I was at a lunch the other day where I was forced to defend memecoins. The person I was speaking with had worked in crypto for a while and had seen memecoins as the element that had made this industry irredeemable in their eyes.

The users are never wrong

My view as a product person is that whichever way people are using technology is the right way. It’s not our job to moralize the correct way to use something. The task as a technologist is to understand emergent behaviors and develop better vehicles for them. Classifying memecoins as only a casino game is an extremely lazy perspective.

“Banking the Unbanked” is crypto’s original goal of making financial instruments accessible to people who they historically have been unavailable. We need to dispense with the idea that “unbanked” are exclusively without access to bank accounts, and include people with improper access to any type of financial instruments.

So what is the emergent phenomenon of memecoins? Memecoins are a capital formation vehicle with an extremely low literacy gap. Your 16 year old cousin feels much more comfortable buying into Fartcoin than investing in NVIDIA. When your 60 year old uncle says he doesn’t understand fartcoin, what he really means is “I don’t understand why people would buy a coin that does nothing” Memecoins are a class of assets so simple that the average person understands them as well as sophisticated investors. Pumpfun and other memecoin launchpads have given anyone the power to create the simplest form of financial asset. The edge that professional investors have elsewhere doesn’t exist.

The coin about nothing

The problem with memecoins is that they are too simple. They are really good at capital formation but they lack the tools to do anything meaningful with the captured value. Memecoins represent product market fit for the stage 1 of an entire capital utilization vehicle. The 3 stages in the ideal capital utilization vehicle are:

1: Capital Formation
2: Capital Allocation
3: Profit Redistribution

There exists many forms of this vehicle in traditional finance and many crypto teams have tried to bring full capital utilization vehicles to market with little success. (DAOs, Investment Clubs, etc.) The main reason for those failures are that the more robust steps 2 and 3 are, the higher literacy gap exists at step

The primordial coins

As a builder in crypto, the most compelling space to build right now is adjacent to memecoins. The market has proven that products should be taking an incremental approach to capital utilization tools. The challenge for us to solve is step 2, finding simply ways for allocating the initial capital. Projects like Zora, SubsFun and Ohara have started to experiment with Appcoins as a way to use memecoin simplicity to allocate capital to content creation and app building. Finding simple ways to allow the average person to invest in value creation activities, is crypto’s most viable path to mainstream. 

Memecoins exist as an inflection point in the crypto asset uncanny valley. The last era was fueled by skeuomorphic assets like ICO and governance tokens. Memecoins exist as the first truly novel asset that crypto has created. From the current primordial slop, truly novel crypto assets will emerge. 

Addendum

It would be dishonest to not talk about memecoin insiders. Yes, they are a big driver of risk and information asymmetry in memecoins. While they appear extremely flagrant within memecoins, they exist in every financial market. That being said, crypto is a uniquely good tool to reduce the impact and increase the visibility of malicious insiders.