What are Memecoins?
February 12, 2024

He who controls the memes, controls the world! 

In fact, it's fair to say that memes are the cornerstone of the internet today. A world without memes is a world not worth living in. Meme culture is so popular that billionaires are also busy mastering the art of the meme, a good example being Elon Musk. 

One of his finest meme moments has to be the “Let that sink in” meme when he made it through the Twitter (now X) headquarters with a sink in hand. Classic chad behavior from the Musk.

Source

Here at blocmates we are true respecters of the meme, this is the crypto way.  Who doesn’t love spinning up some of the finest trends into memes and having a good laugh along the way?

blocmates variation Original meme (Source)

But we digress.

The crux is that memes are fun, and so is the utter degeneracy that comes with them when applied to a crypto context. Crypto enthusiasts who tilt towards the “make it in a single trade” side of life love to speculate on memes or viral moments through a form of cryptocurrency fondly called “Memecoins” aka “shitcoins”.

Memecoins, in their simplest form, are just another type of cryptocurrency. They have no real use case or fundamental value besides price goes up, which just so happens to be the best use case of them all. Each coin is created based on a popular internet meme and gains popularity due to its humorous nature and connection with the online world. A popular example is DogeCoin, which set in motion a multi-year trend of dog themed meme coins that still reign supreme to this day. We will explore specific coins in more detail later, but first, let’s briefly revisit what cryptocurrencies are.

Brief revisit of the basics 

There is no understanding of how to trade meme coins without taking a quick dip into the very basics of crypto. Cryptocurrency is a digital currency that uses cryptography and encryption for security, making it difficult to counterfeit. It operates on a decentralized network using technology known as blockchain, a distributed ledger that records all transactions across a network of computers.

Meme coins represent one of many use cases for cryptocurrency, and are just a shitload more fun than some complicated protocol with a 1000 page whitepaper.

For additional context, decentralized networks distribute power, information, or operational capabilities across multiple nodes or entities rather than centralizing them in a single location or authority. This structure enhances resilience and reduces the risk of a single point of failure, as each node operates independently and can often continue functioning even if other parts of the network fail or are compromised. In context, a blockchains decentralization ensures that no single entity has complete control over the network, promoting a more democratic and secure environment for data transactions. 

The Blockchain itself is a digital ledger where data is stored in blocks that are chained together in a chronological and unalterable sequence. Each block contains a record of multiple transactions. Once added to the chain, the data cannot be altered, providing a transparent and secure way of recording transactions without the need for a central authority. To learn more, be sure to check out our article that gives a good fundamental understanding of blockchain technology here.

So, how do meme coins work?

As explained, meme coins are a type of cryptocurrency, and they are often started as internet jokes that gain popularity through social media traction and community support. Burn this idea of community into your brain as it is probably the key element of successful meme coins. 

Thanks to the decentralized nature of a blockchain there is no need for any central authority, but transparency and security are still a considerable part of the continuation of the meme coin space. While meme coins share the same technological framework as larger cryptocurrencies like Bitcoin, they often lack a practical purpose other than being a vehicle for pure speculation. And let’s be real here, who said pure speculation wasn’t a practical purpose of its own?

Every meme coin transaction, or any other cryptocurrency, involves cryptocurrency addresses. These addresses are similar to a bank account number, identifying your specific account so that transactions leave and enter at the correct place. These addresses are unique identifiers and allow for the transaction of digital currencies. These transactions are initiated when one party sends a specific amount of a meme coin to another person or company’s address. 

Network participants, known as miners or validators, verify this, then find meme coin data within the blockchain and allow it to be sent along the network between the specified accounts. Once these individuals verify a transaction, the currency is transferred, the chart goes up and Gucci wearing Lamborghini drivers are born.

It is important to remember, and would be irresponsible not to mention, that meme coins are highly speculative when compared to more solidified projects in the scene like Ethereum and Bitcoin. While they typically gain a burst of purchases right at the start of their creation, many struggle to keep this increase going after the first push. Afterall, mindshare is a hard commodity to keep in crypto and this makes them particularly susceptible to rapid price fluctuations as they are a hype-driven market. Ape at your own risk!

Can meme coins be hacked or stolen?

While the coins themselves generally cannot be hacked due to the underlying code that creates them, the safety of investing in them is a risk. Rather than the coins being stolen, they could be used by celebrities or social media influencers to make themselves some quick profit. This is known as a Pump And Dump scheme, which involves creating a new coin with a very low market cap, buying a large amount of them at or before launch, advertising the coin to have other people buy them, and then selling their entire holdings for a profit. The effect of this is the price crashing and everyone becoming exiting liquidity, losing their money or becoming forced long term investors and full time copers.

Various nefarious actions can occur when playing in the meme coin casino, including unintentionally or ignorantly purchasing a “honeypot” meme coin. A honeypot contract is a compromised contract in which the sell function is disabled, enabling you to buy a token but preventing you from exiting, and once again you are now a long term investor. Presently, honeypots are getting more sophisticated as unscrupulous developers whitelist specific addresses to create an impression that there is selling activity, but in hindsight, you are unable to execute your sell orders.

However, fear not my friend, there is a solution. A well versed meme-coiner will indulge in routinely checking contracts for defects on websites such as Token sniffer. These websites help detect any suspicious activity in the contract and warn you before you interact with it.

An additional risk associated with trading Meme coins is the potential for developers to pull liquidity from a contract at any point in time if the liquidity on the contract is not locked. The act of removing liquidity from a contract by a developer or the meme coin creator is called “Rugging”. Once liquidity is pulled, holders of the meme coin lose the ability to swap to other pairs due to insufficient or non-existent liquidity. To avoid such a situation, it is advisable to consistently verify if the liquidity is locked and refrain from purchasing meme coins with unlocked liquidity, as they possess a considerable degree of risk.

What are the top meme coins? 

Mindshare is the driving force of the meme coin and cult-like behavior should be seen as a good sign you have found the right meme. The more attention a memecoin gets and sustains, the more likely it is that individuals will throw their money at it. Over time, the crypto industry has witnessed the rise of some meme coins to multi-billion dollar valuations, such valuations would put them up there with many S&P 500 companies, which quite frankly, makes the whole thing just that much funnier!

Here are a few notable memecoins ranked by their market cap on Coinmarketcap

  • DogeCoin: Known as the “OG” meme coin, DogeCoin was created in 2013 based on a popular internet meme of a Shiba Inu dog known as Doge. Thanks to the popularity of this meme and the help of Elon Musk, the coin was quickly scouted and continues to be the top-purchased coin in the meme coin space. This coin ranks as the top meme coin by market cap and at its 2021 peak was valued at around $88 billion US dollars. If only we had a time machine!
  • Shiba Inu: Based on the popularity of this coin, the Shiba Inu coin ($SHIB) is another one of the top coins and often said to be the smaller brother of $DOGE. With an all time high market cap of just over $40 billion USD those who faded are still having trouble sleeping at night. Shiba Inu coins are worth a tiny fraction of a penny, and like most meme coins there are billions in circulation.
  • Bonk:  The Bonk meme coin is another dog variant, this time, on the Solana network. The Bonk meme coin was inspired by Shiba Inu and was developed by a group of 22 developers. Bonk was shot into the limelight in 2023 and kicked off a meme coin parade on the Solana network at a time when many thought it was dead. Bonk is now the third-highest meme coin by market capitalization and is truly loved by those in the Solana ecosystem for bringing large amounts of liquidity when it was needed most.
  • Pepe Coin: What's an article about meme coins without Pepe? Born during the darkest period of the last bear market, Pepe Coin rose to prominence, reaching new heights and capturing the attention of almost everyone. Pepe is originally a character possibly created by renowned artist Matt Furie, known as "Pepe the Frog''. The character is now a famous internet meme and has become a bit of an unofficial mascot of the crypto space. I can tell you now, and many in the cryptosphere will say the same, if you don’t have an album with at least 100 variations of pepe memes you are not really crypto-ing the right way.

  • Other coins include COQ, WIF, FLOKI, CorgiAI, and the ridiculously named HarryPotterObamaSonic10Inu coin. That’s a degenerate tongue twister if ever you saw one!

Community Influence and Mainstream Acceptance

One of the critical drivers for the future of meme coins is the power of community and social media. Platforms like Twitter, Reddit, and TikTok have been instrumental in rallying support and driving up the prices of meme coins. This trend will likely continue, with meme coins benefiting from viral marketing and influencer endorsements. The long-term success of these coins hinges entirely on staying in the spotlight long enough to capture the cash of the masses. The more a meme coin can maintain mindshare or integrate into practical use cases, like online payments or partnerships with established brands, the more likely it is to have longevity and pumpability.

Technological Innovation and Utility

The future of meme coins also depends on technological innovations. The integration of smart contract capabilities, improved scalability, and security features could enhance their utility beyond just being speculative assets. For example, if a meme coin can offer unique features or solve specific problems, it may carve out a niche in the broader crypto ecosystem. However, this requires a shift from a community-driven, meme-focused approach to a more utility and technology-oriented development. This has been seen recently with the likes of BONK bringing in some serious revenue thanks to their automated trading bot and protocols like Guacamole who have built an entire crypto super app around their meme coin token GUAC.

Regulatory Environment 

The regulatory landscape is another significant factor that will shape the future of memecoins. As governments and financial authorities around the world start paying closer attention to cryptocurrencies, meme coins could face challenges. Regulations aimed at investor protection could legitimize these assets by weeding out scams and promoting transparency or stifling their growth by imposing strict compliance requirements that are hard to meet for decentralized, community-driven projects.

This is something that is yet to be seen and so far it seems impossible to stop the meme train from plowing down the track. Some things are just too powerful and most recent attempts at regulating the space have turned into memes of their own. How can you not love crypto!

Market Dynamics and Risk Profile 

The high volatility and speculative nature of meme coins mean they will likely continue to be high-risk investment choices. Their prices are often driven by hype and community sentiment, making them susceptible to sudden price swings. Investors in meme coins should be prepared for this risk profile, the possibility of significant losses, and the potential for high returns. Only ape what you can afford to lose or you might find yourself out on the streets!

What does the future look like for Meme coins? 

Indeed, nothing is certain when it comes to the future of meme coins. As a subset of cryptocurrencies that originated primarily as internet jokes there is certainly no shortage of material. However, we can say that the trajectory for meme coins is a blend of potential growth, fueled by community support and technological innovation, tempered by regulatory uncertainties and inherent market risks. 

Whether they evolve into more stable and widely accepted digital assets or remain niche speculative tools largely depends on how they adapt to these evolving dynamics and to be completely honest doesn’t really matter as long as the price keeps going up. 

So get out there, start saving those pepe memes in a designated folder, spam the timeline and have some fun. This is the essence of crypto!

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