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They started as a joke and mostly still are. But that’s certainly not all.
For the first time in history, it’s easy and cheap for a normal person to mint their own currency.
This has enabled a great meeting between po-faced finance and popular culture. This coupling has spawned the memecoin.
Inspired by internet memes and pop culture references, memecoins tend to be highly playful and mischievous even.
They embrace the absurdity of being a genuine currency one that conveys actual monetary value and can serve as a powerful vehicle of speculation while being minted under a whimsical banner, such as a cute dog, controversial frog or a luminary’s bald head.
And yet, despite not accurately representing the true depth, innovation and promise of cryptocurrencies and Web 3.0, the hype and humor of the memecoin help attract and focus attention like nothing else in the industry.
Despite their lack of seriousness, and often pump-and-dump nature, they arguably represent the ultimate wide-appeal catalyst for mass adoption a fun, demystified gateway, transforming passive consumers of Web 2.0 culture into staked Web 3.0 participants.
Memes and the Binance Smart Chain
The rise of the BSC (Binance Smart Chain) in 2021 was the first time a chain besides Ethereum had found genuine usage as a platform for DApps (decentralized applications).
The token, SafeMoon (SAFEMOON), was launched on BSC in March 2021.
Despite it being widely regarded as a memecoin lacking both team and utility it would play an important role in BSC’s sudden, rapid adoption.
After just eight months in existence, the Binance Smart Chain became the most used blockchain in terms of active unique addresses.
It reached a high of one million active unique addresses on April 21, 2021, compared to Ethereum’s 700,000 on the same day.
BSC’s surge was in large part due to its fast transactions and low-cost scalability.
At the time, the Ethereum network was suffering from congestion and increased transaction costs, straining under the demand from the rise of DeFi and NFTs.
BSC was certainly a viable alternative, and PancakeSwap, a DEX (decentralized exchange) built upon it, had been one of the major drivers of network growth.
PancakeSwap’s own popularity surged due to being one of the main exchanges for trading SafeMoon.
SafeMoon launched in March of that year and in the space of a little over a month, after celebrity endorsement-propelled social media hype, it had increased in value by 23.3%.
SafeMoon was labeled a memecoin and even a Ponzi scheme. But its explosion had played an important role in driving the adoption of BSC, making it the first real alternative to Ethereum as a smart contract platform.
Following in the wake of SafeMoon came a flurry of memecoins launching on BSC.
Not only that, the ecosystem relaunched as BNB Chain in 2022 went from strength to strength, with a range of established protocols deploying there, helping to further drive growth.
Memes and the Solana ecosystem
Following the collapse of the FTX exchange at the end of 2022, the Solana platform faced a significant drain on its ecosystem.
This included a massive sell-off of its native token, SOL, which fell to its lowest level for almost two years after almost nine days of consecutive losses.
Coincidentally, the dog-themed BONK memecoin was launched, with around half of its supply airdropped to the Solana community, including 20% specifically to Solana NFT collections.
The airdrop had an immediate impact on SOL price, which rose over 12% in 24 hours.
This was a deliberate deployment of a memecoin specifically intended to support a community and rescue its platform from a low point.
While the airdrop had an immediate impact on the Solana price, it was not just a short-term ‘firefighting’ effort.
Bonk’s mission was firstly to restore the power of the Solana community, but its scope was wider including ultimately to encourage others into the Web 3.0 space.
A ‘most memeable’ memecoin
Inspired by the controversial Pepe the Frog meme, PEPE launched in April, dubbed by its developers ‘the most memeable memecoin in existence.’
Twitter buzz and the cachet of such a popular and notorious meme helped fuel frenetic trading shortly after launch.
By May 5, its market capitalization had hit a peak of $1.63 billion.
Unlike BONK, PEPE was a pure, unadulterated memecoin. A disclaimer at the bottom of its landing page stated, “The coin is completely useless and for entertainment purposes only.”
But inadvertently, such pure memecoins, that flash so brightly ‘in the pan’ do have a use.
These assets serve as tremendous advertisements for crypto and Web 3.0, attracting a flood of newcomers who want a chance at a quick gain or who are simply amused by involvement in the cultural spectacle.
Memecoins such as this one are arguably one of the most significant drivers of overall mainstream Web 3.0 adoption.
Critics argue that their lack of deeper meaning and extreme price volatility can contaminate the wider space and even give regulators the wrong impression of the underpinning principles of the industry.
But even the most casual new entrant into crypto ownership must sooner or later, after the most cursory due diligence, recognize the difference between an entertaining memecoin and other more established and high utility digital assets and infrastructure.
Coinbase’s new ecosystem gets a memeing
Coinbase this year launched its layer-two ‘Base’ ecosystem firstly with its testnet in January and a mid-July opening to builders.
A few DEXs went live in July, garnering understandably low traction in their first weeks, especially considering Base’s lack of a two-way token bridge.
The appearance in the ecosystem of BALD a memecoin referring to Coinbase CEO Brian Armstrong’s lack of hair quickly changed this. A bull market speedrun ensued.
In less than six hours, BALD amassed a $50 million market capitalization and later $85 million.
Thanks to BALD, Base’s TVL (total value locked) climbed by over 3,000 percent in the span of a weekend.
Despite still being under construction, Base penetrated the top 10 of layer-two solutions, underscoring once again the ability of meme-driven attention to foster rapid growth in nascent ecosystems.
Impact on adoption
While memecoins at first glance appear trivial, their viral impact clearly can play a significant role in galvanizing and accelerating support and adoption.
Memes draw attention, sparking curiosity and excitement, and stimulating community-building.
Memecoins can serve as powerful catalysts for network growth, attracting attention and investment that might not have been possible through conventional means. There is a downside, most certainly.
But despite their often sudden decline in value the ‘rug pulls’ and market manipulation and investors being left out of pocket, much of the attention they attract remains, the market blossoms, user base expands and investment and innovation grow.
Vincent Wu is the core contributor at Hover, a non-custodial liquidity market.
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