Meme Coins Are Everything That’s Wrong With Web3

Disclosure: The views and opinions expressed here belong solely to the author and do not represent the views and opinions of the crypto.news editorial team.

Ah, meme coins. The glittery trinkets of the crypto world. Once, they were just a fun joke, a playful side project for crypto enthusiasts. Today, they’re a staggering $56 billion industry, dwarfing more serious innovations like decentralized physical infrastructure networksOf pine, $23 billionand real world assets, RWAs, $4.5 billion.

It’s as if we’ve collectively decided that shiny, ephemeral pieces are more valuable than solid, long-term infrastructure projects that could truly revolutionize our world.

Let’s be clear: meme currencies are the antithesis of Web3. They are not about decentralization, freedom, or the next iteration of the Internet. They are about fast money, hype, and, more often than not, disappointment. As we’ve seen, 5.7 times the number of tokens compared to 2021, it is high time we recognize the unsustainability of this trend.

Why does this matter? Because meme currencies are tarnishing the credibility of Web3. They are distracting from serious projects, draining liquidity from ecosystems, hurting retail investors who are slow to jump on the hype, and turning potential long-term investors away from the industry altogether. To bring the conversation back to the true mission of Web3, we need to tackle this phenomenon head on.

Remember when Dogecoin was just a joke? It was a fun, light-hearted experiment that somehow gained popularity and captured the internet’s imagination. Then along came BONK, PEPEand many more. The initial appeal was understandable: they were accessible, fun, and promised quick returns on investment.

But when did it all go downhill? Somewhere along the way, memes went from being a fun internet joke to an unsustainable industry where newcomers are losing a lot of money. Historical trends suggest that we may be nearing the peak of this bubble. Or maybe it will inflate even more before it inevitably bursts. Either way, the trajectory is worrying.

Celebrity obsession with meme coins only makes the problem worse. Take for example: Iggy Azalea’s MOTHER Token and Hulk Hogan’s HULK token. Despite Azalea’s attempts to legitimize the token, it has been plagued by insider trading scandals. Blockchain data revealed that insiders bought 20% of the token supply before the official announcement and quickly dumped their holdings for a $2 million profit, leaving regular investors holding the bag.

Hogan’s HULK token suffered a similar fate; the token’s market cap has skyrocketed to $17 million shortly after launch following promotional messages allegedly from Hogan’s Twitter account. However, the market cap dropped to just $8,000 within hours due to large amounts sold by insiders.

These incidents show how meme coins can manipulate investor confidence and divert resources from more deserving projects.

Practical use cases for memes? Virtually nonexistent. Reliability? Even less so.

Insiders often exploit their social media status to manipulate the meme coin market for personal gain. A notable example is the scandal involving Ian and Dylan Macalinao, founders of Saber Labs on Solana. The brothers created a network of interconnected defi protocols using 11 pseudonymous identitiesBy stacking these protocols on top of each other, they inflated the total value locked (TVL) on Solana, making it appear more robust than it was. This artificial inflation attracted more investors, increasing the value of Solana’s native token, SOL. At its peak, Sabre and its associated protocols counted for $7.5 billion of Solana’s $10.5 billion TVL, several billion of which were double-counted. The scheme was dismantled when one of their protocols, Cashio, was hacked, losing $52 million. The U.S. Department of Justice is investigating the Macalinao brothers for their deceptive practices, highlighting the need for transparency and regulation in the crypto space.

Such manipulations not only mislead investors, but also undermine trust in the broader cryptocurrency ecosystem. This case illustrates the risks posed by influencers who use their platforms to deceive their followers for financial gain.

At its core, meme coins conflict with the core values ​​of Web3. Web3 is built on principles of decentralization, transparency, and accountability of individuals over central authorities. It aims to create a more open, equitable, and user-controlled Internet. Here’s how meme coins undermine these values:

• Decentralization and trust: The main goal of Web3 is to decentralize power and eliminate the need for trusted intermediaries. However, meme coins are often rely on relies heavily on centralized influencers and marketing campaigns to generate buzz. This centralization of influence contradicts the decentralized ethos of web3. influencers or celebrities can have a significant impact on value of a meme coin with a single tweet, this undermines the trust and decentralization that web3 aims to achieve.
• Transparency and accountability: Web3 places a high value on transparency and accountability, ensuring that all transactions and activities are publicly verifiable on the blockchain. Meme coins, however, are notorious for their lack of transparency. Many meme coin projects are launched anonymously, with little to no information about the developers. This lack of accountability leads to frequent scams and frauds, where developers disappear with investors’ funds.
• Empowerment and innovation: Web3 seeks to empower users and developers to create and innovate freely. Meme coins, on the other hand, often divert attention and resources away from innovative projects. The focus on quick profits and speculative trading stifles the growth of projects that aim to bring utility and tangible advancements to the blockchain space. For example, significant funds and attention are diverted away from defi projects that provide useful financial services to underserved communities and instead flow into the volatile and speculative meme coin market.
• Sustainability and long-term vision: Web3 aims to create sustainable, long-term solutions for the internet. Meme currencies, however, are often short-lived phenomena, fueled by momentary hype and speculation. This short-term focus can be detrimental to the overall health and sustainability of the blockchain ecosystem. Projects that could offer long-term benefits are overshadowed by the quick profits promised by meme currencies, leading to a lack of sustainable investment in truly transformative technologies.

One of the most insidious impacts of memes is their effect on liquidity across blockchain ecosystems. Memes often divert capital that could be used to support more stable and innovative projects. For example, during periods of high meme activity, significant amounts of liquidity are drawn into speculative trading, leaving less available for legitimate decentralized finance projects and other blockchain innovations.

This phenomenon creates a volatile environment in which genuine projects struggle to maintain stable liquidity. The erratic flow of capital generated by meme hype can destabilize entire ecosystems. On platforms like Solana, memes have integrated into Defi and GameFi, attracting speculative investments but also increasing the risks of drawdowns and scams. This not only harms individual investors, but also undermines the stability and credibility of the entire blockchain space.

For example, in the first quarter of 2024, meme coins checked in Cryptocurrencies have the highest yields among crypto narratives, which has led to a massive influx of speculative transactions. However, this speculative frenzy has come at the expense of more meaningful projects. The extreme volatility associated with meme coins can cause sudden drops in liquidity, making it difficult for serious projects to find and maintain the funds needed for their development and growth.

Moreover, the rampant creation of new meme currencies often leads to an oversaturated market. As a recent study pointed out report19,000 new meme coins were created in a single week, many of which were potential scams. This not only serves to disperse available liquidity, but also damage investor confidence, further destabilizing the market.

The negative experiences caused by the thousands of meme coins flooding the system are unimaginable, as they make investors wary of new projects and siphon off the life savings of individuals who join too late, often leading to their financial ruin. The Twitter account (X) Confessions publishes hundreds of anonymous submissions from members of the web3 community lamenting the loss of their savings and, in many cases, their sanity as they desperately try to salvage what they can from the dumpster fire that is the meme coin frenzy.

Are meme currencies a drag on our industry? Absolutely. Will the hype fade? We can only hope. Are meme currencies the “killer use case” of the next bull run? Let’s pray that they don’t.

The hype around cryptocurrencies is a scourge on Web3. They represent everything that is wrong with the current state of cryptocurrencies: short-term thinking, greed, and lack of real innovation. To save our industry’s reputation, we need to focus on projects that offer real value and embody the true principles of decentralization and freedom.

It’s time to move away from the lure of shiny, worthless cryptocurrencies and shift the conversation toward building a solid, decentralized foundation for the next iteration of the internet. Only then can we hope to realize the transformative potential that Web3 promises.

Meme Coins Dominate 2024: Increase Over 1,800% – What’s Next?

Frank Mathis

Frank MathisCo-founder and CEO of GenesysGo, has a diverse career spanning creative writing, day trading, and 12 years of financial planning. After experimenting with blockchain and being an early adopter of the Solana ecosystem, Mathis co-founded GenesysGo in 2021 to create a faster, more reliable, and more secure decentralized data storage protocol. Their flagship product, shdwDrive, is built on Solana and aims to bridge the gap between blockchain technology and traditional business infrastructure. GenesysGo is powered by a new type of decentralized data storage consensus mechanism built from the ground up by the GenesysGo team.

Fuente