?? Memecoins, what are they good for? Absolutely nothing. Say it again! ??

Last week Vitalik penned a piece on memecoims and when reading it, it got me thinking about what my position is on this growing crypto trend.

https://vitalik.eth.limo/general/2024/03/29/memecoins.html?

Back in 2014 he forecast the existence and potential for tokens as a fundraising and utility method for projects. We saw the first era of this in 2017/18 with ICOs when every business created a token - many of which had questionable purposes at the time, and now most of which are dead.

Now we're seeing an explosion in tokens again, driven by the ease of creation, and mixed with memetic-trends and cultural nods - many claiming to be creating communities and/or driving value from these memes. Pretty much any token created now is being referred to as a memecoin - especially if it’s got questionable (read: zero) utility.?

BONK has an almost $1.5billion marketcap, BOME has risen over 1,000% in the last month, WIF just raised $650k from it's community to advertise on the Las Vegas sphere for a week and SLERF flipped ETH trading volume even after its dev fat finger error’d a $10m loss for the presale investors. And then there's the Solana and Base memecoin frenzy with misspelt politician coins seeing million dollar daily volume as people rush in to show their politician allegiance with either Jeo Boden or Doland Tremp.

The world has gone memecoin mad!?

But there's also the darker side with racist, homophobic, antisemitic, and sexist “memecoins”. Created for shock factor, under the guise of “dark humour” , or simply because there's some horrible humans out there.?

So what’s my position on all this memecoin mania?

… In the spirit of Vitalik’s approach I'll try and highlight some positives within all the negatives I'm about to lay down ??.

Qui Bono?

Whilst the narrative may be that memecoins are for the normie or crypto degen to get rich, even if they missed the early chance on ETH or BTC, you don't have to look too far on Discord or Twitter to find people who have lost life savings, money tagged for rent payments, pension savings and other significant values on memecoins.?

Now of course this could have been the case if they bought a blue chip crypto asset, however memecoins are MUCH more volatile and either trying to buy at the bottom and sell at the top, or buy for a longer term hodl is MUCH harder. In fact most people apeing into a memecoin are likely just providing exit liquidity for the coin creator, a few early people in the know or sniping bots.?

My hypothesis is that the average person buying memecoins has likely done limited due diligence on the project, may have limited experience of investing and crypto investing, and who likely doesn't know the red flags for rug pulls and down-only projects. Memecoin investments are therefore likely losing money for these investors who thought they were about to become a crypto millionaire and who are duped by the FOMO, talks of cent to million riches and snazzy marketing, but who end up jaded by the false promises and with a negative view of the industry at large.?

Yes there are some success stories in memecoins but for everyone who makes money on memecoins there will be plenty more who only see red candles from when they buy in, and they end up losing money.

Where oh where is the utility?

My gran already thinks I must be some kind of scammer because she knows I work in crypto and all she sees in the BBC are stories about SBF and people being romance scammed.

The memecoin frenzy is putting the spotlight back on the industry but for all the wrong reasons.?

It's showcasing projects that promise riches where all there will be is loses. It's tokens with zero utility and 100% hype. It's offensively named assets which do little to show the industry isn't just crypto bros and toxic basement dwelling weirdos.?

I, like so many web3 people I know, are incredibly passionate about what the underlying technology of crypto and the tenets that Satoshi founded Bitcoin on can do.?

This is not it.?

I want to see real utility, real use cases and positive impacts created by our technology.

This is also a key part of Vitalik’s argument in his recent piece. Memecoins, or tokens at large, should be looking to actually do something.?

Now granted, some of these memecoins are creating communities who come together over a shared passion on a topic e.g dogs vs cats seeminging to be the main one right now, and listening into one of the SLERF Twitter spaces after the LP deletion snafu I was impressed (but dumbfounded) by the level of passion and ambition that presale investors still had for the project, but the vast majority of memecoins are bringing together a group of people who are bonded solely by the (unlikely) prospect of becoming rich.?

If we saw more actual community driven memecoins - or rebranded to ‘community-tokens’ which focussed on a topic or interest of choice then I think we could see better value. Vitalik touches on this in his piece when he revists the idea of charity tokens where a portion can be gifted to charities as a fundraising method. Plus a few years ago there was a concept of ‘fan tokens’ which looked to reward celebrity fanbases for their engagement and interaction.?

Imagine an official token for a football club which is airdropped to fans who have attended a game. Or a token for a popstar which you earn through social media engagement with them. Or a YouTube channel launching their own token which gives access to merch and behind the scenes footage.?

Whilst these cryptoassets aren’t saving the world - they’d certainly be a step closer on the utility scale than the current memecoins.

So easy. Much create. No accountability.?

What’s also a challenge around the current memecoin mania and the value they provide, is that most of these memecoins are being programmatically created on chains with super low transaction fees (like Solana and Base). Then because the cost to entry/spam is so low, the creators are generating hundreds if not thousands in the hope that at least one gets meaningful traction. This pollutes the chains with pointless tokens, many of which won’t get above a few hundred dollars worth of marketcap.?

This low barrier to entry, both technically and economically, is also coupled with almost zero accountability since most memecoin projects are created anonymously. There’s a heated debate occuring about whether front ends for DEXs and other centralised crypto service providers should be blocking offensive and spam tokens or whether they should not interfere and allow for free speech. It will be interesting to see what side various services fall on for this but I personally hope that law enforcement is using onchain analytics to try to identify any prolific creators of tokens which are inciting violence or committing hate crimes.

So all in all I think it’s safe to say that I’m not very bullish about the value of memecoins right now, either individually or as a contribution towards our industry. Does that mean I think the future for them is doomed? No! If we can pivot from the trashbucket of memecoins at the moment towards fan and community based tokens with utility, then I think we can circle back on the true purpose of decentralised value, for the people, by the people.?