecoin’s success is a strong community. When you look at successful Web2 startups, most of them started with a community, like Reddit. For example, Instagram and Facebook started out with no revenue model, but eventually introduced ads because they built a “community”. The success of a business often depends more on its community than on the technology itself, because once there is a strong community, any business can be easily built on it. This is exactly what is happening with Memecoins right now. Bonk, which was initially considered a “fake Doge”, now has Bonkbot and has generated $65 million in fees. Similarly, Shiba Inu is creating a Layer 2 solution called Shibarium. Even if a Memecoin looks “useless” in the beginning, it can scale in different ways as it builds a successful community. Therefore, criticizing a Memecoin with a strong community for not having utility is like blaming the early Facebook and Instagram for not having a revenue model.
Figure 4: Meme-coins to utility coins
Source: Degen, Shibarium, Bonkbot
However……
Of course, there are still many problems with the Memecoins market. It is a highly manipulated market where prices can be manipulated by certain large players and insiders, and it is easy to manipulate with minimal resources. On top of that, since trading mainly occurs on decentralized exchanges, there is little regulation. This leads to frequent rug pulls on DEXs, where only a few of the thousands of tokens survive the next few months. Therefore, we must establish higher ethical standards and regulatory measures to prevent these behaviors.
