Memecoins, the intersection of digital currency and internet culture, have captivated participants throughout crypto cycles. Once again, they have captured the zeitgeist for their approachability, viral spread, and alluring potential for lucrative returns.

In this article, we'll cover:

• The origin of memecoins: proof-of-work meme blockchains

• How memecoins have evolved through cycles: ICOs, tokens, DeFi summer, Solana

• How NFTs have influenced the memecoin landscape

• Recent developments and emerging trends

• Potential risks and opportunities

A meme is a unit that carries cultural ideas and symbols and spreads from one mind to another.

 Like genes, memes vary in their ability to spread; those that resonate live on, while less impactful ones are quickly forgotten.

The internet brought upon the idea of ‘Internet memes’, which allow for faster transmission of memes and cultural ideas, usually in the form of images, videos, gifs, and jokes.  One study likened the spread of internet memes to diseases: “Memes propagate in a viral pattern, "infecting" individuals in a pattern reminiscent of the SIR model for spread of disease”.

"Memecoins" are cryptocurrencies that derive their value solely from the memes with which they are associated, essentially bringing financial value to the concept of memes.

With the advent of memecoins, cultural ideas and symbols, and their spread, can be traded and speculated upon.  Their value is based on the meme's relevance and ability to capture mindshare, creating a new type of market where cultural resonance is quantifiable and financially valued.

Below is a brief look at crypto cycles and the memecoins that were created within them:

Proof-of-work memecoins were primarily designed for miners to allocate their resources to new coins for mining and selling. Many of these memecoins made their debut on Bitcointalk's alternative cryptocurrency forums. Although a significant number failed to reach exchanges, those that succeeded were traded on platforms like Cryptsy and BTC-E, centralized services that are now closed. Each memecoin was usually differentiated by name and branding, hashing algorithm, block time, and supply, all of which contributed to their overall narrative or “meme”.

The first wave of coins after Bitcoin were ‘memecoins’ in the sense that they provided little value beyond a new idea. A few examples include:

These coins, aside from Litecoin, are all dead (low volume and market cap, no exchange support, easy to 51% attack).  This is likely due to several reasons: the meme not sticking (lacked cultural longevity) and issues accessing them (each memecoin was an entire blockchain).

Litecoin’s survival is likely due to the sheer pull of Bitcoin’s memetic value (“digital gold”), it being significantly earlier than the others, and continued support from modern exchanges.

The original doge meme (“much wow”), began spreading on 4chan and Reddit in the summer of 2013.  Capitalizing on this cultural trend, Dogecoin was released on Dec 8, 2013, on Bitcointalk by Jackson Palmer and Billy Markus. It was the first cryptocurrency to be based on an Internet meme.

Dogecoin's success brought upon a new ‘class’ of coins, that were irreverent, humorous, ironic, used celebrities (Kanye West, Max Keiser), animals (Pandacoin), or tried to capture a specific community.  These were all proof-of-work coins launched in Bitcointalk’s “Alternative Cryptocurrency” sub-forum.  “Specs” became less important and the “meme” became more important.  Some examples:

The rise of Ethereum brought upon a wave of innovation which enabled new use cases, a better user experience, and new users.

Some specific improvements included:

• Easier to launch coins (ERC20 standard)

• Brought in a new userbase (non-miners)

• Creators of coins could make more money (unlike zero-premine PoW coins, ERC20s were sold via ICOs)

• Introduced interoperability / one ecosystem / one wallet (via ERC20)

The ICO era brought in a wave of more ‘serious’ projects: theDAO, Filecoin, Tezos, EOS, Cardano, Tron, and Bancor, which attempted to have some sort of utility or purpose beyond memetic value.

There were a smaller number of memecoins, which were not particularly notable but still garnered some attention.

One example was the Useless Ethereum Token, released in June 2017, which poked fun at the idea of ICOs, and raised 310 ETH.

Dentacoin, although originally meant to be a ‘cryptocurrency for Dentists’, was treated as a memecoin and peaked at a $2B market cap in Jan 2018.

HAYCOIN, the first ERC20 deployed to Uni v1, was also a memecoin created in this era (2018).  Hayden Adams, founder of Uniswap, created the token as a test for the Uniswap protocol.  It did not have much reception or volume at the time, but was resurrected in 2023 for its historical significance.

Outside of crypto, a subset of Pepe the Frog memes were referred to as ‘Rare Pepes’, memes that were not posted publicly, and if they were, had the watermark ‘RARE PEPE DO NOT SAVE’.

Between 2016 - 2018, a group of counterparty developers (a smart contract protocol built on top of Bitcoin) and Pepe-meme enthusiasts created the Rare Pepe Wallet, Pepe Cash, and curated ‘Rare Pepe memes’ to be traded on the Counterparty Protocol.

Often considered the second NFT collection ever, Rare Pepe continue to hold value and some have sold for over $500,000.

Following the release of CryptoPunks, MoonCats, and CryptoKitties, NFTs began entering the Ethereum zeitgeist: non-fungible tokens that could point to pictures and other media. EtherRocks, launched in 2017 on Reddit as a joke, was a collection of 100 multi-colored clipart rocks.  The collection had very little reception at the time (only 30 were minted), but was later resurrected and had a frenzy of buying activity, reaching a floor of 305 Ether in Aug 2021 ($1m USD at the time).

Another example of collector item memecoins is Unisocks (SOCKS), launched by Hayden Adams on May 9, 2019.  500 physical socks were created, and 1 SOCK (an ERC20) can be used to redeem them.  At $53,000 per sock at the time of writing, they may be the most expensive socks in the world.

In June 2020, Compound Finance pioneered a new token distribution method: ‘liquidity mining’ or ‘yield farming’.  Users would lock their assets to provide liquidity and get rewarded with tokens.

This new primitive kicked off ‘DeFi summer’, and culminated in ‘food coin’ yield farms that offered 10,000% APY (in memecoins) in exchange for having your tokens locked up in a Yam or a Pickle contract.

Stimulus checks, rate cuts, cheap money, and COVID lockdowns brought about a highly risk-on environment throughout 2021.

In early 2021, retail traders gathered on Reddit and began proliferating the 'Gamestock' meme, posting images/videos and fueling a rapid increase in the stock's price.  Many average users were able to participate thanks to the UX of Robinhood (mobile app, fee-free).

‘GME’-mania led many to begin speculating on other assets, particularly those that were also available on Robinhood.  DOGE was listed on Robinhood in 2018, and was priced at .008 cents in late January, a very appealing “price” for retail users.  In early February 2021, Elon Musk began posting numerous tweets proliferating the Doge meme.  DOGE peaked in May 2021, at a market cap of $90B.

DOGE’s popularity led to many cryptonative memecoins, including Shiba Inu, Floki, and Safemoon, all of which reached very high valuations within months.

With the standardization of ERC721 and generalized marketplaces like OpenSea, NFTs created a new ‘class’ of cryptoasset: unique, visual representations of an overarching “culture” or “meme”.

Some of the most recognizable NFTs include: CryptoPunks, Bored Apes, Squiggles, and Pudgy Penguins.  NFTs were sported as profile pictures on platforms like Twitter and Discord, spreading their virality by individuals who donned them as their identity.  These PFPs signaled prestige and “membership within a cultural club”.  Many collections made their holders rich, but the holders couldn’t sell their NFT without ‘leaving the community’.  In order to reward their loyal holders, some NFT projects released a ‘memecoin’ (ERC20) component to their community, as a form of liquidity, ‘utility’, and cultural ‘currency’.

Some examples of NFT projects in this era (and if applicable, their memecoin) include:

As crypto recovers from a bear market, new memes, cultures, ideas, and ecosystems have been emerging.  Memecoins have been one of the few categories that have continued to find traction (volume, market cap appreciation, social interest), and most recently have had surging interest.

Some recent narratives include:

Every cycle has some form of memecoins: Memecoins manifest in different ways depending on the underlying technology (PoW coins vs ERC20 vs NFTs), they are one of the earliest ‘applications’ of new technology or form factors.

Although memecoins come in all different types of mediums, they accrue value in the same way: they all require attention, narrative, and hype to survive and spread. While new mediums always find initial early excitement, long-term retention of value is only possible via sustained attention. Just being an NFT is not enough; just being an Ordinal is not enough alone. Attention is highly cyclical, and after an initial medium’s first hype cycle, it requires more fundamental attention drivers.

The meme came first, the coin came after: For the most successful memecoins, such as doge, pepe, and dogwifhat, the Internet meme came first and the coins capitalized on existing awareness and spread.

Memes originating from crypto are just beginning:** cryptonatives have started to create memes that successfully extend beyond web3 circles. A prime example of this trend is the emergence of cryptonative intellectual property, especially NFT projects like Pudgy Penguins.

Low price as a meme: since the earliest days of altcoins, users have enjoyed speculating on tokens with a low ‘price’ (due to high supply).  There is a psychological allure that should a token with a seemingly insignificant price reach $1, it could transform holders into overnight millionaires.  The price itself serves as a meme.

Strong Community + Marketing: memecoins need a strong community, founder, or ‘spokesperson’ that can create content, promote the brand, and spread the ‘meme’.

Organic launches to dedicated teams:  The first wave of memecoins were organic, often fair-launched with no insider or team allocation.  These organic launches have many benefits, but also carry risks such as rugpulls and stolen funds.  An emerging solution is memecoins with dedicated teams incentivised to bootstrap attention around them, such as PFP projects.

Strong imagery, derivative imagery, and slogans spread the meme: Imagery is the primary way memes propagate on social networks.  Often, it begins with one keynote symbol, which manifests itself in many different ways.

At a combined market cap of over $60 billion, and daily volume exceeding $13 billion, memecoins command substantial financial value.

Since a meme’s only function is to spread into other people’s minds, catching the next ‘meme’ early can be a lucrative opportunity.  Creators and investors ‘work for the meme’ by spreading its reach and get rewarded in the process for being early believers.

Whether it’s a lottery ticket to get rich, following a particular influencer’s picks, or speculating on societal trends and ideas, memecoins have continued to grow explosively since the beginnings of cryptocurrency.

Despite the opportunity, memecoins are not without risks.  Many memecoins tend to attract users trying to acquire instant wealth with little effort, treating it as a lottery ticket or form of gambling.

Another common trend are ‘rug pulls’ and ‘pump-and-dump’ schemes, which occur almost daily on decentralized networks through memecoins. According to a recent report by CipherTrace, a blockchain analytics firm, rug pulls accounted for 99% of all crypto frauds in 2023, totaling $2.1 billion in losses.  It is important to check some key features of a memecoin, such as the status of LP tokens (are they burnt or held centrally?), team allocation, transfer taxes, and if the contract is renounced.

There is also a lack of regulatory clarity on memecoins.  The most notable regulation on memecoins is when Thailand 's SEC banned tokens that have "no clear objective or substance" and whose prices are swayed by social media trends and influencers in June 2021.

Another major issue is that memes may not ‘survive’, purely due to lack of interest, attention, and mindshare, rather than any malicious act.  These investment losses can create a hostile or apathetic community of holders.

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