Meme coins: Betrayal of crypto’s ideals… or its true purpose?
When Satoshi Nakamoto invented Bitcoin (BTC), the anonymous cryptographer envisioned a world where people would free themselves from the iron shackles of banks and tyrannical governments.What he probably didn’t expect, though, was a crypto industry teeming with badly drawn frog, cat and dog tokens, along with a sprinkling of racist memes.
With coverage of the fourth Bitcoin halving overshadowed by a speculative mania in meme coins — including on the Bitcoin network itself — it’s not surprising to see a very vocal debate over the value of meme coins to the crypto industry.
Which we can answer — they now have a combined value of $51 billion in market capitalization.
What is a meme coin? The “dumpster of crypto”
Many vocal critics, including popular anonymous crypto commentator Polynya, are disillusioned and angry about the recent meme coin surge, arguing they have no place in the crypto ecosystem.
In his final blog post on Medium, where he essentially rage quit crypto, Polynya decried meme coins as “merely a vehicle to transfer wealth from the many to the most obnoxious people on the planet.”
The analyst highlighted reports of a wave of racist meme coins (dubbed “SlurFi” by some) as representing the token form’s nadir.
Things have hit an all-new bottom with 2024: racist, sexist, and other shitheaded memecoins.”
“At this point, this evil in crypto is banal and normalized. This has become the identity of crypto — sure, some useful stuff, but mostly just infested with scams and absolute degeneracy,” Polynya added.
Meme coins are also infested with rug pulls, scams and malicious taxes and are often run by inept founders who don’t know what they’re doing.
A recent investigation from Magazine found that 1 in 6 new Base meme coins are outright scams, while almost 91% of them had at least one security vulnerability.
According to BlockAid, more than 50% of presale tokens launched on Solana between November and February were malicious.
Is the recent meme coin degeneracy contributing to genuine builders giving up on the industry? There’s a fair degree of “financial nihilism” in the argument that nothing means anything; everything in crypto is a meme anyway, and it’s “mid curve” to support projects that actually have a purpose.
“Seeing meme coins leading to disillusionment/churn of crypto builders to a degree more extreme than even the bear market the past few years,” says Michael Dempsey, managing partner at Compound, a New York-based venture capital firm.
“Building something of durable value is a long emotional journey, and it can be tough after a two-year bear market […] to then have a reversion of curiosity from crypto, and the main vacuum of energy is gambling.”
Another venture capital executive, Eddy Lazzarin, chief technical officer at Andreessen Horowitz, says meme coins are “undermining the long-term vision of crypto” that has kept so many in the space.
Are meme coins worth it for attention and users?
But ignoring the racist tokens, rug pulls, and scams, meme coins aren’t all bad. Some argue the attention that meme coins bring is still a net benefit for crypto. It’s certainly a net benefit for blockchain networks as traders race to buy and sell coins. Solana, Base and BNB Chain in particular, are benefiting from a big influx of meme coin stans looking for a cheap way to trade coins.
In the last few months, layer-1 blockchains BNB Chain and Avalanche have launched million-dollar funds to try to bring meme coin magic to their networks to drive network growth.
A community proposal on the Ethereum layer-2 network Arbitrum is also seeking a massive $3.3 billion fund to open the proverbial meme coin floodgates. As befits a meme coin proposal asking for billions, it was knocked up in an hour.
Solana meme coins frenzy drives usage
In mid-March, Solana’s network activity briefly surpassed Ethereum’s as traders hoped to catch the next runaway meme coin success. Trading volume on March 15 reached $3.5 billion, outpacing its older and slower rival by more than $1.1 billion, per DefiLlama.
The frantic activity tested the scaling limits of the network and found them wanting, with up to three-quarters of all transactions failing at one point. This was addressed in a patch a month later.
Anonymous MSPaint rendition of the HarryPotterObamaSonic10Inu memecoin mascot.The speculative degen blockchain of choice from the last cycle, BNB Chain, is eying that same market. The chain announced it would allocate up to $1 million throughout April to reward developers who hit a 30-day volume above $2 billion on the network as part of its “Meme Innovation Campaign.”
“When the community sends a clear signal that something matters to them, we seek to deliver on it,” a spokesperson from BNB Chain says, adding that meme coins have the potential to bring more users into crypto whether or not they end up being just “noise in the crypto market.”
Solana’s head of strategy, Austin Federa, says meme coins have been getting traction on Solana largely due to the tokens having become “rather strictly proxies for online culture and community.”
“For example, certain meme coins, like BONK, have rallied communities together and built vibrant ecosystems that resonate in the broader crypto space.”
Meme coins make millions addicted to Base
Coinbase’s Base network has also been a huge winner in the recent meme coin rush, with its layer-2 network’s total value locked recently surpassing $5 billion per L2Beat data.
“There’s been a ton of energy on base,” Base creator Jesse Pollak said in a presentation for an April 20 hackathon in New York, which was re-recorded and posted on X.
The Base founder said that while speculation is driving the activity, one of the aspects of memes he was most optimistic about was the creative ways that meme communities have tried to onboard new followers.
“What that’s creating is this kind of Cambrian explosion of onboarding experiments where people are taking tons and tons of shots on goal to say ‘how do we get our culture into the hands of more people,’” said Pollak.
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