This article will explore:
The Origin of Meme Coins: Meme Blockchain Based on Proof of Work
How Meme Coins Evolve with Cycles
The Impact of NFT on the Meme Coins Ecosystem
Recent Developments and Emerging Trends
Potential risks and investment opportunities
With its accessibility, virality, and attractive high-yield potential, Meme Coins, the intersection of crypto digital assets and Internet culture, have always attracted many participants in every crypto cycle.
Since May 2024, the Meme Coins market has soared in popularity, and some asset traders are focusing on allocating their investments in Meme Coins that have performed strongly in recent times, such as SHIB, FLOKI, PEPE, and APORK.
Since January 2024, institutional investors have also increased their attention to Meme Coins. According to statistics from the Bybit trading platform, as of April 2024, the value of Meme Coines held by institutional investors on Bybit has increased from US$63 million in January 2024 to US$300 million. The Meme Coins that have attracted the most institutional attention are the more liquid Doge Coin (DOGE) and SHIB.
What is a Meme?
Meme, as a communication unit that carries cultural concepts and symbols, is transmitted and evolved between people like genes. Among them, meme trends with strong resonance can be spread for a long time, while those with weak influence will quickly fade out of people's sight.
The rise of the Internet gave birth to the unique phenomenon of "Internet memes", which greatly accelerated the spread of memes and various cultural concepts. Common carriers include images, videos, animated pictures and humorous paragraphs. Some studies even vividly compare the spread of Internet memes to the spread of diseases: they follow a viral spread path similar to the SIR model, "infecting" a large number of Internet users.
Meme Coins is a type of crypto asset that generates value based on related memes. It gives financial attributes to the meme concept that originally circulated only on the social level.
With the birth of Meme Coins, memes and their dissemination process, which contain cultural connotations and symbolic meanings, have trading and investment value for the first time. The core value of Meme Coins lies in the current popularity of Memes and their power to attract public attention, which has given rise to a new market form: here, cultural resonance can not only be accurately measured, but also given real economic value.
A brief history of Meme Coins
Hereâs a quick review of crypto asset cycles and the meme coins that emerged during them:
Proof-of-Work Meme Coins are designed to attract miners to switch their computing power to new assets for mining and sales. Most of these assets were born in the Altcoin section of the BitcoinTalk forum, and not all assets can be listed on trading platforms.
However, the few assets that have been lucky enough to enter the market have been active on now-defunct centralized exchanges such as Cryptsy and BTC-E. Each Meme Coin has its own recognizable narrative theme with its unique name, brand image, hash algorithm, expiration time, and supply.
The first batch of assets that emerged after BTC were, in a sense, Meme Coins because of their relatively limited actual value outside of innovative concepts. Here are a few typical examples:
With the exception of Litecoin, these crypto assets have all fallen into obscurity, with near zero trading volume and market cap, no exchange support, and are vulnerable to 51% attacks. The reasons for this include a lack of cultural influence as meme coins and significant barriers to user acquisition and use of these meme coins (because each meme coin is developed on an independent blockchain network).
The main reason why Litecoin has been able to stand out among many similar coins and survive to this day is that it closely follows Bitcoin's "digital gold" narrative, enters the market earlier to seize the opportunity, and continues to receive strong support from mainstream exchanges.
Doge Coin: The First Meme Coin
The meme trend that Doge Coin relies on has emerged since the summer of 2013 and became popular on social platforms such as 4chan and Reddit.
âł Doge Meme spread on 4chan
Jackson Palmer and Billy Markus took advantage of this cultural craze and launched Doge Coin on the Bitcointalk forum on December 8, 2013, making it the world's first encrypted asset based on the Internet Meme trend.
The rise of Doge Coin has spawned a new class of asset species, which are characterized by cynicism, humor, celebrity influence (such as American rapper Kanye West, American TV host Max Keiser), animal images (such as Panda Coin) or precise targeting of a certain community. These are all crypto assets with proof of work mechanism, born in the Altcoin section of the Bitcointalk forum. At that time, compared with technical specifications, the meme trend elements contained in them became more and more important.
The rise of Ethereum
The rise of Ethereum is like a catalyst-driven innovation revolution, which has not only created many emerging application fields, deeply optimized user experience, but also successfully leveraged a large and diverse user group. Its innovations are reflected in:
1. Simplify the asset development process (ERC20 standard)
2. Expand the user base (attract non-miner users)
3. Increase the project's profit margin
4. Interoperability / Single Ecosystem / One Wallet through ERC20
During this period of prosperity, a group of more "pragmatic" projects emerged, such as The DAO, Filecoin, Tezos, EOS, Cardano, Tron and Bancor. In addition to pursuing the value of Meme trends, they are more committed to achieving certain practical functions or achieving specific goals.
At the same time, a small number of Meme Coins that have not received widespread attention but have a certain degree of popularity have appeared in the market, such as:
Useless Ethereum Token, launched in June 2017.
Dentacoin was launched in February 2017 and was originally intended to be a crypto asset serving the dental industry. Its market value reached as high as $2 billion in January 2018.
HAYCOIN was launched in 2018 and was the first ERC20 asset deployed to Uniswap V1. This asset was created by Uniswap founder Hayden Adams with the original intention of testing the Uniswap protocol. Although the response was mediocre at the time and the trading volume was negligible, it was revived in 2023 due to its unique position in history.
Collectible Memes and Early NFTs
Outside of the crypto asset space, a subset of Pepe the Frog emoticons are called Rare Pepes, which are not released publicly and, if released, carry a watermark that says RARE PEPE DO NOT SAVE.
Between 2016 and 2018, a group of Counterparty (a smart contract protocol based on Bitcoin) developers and Pepe emoji enthusiasts created rare Pepe wallets and carefully selected a batch of Meme Coins based on rare Pepe emojis for trading on the Counterparty protocol. As a recognized second-generation NFT collectible, rare Pepe still retains its value very well, with some single items sold for more than $500,000.
Following CryptoPunks, MoonCats, and CryptoKitties, NFTs (non-homogeneous digital assets pointing to images and other media) began to emerge in the Ethereum ecosystem. EtherRocks appeared on the Reddit platform in 2017 as a joke. It consists of 100 colorful clipart rock images.
At the time, only 30 stones were minted in the series and the response was mediocre, but it was later re-excavated, triggering a buying frenzy. By August 2021, its floor price had soared to 305 ETH.
Another example of collectible Meme Coins is Unisocks (SOCKS), launched by Hayden Adams on May 9, 2019. A limited number of 500 pairs of physical socks were produced, and each SOCKS (ERC20 asset) can be redeemed for one pair of socks. Based on the current market value of SOCKS, this may be the most expensive physical socks in the world.
Summer of DeFi
In June 2020, Compound Finance pioneered a new way to develop and distribute assets: liquidity mining or yield farming. Users lock their assets to provide liquidity and receive asset rewards.
This innovation kicked off the summer of DeFi and gave rise to a variety of yield farms that promised investors to lock up their assets in contracts called "Yam" or "Pickle" and earn returns.
Meme Stocks and the Doge Coin Trend
Market risk appetite rose significantly in 2021, driven by a combination of fiscal stimulus, interest rate cuts, ample liquidity and COVID-19 lockdowns.
At the beginning of 2021, retail investors on Reddit launched a heated discussion around the topic of "Gamestock", and by posting relevant pictures and text information, the stock price soared sharply in a short period of time. The convenient experience of Robinhood (mobile application, free transaction fee) enabled many ordinary investors to join this carnival.
The âGMEâ (GameStop stock code) craze has further stimulated peopleâs enthusiasm for speculation in other assets, especially those that can also be traded on Robinhood. Doge Coin has been listed on Robinhood since 2018. At the end of January 2021, its price was only 0.008 cents, which was very tempting for retail investors.
In early February 2021, Tesla CEO Elon Musk frequently posted tweets related to Doge Coin on Twitter, which further boosted the popularity of Doge Coin. By May 2021, the market value of Doge Coin once reached 90 billion US dollars.
The popularity of Doge Coin has spawned the emergence of more Meme Coins such as Shiba Inu, Floki, and Safemoon, all of which have reached extremely high valuations within a few months.
NFT Boom: Meme Coins for Pictures
With the popularity of the ERC721 standard and the rise of markets such as OpenSea, NFTs have created a whole new category of crypto assets: unique, visual assets that are the core embodiment of a certain "culture" or "Meme."
The most well-known NFTs include: CryptoPunks, Bored Apes, Squiggles, and Pudgy Penguins. These NFTs are used as personal avatars on platforms such as Twitter and Discord, and those who wear them use them as personal identity identifiers, thus accelerating the viral spread of NFTs.
These avatars (PFP) symbolize noble status and membership in a cultural club. Many NFT series have made holders extremely wealthy, but if the holder sells the NFT, it will be regarded as "leaving the community."
In order to give back to loyal holders, some NFT projects have issued Meme Coins (ERC20) to the community as a supplement to liquidity, an extension of practical functions, and cultural "currency."
The NFT projects at this stage and their associated Meme Coins (if any) are listed below:
Recent (2023 to present)
As the encryption market comes out of its trough, various emerging Memes, cultures, ideas and ecosystems are emerging. Meme Coins is one of the few subdivisions that has always maintained activity (transaction volume, market value appreciation, social attention), and it has shown a significant warming trend recently.
Several recent narratives worth noting include:
Universal Rules for Meme Coins
In each cycle, Meme Coins emerge in different forms: they present diverse performances based on the underlying technology (such as PoW assets, ERC20 assets or NFTs), and are often the first practitioners of new technologies or new forms.
Although Meme Coins rely on different media, their paths to value accumulation are common: they all rely on the power of attention, narrative, and hype to survive and spread.
Although new media always attracts enthusiastic attention in the early stage, in order to achieve long-term retention of value, it must rely on continuous attention. The identity of NFT or Ordinal alone is not enough to support value, there must be a deeper driving force of attention. Attention has a clear cyclicality. Once a medium has experienced the first round of hype, a more fundamental driving force of attention is needed to maintain the popularity.
First there is the meme trend, then the asset is born: for the most successful meme coins such as Doge Coin, Pepe Frog and dogwifhat, Internet memes took the lead, and meme coins took advantage of the trend and realized value enhancement by leveraging their existing popularity and dissemination.
The meme trend originating from the crypto field is gradually emerging: crypto-native users are beginning to create meme trends that can break through the limitations of the Web3 circle and spread widely. Among them, crypto-native intellectual property NFT projects represented by Pudgy Penguins are vivid examples of this trend.
The low price phenomenon: Since the early days of altcoins, users have been keen to speculate on digital assets that appear to be cheap (usually due to large supply). The psychological appeal is that if a digital asset with a negligible price can climb to $1, the holder may become a millionaire overnight. The price itself constitutes a unique meme trend phenomenon.
Strong community and marketing strategy: The success of Meme Coins is inseparable from the support of a strong community, founders or spokespersons, who inject vitality into encrypted digital assets by creating content, promoting brands and spreading Meme trends.
From spontaneous launch to professional team operation: Early Meme Coins were mostly spontaneous and fair launches, with no insider or team share. Although this model has many advantages, it also faces risks such as pull-ups and fund theft. To address these issues, Meme Coins projects with professional teams have emerged, such as the PFP project, which is committed to attracting attention and expanding the influence of Meme Coins.
Distinctive visual elements, derivative images and slogans accelerate the spread of meme trends: In social networks, images have become the key carrier of meme trends. Usually, a meme trend usually starts with a core visual symbol, and then derives a rich variety of expressions.
Criticisms and risks
While Meme Coins present opportunities, their risks should not be ignored. Many Meme Coins are prone to attracting users who are looking to get rich quickly and view investments as buying lottery tickets or participating in gambling.
At the same time, the Meme Coins market frequently sees pump-and-dump scams and market manipulation. According to a recent report by blockchain analysis agency CipherTrace, pump-and-dump scams accounted for 99% of all crypto asset fraud incidents in 2023, causing a cumulative loss of $2.1 billion. Therefore, for Meme Coins, investors should carefully examine its characteristics, such as the status of LP assets (whether they have been destroyed or held in a centralized manner), team allocation ratio, transaction taxes, and whether the smart contract has given up management rights.
Additionally, regulatory rules for meme coins remain unclear. In June 2021, the Thai Securities and Exchange Commission banned a group of digital assets that lacked a clear purpose or substance and whose prices were susceptible to manipulation by social media trends and influencers.
Another major concern is that Meme Coins could die out from a simple lack of interest, attention, and awareness, rather than from malicious attacks. Such investment losses could cause the community of holders to become hostile or indifferent.
