The Memecoin market continues to expand, and how can we better understand Memecoin with a framework? This article is sourced from an article written by Paul Veradittakit, a partner at Pantera Capital.
Table of Contents:
– Memecoin Relies on Attention
– The Importance of Distribution
– Memecoin Trading Creates Huge Market Opportunities
– Super Distribution of Memecoin
– Memecoin Enhances Blockchain and Application Activities
– Final Thoughts: Trojan Horse Disguised as a Toy Meme
Memes are defined as units that transmit cultural ideas between people. Over the past 10 years, memes have been deeply intertwined with crypto culture. The first Memecoin, Dogecoin, was launched in 2014 as a fun derivative of Bitcoin and reached a peak market cap of $75 billion in the 2021 bull market.
Recently, the Memecoin market has experienced explosive growth. In less than a year, the market cap of the ERC-20 token PEPE, centered around Pepe The Frog, has soared by 400% to $2 billion. Another Memecoin, DEGEN, depicting a purple top hat, launched on the decentralized social network Farcaster, has a market cap exceeding $1 billion, surpassing Farcaster’s own valuation.
Lastly, there is the dog meme with a knitted hat, WIF, which has gained popularity on crypto Twitter through viral spread. Since the beginning of this year, its price has multiplied over 20 times, with a current market cap of around $4 billion.
Memecoin will continue to exist, and this article explores the reasons why. It provides a framework for better understanding Memecoin, studies the infrastructure supporting their continuous development, and discusses how they significantly enhance network participation.
A key understanding is that Memecoin thrives on attention. In the world of Memecoin, attention is everything. Attention drives community behavior, hype, and the price movement of Memecoin.
You often find people promoting Memecoin on Twitter. This behavior stems from a simple fact: the price of Memecoin ultimately depends on the attention it receives. The more attention a Memecoin gets, the more potential buyers there are. If the associated meme is interesting, these potential buyers are more likely to make a purchase.
In addition to sharing memes on social media, Memecoin enthusiasts come up with various creative ways to attract attention to their tokens. For example, the WIF community raised $700,000 for an event aiming to display their meme on the iconic Las Vegas Ball. As a result, the value of the token surged by 25% due to the expected buzz generated by this marketing stunt.
Sometimes, Memecoin leverages existing attention instead of generating its own. For example, while prediction markets like PredictIt and Polymarket allow users to bet on the outcome of presidential elections, the attention-based “Politifi” Memecoin developed around presidential candidates is designed to speculate on public interest in the candidates. As the 2024 election approaches, speculation and prices of these “Politifi” Memecoins have significantly increased.
So which Memecoin performs well? The answer lies in the tokens that people believe will attract the most attention.
When evaluating Memecoin, token distribution is a key factor for many potential buyers.
Some Memecoin projects decide to reserve tokens for the team and other plans. In addition to airdropping to community members and developers, many projects choose to set aside a portion of tokens for marketing initiatives, the team, and DAOs.
Reserving a portion of the supply can create stronger incentive mechanisms and increase the chances of long-term success. By allocating tokens to themselves, teams have the motivation to participate more in the project and ensure its success in the long run. Additionally, DAOs can be used to fund large-scale projects.
Other Memecoins, like WIF, may be considered “more organic.” While this strategy may make it more challenging to fund projects and market them, fair distribution is still a key factor that attracts many Memecoin enthusiasts.
The Memecoin market is becoming massive. Currently, the top 10 Memecoins have a combined market cap of over $50 billion. Memecoins have a significant on-chain trading volume, with over $1 billion in daily trading volume on Solana, primarily driven by Memecoin.
Therefore, there are valuable market opportunities for developers. Tools and applications catering to the process of creating and trading Memecoin have gained significant attention. For example, Bonkbot is a simple Telegram trading bot that allows easy trading of Memecoin on Solana. In just 5 months, it has generated over $23 million in revenue.
Platforms like Bonkbot not only make trading Memecoin increasingly accessible but also build infrastructure to simplify the process of launching Memecoin. To launch a Memecoin, it usually involves creating a token, establishing liquidity pools on decentralized exchanges like Uniswap or Raydium using their funds, and marketing the project.
Pump.fun is a platform that allows users to launch Memecoin with just one click, and thousands of users have used their platform to launch and find the latest Memecoins. Currently, it earns hundreds of thousands of dollars in daily revenue through transaction fees.
Memecoin combines the fun of sharing memes with economic incentives to encourage buying, turning ordinary memes into “super” memes. The community behind the first Memecoin was incentivized by token ownership, elevating the Doge meme into a movement that caught the attention of figures like Elon Musk. Understanding and applying the incentivizing mass distribution characteristics of Memecoin not only enhances memes but also drives other areas of cryptocurrency.
One field that can leverage the attributes of Memecoin is NFTs. Currently, most NFTs have underperformed during bull markets. Why? Because they suffer from “distribution” issues.
While the scarcity of NFT collectibles makes them excellent luxury assets, only a limited number of participants have the incentive to increase the visibility of the collectibles. For example, avatar collectibles like Cryptopunks have a supply limit of 10,000, which can serve as a prestigious symbol of status. However, the same limit restricts the fan base to a maximum of 10,000 people, limiting the broader participation and visibility that Memecoin enjoys.
The introduction of ERC-404 offers a creative solution to the distribution problem of NFTs. ERC-404 is a new standard that facilitates fractional ownership of NFTs. Projects like Pandora, DN-404, and Asterix are pioneering this area, allowing NFTs to be divided into multiple shares (if you will, Memecoins). This means that traditionally owned single NFTs can choose to be divided into multiple parts. This division expands access to a wider audience, incentivizing them to create more visibility for the collectibles while maintaining the exclusivity of holding the entire NFT.
In November 2022, after the collapse of FTX, the Solana ecosystem experienced a sharp decline in activity. Many teams had just lost funds in FTX, and FTX itself is closely related to Solana, which lowered the community’s confidence and activity. However, on December 25, 2022, a Memecoin depicting a mischievous orange Shiba Inu was airdropped to existing developers and users on the Solana network as a way to reward and revitalize the Solana community.
This strategy was successful. The Memecoin became a gathering point for the Solana community, quickly integrating with hundreds of DeFi protocols and applications on the platform. Users discovered that they could earn profits through Memecoin, use Memecoin as collateral, and even spend Memecoin in Solana-based games. With the increase in activity and price around Memecoin, community enthusiasm soared, enhancing developer activity and enabling Solana to sustain during the bear market.
These stories are not isolated incidents; Memecoin plays a crucial role in stimulating online activity. DEGEN, with a market cap of $1 billion, originated from Farcaster and is a way to reward users for posting. Its launch provided an additional incentive for people to post, significantly boosting activity on Farcaster. Memecoin has the ability to enhance community vitality and drive interaction within platforms.
More and more people are recognizing Memecoin as a tool to stimulate online activity. For example, the blockchain Avalanche has established a $100 million “Culture Fund,” while Blast rewards users who use Memecoin with Blast Gold. Social platforms like Drakula, a short video platform, have integrated Farcaster DEGEN to drive user activity. I believe more internet platforms should consider how to leverage Memecoin to enhance activity.
Here are my key thoughts on Memecoin:
First, it is clear that Memecoin will not disappear. I see the next generation viewing Memecoin as a very fun social activity. Our current Z Generation Pantera interns have a lot of fun playing with friends, using newly launched Memecoins for simple and fun social contact, and experiencing the pros and cons.
Second, Memecoin greatly enhances platforms and applications. While they are an incentive mechanism for spreading memes, Memecoin can greatly enhance NFT projects, social protocols, and the entire blockchain industry.
Ethereum founder Vitalik Buterin proposed interesting ideas about the use of Memecoin, focusing on its use in charity and Robin Hood-style games.
I believe the role of Memecoin goes beyond that. Ultimately, while Memecoin may appear as toys, they are Trojan Horses for cryptocurrencies. They are the easiest way to introduce the next generation to experience the latest DeFi applications and bring them into Web3.
Related Reports
Next wealth explosion? Bitcoin runestone: will send 3 Memecoins to holders, airdrop to start this month
Arthur Hayes: Don’t think Memecoin is foolish! Memecoin has “positive effects” on blockchain
Vitalik Buterin praises Memecoin: Memecoin should be fun and “meaningful”! Should not become a tool for a few to get rich.