The most successful narrative in the crypto space in 2024 is with very little doubt the one about memecoins (source: Dune dashboard by @cryptokoryo_research).
Memecoins’ performance has clearly outpaced RWAs and L2s narratives, achieving an aggregated market cap of almost $50B (as of July 30, 2024), with an all-time high of almost $70B. This number is stunning considering that these tokens explicitly lack any fundamentals and are unrelated to any economic activity.
The goal of this post is to dig deeper into this narrative, in order to understand memecoins’ volumes and user adoption, their key trading venues, and explore the reasons why this segment has exploded.
A few numbers
Memecoins are crypto tokens centered around popular Internet memes, pop references, and viral trends. They are purely entertainment- based tokens and, unlike others, they serve no other purpose than speculation. They lack fundamentals—though, according to many crypto skeptics, this is true for every crypto token—but they also lack vision.
The father of all memecoins is Dogecoin, a pet project of IBM engineer Billy Markus and Adobe engineer Jackson Palmer inspired by Bitcoin and Litecoin, launched in 2013 and then turned into a mainstream crypto brand. Other meme projects followed (Shiba Inu, Pepe), but the industry didn’t really flourish until 2024.
Over the last six months, the creation and trading of entertainment-only tokens have been productized (made extremely simple and scalable via a product) and turned into a profitable business, attracting millions of users.
The catalyst for this explosion has been the launch of pump.fun: a memecoin launchpad that allows the creation of a new token for 0.02 SOL ($3.62 as of July 30, 2024) and seamlessly lists it on Raydium, a Solana DEX.
Pump.fun’s adoption has been very strong, demonstrating a clear PM-Fit from the get-go: since March 2024, more than 1.5 million tokens have been created, with an average of more than 10,000 tokens launched per day.
The project has already made revenues north of 500K SOL (~$90M per 30/07/24 valuation) with peaks of 15K SOL/day (~ $3m).
The explosion of memecoins had cascading effects on the entire crypto ecosystem, particularly on DEXs. Since March 2024, the number of daily traders and daily transactions on Solana and Base—the other center of gravity of memecoin activity—has dwarfed those on ETH.
Solana, in particular, is now the chain of choice for millions of retail traders, with a peak of 5 million weekly active traders and—since May 2024—an average of around 2 million new traders per week entering the space.
Why?
There are multiple reasons behind the wild success of the memecoins’ space.
GAMBLING. The most relevant one, in my humble opinion, is the status of crypto as a global unregulated 24/7 online casino, with memecoins representing the best speculative assets right now.
The crypto space is still perceived, particularly by many retail users, as a proxy for a lottery, but easier to win: a space where big money can be made quickly by everyone.
In the past, altcoins or by governance tokens were rather viewed as lottery tickets of sorts. But unfortunately, both proved to be, in the vast majority of cases, very bad investments for retail investors, who ended up being used as exit capital by VCs and pre-launch investors.
Thus, retail users reacted by starting to gamble en-masse on purely speculative memecoins that, as clearly stated by pump.fun in the creation flow, allow a fair distribution and leveled playing field: there is no presale, no advantage for any VC, no team allocation.
ATTENTION. A second, extremely interesting, phenomenon is the role of memecoins as attention assets. When memecoins investors think that a particular topic will capture significant shares of public attention, they invest in the affiliated memecoin. Even though there is no direct connection to that topic, people decide to remunerate attention or potential attention with their investment.
The result of this behavior is that a memecoin can become a proxy for prediction markets projecting the collective attention that a meme or a topic will get.
FUN. Last but not least, memecoins are a web3 way of having fun with like-minded people and cultivating web-native humor epitomized by memes. Many people simply trade memes because it is fun, provocative, and entertaining.
Conclusions
It would be very easy to dismiss memecoins as the nth speculative iteration of a global online casino , but I’m not convinced it would be a smart thing to do.
Memecoins have found a clear PMFit and have attracted millions of users. In addition, they are now becoming a critical Go-To-Market and Fundraising tool in web3: teams build a memecoin to raise capital and, in the process, form a tribe. Then, they expand by building something useful for that tribe.
So, in the end, will memecoins become a significant force after the hype is gone? I just don’t know, but Sam Altman once wrote:
“There are two time-tested strategies to change the world with technology. One is to build something that some people love but most people think is a toy; the other is to be hyper ambitious and start an electric car company or a rocket company”
Memecoins are definitely a product that some people love but most people think is a toy. Perhaps they could also change the world with technology.
Resources
- https://yashhsm.medium.com/memecoins-governance-tokens-c3f556d07f35
- https://thedefiant.io/news/defi/memecoin-infrastructure-is-taking-over-defi
- https://www.ournetwork.xyz/p/on-251-memecoins
- https://dune.com/hashed_official/pumpdotfun
- https://dune.com/ally/solana-memecoins
- https://base.blockscout.com/stats
- https://twitter.com/Travis_Kling/status/1753455618407448974
- https://www.binance.com/en/square/post/4533450564618
- https://www.coingecko.com/en/categories/meme-token
