Meme Coin (Memecoin)

What Is a Meme Coin? 

Meme coins are cryptocurrencies inspired by Internet memes, jokes, and satire. They have meme-inspired branding, logos, and names and are often not designed to have any specific use cases. Such coins bank on community participation, humor, virality, social media trends, and the potential of quick market gains to attract young, Internet-savvy crypto market participants.

Advertisements

Dogecoin (DOGE) and shiba inu (SHIB) have been at the top of the most popular meme coins list since 2021. PEPE, FLOKI, and BONE, as well as the 2023 viral hit wall street memes (WSM) and ChatGPT-inspired TURBO, are other famous meme coin examples.

Dogecoin is considered the original meme coin, which was created to satirize the crypto hype in 2013. 

Today, the majority of meme coins are issued on the Ethereum blockchain network as ERC-20 tokens. They can also exist on their own native blockchains and on other blockchain networks such as BNB Chain, Solana, and Cardano

Meme Coins vs. Traditional Cryptocurrencies

Traditional cryptocurrencies such as bitcoin (BTC) and ether (ETH) are digital cash that users can spend and transfer on their respective blockchains. Cryptocurrencies like BTC and ETH are designed with a specific utility in mind.

For example, BTC was created as an electronic peer-to-peer currency that people can transfer and spend without having to interact with an intermediary body such as a bank. Meanwhile, ETH is spent on transaction fees on the Ethereum blockchain whenever users want to interact with decentralized applications and transfer value over the blockchain.

When it comes to meme coins, these cryptos are typically not created with any utility in mind. In most cases, people are drawn to them for their virality and potential market gains. Most meme coin projects enjoy a short period of fame when they post extraordinary market gains and may become irrelevant after the market loses interest in them.

On the technical side, meme coins are just like any other cryptocurrencies issued on a blockchain network. Token holders and meme coin transactions are recorded on the blockchain ledger as usual. 

Here are some ways that meme coins and traditional cryptocurrencies differ:

A comparative table: Meme coins vs. Traditional cryptocurrencies

The Meme Coin Phenomenon 

Meme culture has been ever present on the Internet since the advent of social media platforms such as Facebook and Twitter. Here, users share funny posts that tend to go viral due to their universal humor.

It was only in 2013 that Billy Markus and Jackson Palmer merged the worlds of Internet memes and cryptocurrency by creating dogecoin. At the time, a meme of a photogenic Shiba Inu dog accompanied by colorful and grammatically incorrect statements was popular on the Internet.

Dogecoin made the Shiba Inu meme its logo and mascot, and the rest is history.

What really sent dogecoin soaring was tweets of support from Tesla CEO Elon Musk. Musk, an outspoken personality on Twitter, has not only tweeted about DOGE on frequent occasions but also introduced dogecoin payments for Tesla merchandise in 2022.

The meme coin phenomenon has shown no signs of stopping in 2023 as coins like PEPE and TURBO surged on their market debuts. The latter has a unique origin story.

Rhett Mankind created TURBO with the help of ChatGPT, allowing the popular artificial intelligence (AI) service to suggest the name of the token, design its tokenomics, and even write code for the meme coin project.

Regulatory Concerns and Scams 

Not all of the crypto industry has taken a liking to meme coins. Some critics have frequently pointed to the coins’ lack of utility and intrinsic value. There have been numerous instances where these have been used for rug-pull scams and pump-and-dump schemes. The market can be highly speculative and can lead to severe investment losses. 

Regulators and lawmakers around the world have turned their attention to the crypto industry, having seen investors lose billions of dollars following multiple high-level collapses in the industry, which included the fall of the Terra ecosystem (once valued at over $40bn) and the FTX crypto exchange.

There is a debate on whether cryptocurrencies are securities or commodities. Crypto insiders are advocating for cryptocurrencies to be classified as commodities in order to avoid strict disclosure compliances.

While utility cryptocurrencies like BTC and ETH may get the support of pro-crypto lawmakers, it remains to be seen if meme coins – usually associated with volatile market prices and scams – will get the same treatment.

Potential Pros and Cons of Investing in Meme Coins

Pros of investing in meme coins:

  • Accessibility: Meme coins often have lower entry barriers compared to traditional cryptocurrencies. They can be more accessible to retail investors who may not have substantial capital to invest. This accessibility allows a broader range of individuals to participate in the market and potentially benefit from the price growth.
  • Potential for high returns: Meme coins have gained a reputation for their potential to deliver significant returns on investment. When a coin gains popularity and attracts a strong and active community, its value can skyrocket, leading to substantial profits for early investors.
  • Entertainment and engagement: Investing in meme coins can provide a unique and entertaining experience for individuals who appreciate and enjoy meme culture. It allows investors to engage with a community that shares similar interests, adding an element of enjoyment and connection to the investment process.

Cons of investing in meme coins:

  • High risk: Meme coins are inherently speculative and carry a high level of risk. Their prices can experience extreme volatility, leading to significant price swings within short periods. The same factors that contribute to their rapid growth potential can also result in substantial losses for investors if the hype and demand fade.
  • Lack of liquidity: Meme coins often suffer from limited liquidity, meaning there may be a lack of active buyers and sellers in the market. This can make it challenging to buy or sell coins quickly and at desired prices, potentially leading to difficulties in exiting positions or executing trades.
  • Lack of regulation and investor protection: Meme coins operate in a relatively unregulated space, which means investors may have limited legal protection or recourse in case of fraudulent activities, scams, or market manipulation. The lack of oversight can expose investors to a higher level of risk compared to regulated financial markets.

The Bottom Line

Meme coins have emerged as a prominent force in the cryptocurrency market, fueled by their distinctive charm and the potential for lucrative returns. The universal humor and sense of community are underrated social factors that, when combined with the potential of outsized market gains, have the power to attract investors in droves. 

However, when considering buying popular meme coins, it is important to conduct due diligence and only invest what you can afford to lose. Staying informed about market trends, regulatory developments, and technological advancements is essential for navigating the evolving crypto landscape. 

Advertisements

Related Terms

Mensholong Lepcha

Mensholong is an experienced crypto and blockchain journalist, now a full-time writer at Techopedia. He has previously contributed news coverage and in-depth market analysis to Capital.com, StockTwits, XBO, and other publications. He started his writing career at Reuters in 2017, covering global equity markets. In his free time, Mensholong loves watching football, finding new music, and buying BTC and ETH for his crypto portfolio.