News
In defense of meme coins
I get it: meme coins are stupid. Not serious. A waste of time. They give the impression that the cryptocurrency industry is trivial. Full of speculators. Vitalik Buterin is probably right that the entire industry would be better off if people focused on legitimate projects instead.
This is an excerpt from The Node newsletter, a daily roundup of the most crucial crypto news on CoinDesk and beyond. You can sign up to get the full service newsletter here.
Note: The opinions expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.
But. Buuuuut: the only thing more boring than trying to financialize memes is complaining about meme coins. One can have many deep thoughts about how meme coins are emblematic of this age of “financial nihilism,” but shame on anyone who says them out loud, especially if you’re holding a bag.
I don’t necessarily think that meme coins should be celebrated, especially not for the reasons most often given. At this point in the cycle, these are light chips, even “blue chips” like Shiba Inu (SHIB) or dogwifthat (WIFE) – they are not really attracting new adopters; at least not yet. I think it is questionable to say that the “communities” that form around meme coin investing are sustainable in the long term. And it is, of course, irresponsible to suggest that these tokens are creating “generational wealth” for people.
Meme coins are what they are: highly speculative investment vehicles. The fact that there seems to be an almost infinite amount of interest and capital to invest in them essentially proves that “speculation is a use case”, regardless of whether you agree with the sentiment expressed there.
Fair enough to criticize casinos or state-sanctioned gambling like lotto on moral grounds, but meme coins exist for the same reason: people like to dream that their life can change in an instant, without having to do much Work. It’s an itch that can’t simply be scratched, and it turns out that gambling on blockchain-based tokens is as good as a scratch card.
More fundamentally, it is becoming clear that meme coins are tools for coordinating and measuring attention. It’s in the name: meme coins talk camouflage – or the process by which ideas acquire cultural value through sharing.
As Ravi Bakhai, who is building a meme coin trading platform called Hype, explained, meme coins have essentially become a large, generalized betting market to determine how relevant something is at any given time. For example, that of Iggy Azalea MOTHER token it literally put a price on his fame and the rapper’s ability to attract an audience of cryptocurrency enthusiasts.
Now, a lot has been said about cryptocurrencies’ place in the market over the years “attention economy”, based on the idea that attention itself is a scarce commodity, and it’s easy to overestimate the value of “crowdsourcing” popularity in this way. Essentially, what meme coins revealed about the world is that people like cute dogs and they can be incredibly racist.
But that doesn’t mean the primitives behind meme coins can’t one day be more useful. In the same way that prediction markets help us understand sentiment because users with “skin in the game” are incentivized to tell the truth, meme coins can also help tone down the noise.
This is the idea behind the emerging “PoliFi” category, a mix of politics and finance, and the series of tokens such as JEO BODEN, MAGA and elisabath whore which some people use as a metric to bet on those candidates’ chances of re-election. But this must not be limited to politics.
As CEO of Calaxy Ceesay only recently wrote in a piece for The Defiant: “Memecoins are a great example of how any collective group of individuals can create the economic infrastructure to facilitate trade, commerce, and collaboration without the need for a middleman. Before blockchain, this was virtually impossible.”
Finally, like the creation of dogecoin (DOGE) as of late 2013, it’s worth noting that meme coins are essentially just a blank canvas for “performance art,” like Tez puts it. Co-creators Billy Markus and Jackson Palmer claimed that DOGE was just a parody of Bitcoin.
This actually gets to the heart of the most trenchant criticism of meme coins: they reveal the financial and psychological mechanisms that essentially make all cryptocurrencies work. Although it is unlikely to be bitcoin (BTC) it’s going to zero, it only has value because a crowd of people say yes, which is the same reason why something like the BALD token momentarily had value (and then he didn’t).
The only real difference is that one is supported by the belief that the digital age needs a functioning store of value and the other by a desire to make fun of the person who runs Coinbase. Some see this as proof that BTC is a giant Ponzi, while others cry at the beauty of the economic miracle of aligning people through shared interests.
Likewise, the worst aspects of meme coins apply to the rest of cryptocurrencies as well. Celebrities flipping tokens and using their fans as exit liquidity is unseemly. Carpet pulls are objectionable. The relentless pursuit of wealth is shocking. But there’s actually something more honest about meme coins. They have no illusions about the game being played.
Ultimately, the stance on meme coins will likely depend on how serious they are. There are genuinely people out there who think that meme coins are giving cryptocurrencies a bad name, unaware of the fact that most people view cryptocurrencies that way anyway.
I don’t think I’ll ever buy a dog token. But betting against the monetization of virality seems like a losing strategy.