What are meme tokens?
Meme tokens are tokens with no applied value at the time of their creation, mainly referring to Internet humor, social narratives or events. In a broad sense, such tools act as a tokenized version of the network effect or public attention to a phenomenon.
The first meme token is considered to be Dogecoin. It was created back in 2013 as a joke about the rapidly growing number of cryptocurrencies.
Since then, many similar projects have appeared. However, their popularity peaked at the end of 2023 — the beginning of 2024. According to the Google Trends service, the peak interest in the memecoin request was recorded in November 2023.
Data: Google Trends.By the end of May 2024, the Coinmarketcap dashboard includes more than 2,300 Memes tokens with a total market capitalization of over $53 billion. However, the entire market for these tokens includes tens of thousands of units on various networks that are not monitored by monitoring services.
Why have meme tokens become popular?
Binance analysts note that the economic attractiveness of meme tokens lies primarily in the fact that the vast majority of such assets have a market capitalization equal to their FDV. This indicates that their creators unlock and put into circulation all the coins at once, without assuming further emission and, consequently, dilution of the value of the tokens.
According to Ethereum founder Vitalik Buterin, there are three main reasons why mass users are interested in such assets:
their cost is increasing; they are open and democratic; they give pleasure.Buterin also noted that such cryptocurrencies can become a new way of financing socially significant projects.
What is the social significance of meme tokens?
The meme token market has attracted not only those who want to earn money, but also those who want to spend on social projects.
The same Buterin in 2021 sent over $1 billion in SHIB meme tokens to fight the coronavirus. Since 2014, the Dogecoin community has raised funds to send the Jamaican bobsleigh team to the Sochi Olympics, launch two water wells in Kenya, and eliminate the consequences of flooding in Kashmir.
These are only a small part of the initiatives based on meme tokens. For example, there are charitable organizations whose goal is to help pets. The main drivers of token adoption in this area are efficiency, accountability, accessibility, benefits and growth potential.
Celebrities like Elon Musk, who supported Dogecoin in 2021, influencers and crypto funds played a significant role in popularizing the trend. Many users perceive memes as a response from retail traders as part of the confrontation with Wall Street, which began in 2020 amid the growth of GameStop shares.
Well-known cryptocurrency supporter and former MMA fighter Andrew Kang from Mechanism Capital saw a qualitatively new asset class in meme tokens. In his opinion, they carry not only a comic narrative, but also other values, including identity, lifestyle and political views.
What are meme tokens criticized for?
Some analysts believe that the meme token market is similar to a risky casino and disguised gambling, similar to the ICO bubble of 2017. The popularity and ease of creating such assets can lead to an outflow of developers from the industry.
The consequences of such trends may be more negative than a bear market. At least, this is the opinion expressed by Michael Dempsey, managing partner of the venture capital division of Compound. This point of view was supported by CTO a16z Crypto Eddie Lazarin, stating that memes are not very interesting from a technical point of view.
In addition, such tokens can cause reputational damage to the entire industry. The boom in crazy experiments is changing the way some of the public, regulators and entrepreneurs look at cryptocurrencies.
For example, in May 2024, a schoolboy launched the LIVEMOM meme token based on Solana, and his mother showed her breasts on a stream to attract attention to the project. Another case is the HANDS token, the author of which held a sheet with the inscription "No hands — no rug pull" under his chin while users pumped the token. At its peak, it "deceived" depositors by 7 SOL.
Extremely low financial and technological requirements for entering the meme token market have led to the emergence of a huge number of coins. Only from the beginning of April to the middle of May 2024, more than 1 million new tokens appeared in blockchains. According to Coinbase director Conor Grogan, this figure is twice as high as for the entire period from 2015 to 2023.
Who invests in meme tokens?
In addition to retail investors flooding the meme token market, organizations are also supporting the trend.
In mid-May 2024, MarketVecto, a subsidiary of the American asset management giant VanEck, launched the Meme Coin index, which includes Dogecoin (30.77%), Shiba Inu (28.34%), Pepe (14.51%), Dogwifhat (12.54%), Floki Inu (7.14%) and BONK (6.7%). The Meme Coin index has grown by more than 280% ahead of time.
The Open Network (TON) blockchain team launched a hub for Memelandia token developers in April 2024. At the same time, the BNB Chain blockchain team announced its readiness to allocate up to $1 million to the creators of native meme tokens.
Other organizations are also involved in the trend. At the end of 2023, the Avalanche Foundation announced that it would direct funds from the Culture Catalyst fund to invest in meme cryptocurrencies based on the blockchain of the same name.