The Evolution and Development of Meme Coins: From Internet Culture to Encryption Assets

Meme Coins, as the intersection of encryption digital assets and internet culture, have always attracted numerous participants in various cryptocurrency cycles due to their affordability, viral spreadability, and high return potential.

Recently, the popularity of the Meme Coins market has surged again. Some asset traders are focusing on Meme Coins that have performed strongly recently, such as SHIB, FLOKI, PEPE, and APORK. Starting from January 2024, institutional investors have also increased their allocation to Meme Coins. According to statistics from a trading platform, as of April 2024, the value held by institutional investors in Meme Coins on that platform has grown from 63 million USD in January 2024 to 300 million USD, with the more liquid DOGE and SHIB being the most favored.

The Essence of Meme

A meme, as a unit of cultural concepts and symbols, is transmitted and evolves between people like genes. Memes with strong resonance can endure and spread over time, while those with weak influence quickly fade from people's sight.

The rise of the internet has given birth to the unique phenomenon of "internet memes," greatly accelerating the dissemination of memes and various cultural concepts. Common carriers include images, videos, GIFs, and humorous anecdotes. Some studies even liken the diffusion process of internet memes to the spread of diseases: they follow a viral propagation path similar to the SIR model, "infecting" a wide range of internet users.

Meme Coins are a type of encryption asset that derives value from related Memes, giving financial attributes to the Meme concept that originally only circulated on a social level. The emergence of Meme Coins has allowed Memes, which contain cultural connotations and symbolic meanings, and their dissemination process to possess trading and investment value for the first time. The core value of Meme Coins lies in the current popularity of Memes and their ability to attract public attention, thus giving rise to a brand-new market form: here, cultural resonance can not only be accurately measured but also endowed with tangible economic value.

The Development History of Meme Coins

early proof-of-work Meme Coins

The earliest Meme Coins were designed to attract miners to shift their hashing power towards new assets for mining and selling. These assets mostly originated from the Altcoin section of a certain forum, and not all assets could be listed on trading platforms. However, a few fortunate assets that entered the market had been active on some now-defunct centralized exchanges. Each Meme Coin builds its own recognizable narrative theme based on unique characteristics such as name, brand image, hashing algorithm, block time, and supply.

The first batch of assets that emerged after Bitcoin, due to their relatively limited practical value beyond innovative concepts, can be considered Meme Coins in a sense. Except for Litecoin, most of these early encryption assets have largely fallen silent, with trading volume and market value nearly approaching zero, lacking support from trading platforms, and being susceptible to 51% attacks. The reasons for this outcome include the lack of cultural influence as Meme Coins and significant barriers for users to acquire and use such Meme Coins.

The reason Litecoin has been able to stand out among many peers and survive to this day is mainly due to its narrative closely following Bitcoin's "digital gold", its early entry into the market to seize opportunities, and its continuous strong support from mainstream exchanges.

Dogecoin: the first Meme Coin

The meme trend that Dogecoin relies on emerged in the summer of 2013 and became popular across multiple social media platforms. Taking advantage of this cultural wave, two developers launched Dogecoin on December 8, 2013, making it the world's first encryption asset based on internet meme culture.

The rise of Dogecoin has given birth to a new class of asset species, characterized by irreverence, humor, leveraging celebrities, animal imagery, or precisely targeting specific communities. These are all encryption assets based on proof-of-work mechanisms, originating from the Altcoin section of a certain forum. At that time, the Meme trend elements contained within seemed increasingly important compared to the technical specifications.

Ethereum Era

The emergence of Ethereum has driven a significant transformation in the encryption asset ecosystem, simplified the asset development process, expanded the user base, increased the profit margins for project parties, and achieved interoperability through the ERC20 standard.

During the Ethereum boom period, a group of more "pragmatic" projects emerged, such as The DAO, Filecoin, Tezos, EOS, Cardano, Tron, and Bancor. They are more committed to achieving certain practical functions or specific goals beyond pursuing the value of the Meme trend.

At the same time, there are a small number of Meme Coins that have not received widespread attention but have some popularity in the market, such as Useless Ethereum Token, Dentacoin, and HAYCOIN.

The fusion of NFTs and Meme Coins

From 2016 to 2018, a group of developers and Pepe meme enthusiasts created Rare Pepe Wallet and carefully selected a batch of Meme Coins based on Rare Pepe memes for trading. This is regarded as the second generation of NFT collectibles, which still maintain significant value to this day.

Following CryptoPunks, MoonCats, and CryptoKitties, NFTs began to emerge in the Ethereum ecosystem. EtherRocks made its debut in 2017 in a tongue-in-cheek manner, consisting of 100 images of clip-art rocks in various colors. Another example of a collectible Meme Coin is Unisocks, which produced a limited quantity of 500 physical pairs of socks, with each SOCKS redeemable for one pair of socks.

The Summer of DeFi and Meme Coins

In June 2020, Compound Finance pioneered a new model of liquidity mining, marking the beginning of the DeFi summer. This innovation gave rise to various yield farms, which promised investors high returns by locking up assets.

Meme stocks and the Dogecoin craze

At the beginning of 2021, influenced by multiple factors, market risk appetite significantly increased. Retail investors on Reddit engaged in heated discussions around the stock of a certain game retailer, pushing its stock price to soar dramatically in a short period. This frenzy further fueled people's speculative enthusiasm for other assets, especially those that could be traded on a certain free trading app.

As one of them, Dogecoin's popularity further increased under the frequent tweets of a certain technology company's CEO. By May 2021, Dogecoin's market value once reached 90 billion USD. The popularity of Dogecoin has led to the emergence of more Meme Coins, such as Shiba Inu Coin, Floki, and Safemoon, all of which achieved very high valuations within a few months.

NFT prosperity and the new generation of Meme Coins

With the popularity of the ERC721 standard and the rise of the NFT trading market, NFTs have created an entirely new category of encryption assets: unique, visual assets that embody a certain "culture" or "Meme".

The most well-known NFTs include: CryptoPunks, Bored Apes, Squiggles, and Pudgy Penguins. These NFTs are used as personal avatars on social platforms, symbolizing prestigious status and membership in cultural clubs. To give back to loyal holders, some NFT projects have issued Meme Coins to the community as a supplement to liquidity, an extension of utility, and cultural "currency."

Recent Developments (2023 to Present)

As the encryption market emerges from its lows, various new Meme, culture, ideas, and ecosystems are breaking ground. Meme Coins, as one of the few subsectors that have remained active, have recently shown a significant warming trend.

Recent narratives worth paying attention to include: BRC-20 tokens, Ordinals inscriptions, and Friend.tech social tokens. These emerging areas demonstrate the innovative applications of Meme Coins across different technological platforms.

General Patterns of Meme Coins

1. In each cycle, Meme Coins emerge in different forms, often being the first practitioners of new technologies or new formats.

2. The value accumulation path of Meme Coins depends on the power of attention, narrative, and hype to maintain survival and dissemination.

3. First comes the Meme trend, then the birth of assets: The most successful Meme Coins often achieve value enhancement by leveraging existing recognition and virality.

4. The encryption native Meme trend is gradually emerging, with projects like Pudgy Penguins.

5. Low price phenomenon: Users are keen on speculating on the seemingly low-priced digital assets, and the price itself constitutes a unique Meme trend.

6. A strong community and marketing strategy are crucial for the success of Meme Coins.

7. The operating model of Meme Coins has gradually evolved from spontaneous initiation in the early days to professional team operations.

8. Distinctive visual elements, derivative images, and slogans help accelerate the spread of Meme trends.

Risks and Challenges

Despite the opportunities that Meme Coins contain, their risks cannot be ignored:

1. Easily attracts users who view investment as similar to buying a lottery ticket or participating in gambling.

2. The market frequently experiences phenomena such as pump and dump and market manipulation.

3. Regulatory regulations are still unclear, and some countries have begun to restrict the trading of Meme Coins.

4. Meme Coins may fade away due to a lack of sustained interest and attention.

5. Investment losses may cause the holder community to become hostile or indifferent.

Investors should carefully examine the characteristics of Meme Coins, such as the status of liquidity pools, team allocation ratios, transaction taxes, and whether the smart contracts have relinquished management rights, in order to reduce investment risks.