Introduction

The concept of Memes far predates the existence of blockchain technology with the likes of “Dancing Baby” going viral across internet forums and emails in the mid-late 1990s. This event, often dubbed the birth of the internet’s Meme culture, highlighted humans’ desirability for consuming and sharing humorous and relatable internet content.

Fast forward to today, blockchain technology has enabled humans to connect with Memes on a much deeper level through digital ownership via NFTs and Memecoins. This monetary tie invokes new feelings to Memes, feelings of euphoria or despair, feelings so strong that we now have a memecoin sector worth over $47b.

But how did we get here and where are we at?

A Quick Trip Down $Mem’ory Lane

Memecoins began with Dogecoin ($DOGE) in 2013 which was launched as a joke, combining the virality of memes with a peer-to-peer payments blockchain. However, given the fact that the blockchain industry was rather niche at this time and not everyone had the capabilities of creating a meme-centred blockchain, we didn’t see any new majorly successful memecoins until they became easier to create with Ethereum’s ERC-20 standard.

It wasn’t until 2020, that we got our first new majorly successful memecoin with the launch of Shiba Inu ($SHIB) touted as the “Dogecoin killer”, followed by SafeMoon ($SAFEMOON) in March 2021 latching on to the popular crypto-phrase “To the moon”, Floki Inu ($FLOKI) in June 2021 representing Elon Musk’s dog, and more recently PepeCoin ($PEPE) in April 2023 which is based off Pepe the Frog.

As the memecoin market grew, it became clear that these tokens were more than just a passing fad. They’ve attracted massive communities, propagated across different blockchains, and have led to some of the largest revenue-generating applications seen in crypto. But what does their future hold?

The Current State of Memecoins

Sector Growth, Performance, and Preferences

The value creation from memecoins has been nothing short of astronomical, significantly outperforming majors such as BTC, ETH, & SOL, with a 2402% growth in the sector’s market cap over the past year. As a result, we have entered an era where the collection of dog, cat, and frog coins to name a few, has become the third-largest sector in crypto, narrowly surpassing the collection of platforms powering the DeFi ecosystem.

Unsurprisingly, we have also seen Doge-lore lead 2nd gen memecoins with dog-themed memecoins being the largest animal-themed subsector, accounting for 71% of the total memecoin market cap. This is still true even after the removal of Doge and by a large margin.

Frogs are the second-largest memecoin category, but arguably less popular according to CoinGecko as its growth is largely driven by $PEPE and $BRETT which account for 84.9% of the frog-themed memecoin market. It also has considerably fewer tokens in its category sitting at around 30 as opposed to cat-themed memecoins which has around 110 but with less than half the market cap of frog-themed coins.

While the battle between dogs, frogs, and cats continues; chains, dexs, and lending protocols have been fighting their own battle for the activity and attention these memecoins cultivate.

Onchain Activity

When it comes to attracting attention and activity, you’d probably think that the chain with the largest memecoin sector wins, right? It probably has the best-performing memecoins, the most DEX volume, the highest number of coin creations; everything a memecoin trader is looking for. But is this true? Funnily enough, not really…

For example, Ethereum is by far the largest memecoin chain by market cap with around 62% of the total memecoin market but has lost a significant amount of DEX trading volume activity to Solana since the start of the year, despite the Solana memecoin ecosystem being nearly 3x smaller by market cap. However, Ethereum ranks 3rd worst by median all-time high (ATH) drawdown and 4th best by median all-time low (ATL) recovery for memecoins, which is notably better than Solana, and is likely the reason why its memecoin economy has sustained more value.

We also found that:

• Despite losing a commanding +25% market share in 2021, BNB is seeing a resurgence in their monthly DEX trading volume, specifically in the last 2 months.

• Avalanche had a short-lived burst in memecoin DEX activity at the end of last year, but activity has died down considerably; while Base has maintained persistent memecoin DEX activity, indicating signs of a true memecoin community.

• Of the 34 chains we looked at, Cronos is the best-performing chain for memecoins when weighted by market cap. It had one of the lowest median ATH drawdowns of -79.6% and an impressive median ATL bounce of 1130%.

As you can imagine, with such a large economy and the possibility of making millions, memecoin traders began searching for any edge to improve their chances of making it big. Such desires have created a sub-economy of tools, websites, dashboards, and execution clients, which are now some of the largest revenue generators in crypto.

The Memecoin Tool Economy

As memecoins grew in popularity, more and more stories came out about traders making millions off a few dollars due to buying early. This notion of buying early allowed retail participants to get in at a ‘good price’ and a ‘low market cap’, yielding fruitful results if the token ever went up. Similarly, such phenomena were not isolated to memecoins as the success of AMMs made it viable for legitimate projects to launch and seed liquidity for their tokens on-chain. Thus, in a similar fashion, users were trying to buy their long-awaited favourite project’s token as soon as it launched to get in ‘cheap’. The behaviour - dubbed ‘sniping’ has created one of the biggest on-chain economies due to its commercialisation.

In the beginning, most sniping tools were kept private due to the nature of being first and the profitability that followed. Quite simply, if you’re the first buyer someone else ‘has’ to buy at a higher price, netting you unrealised PnL. However, sniping tokens also came with significant risks - rug pulls, team dumping their tokens, and malicious token contract codes. Considering these risks and given the high level of demand for sniping, Devs quickly realised that they could sell sniping services via Telegram bots and earn fees without risking money on memecoins.

Fast forwarding to today, there are over 20 well-known Telegram bots that allow users to Snipe & Trade tokens across multiple blockchains while protecting them from rug pulls and malicious token contracts. These Telegram bots dominate on-chain trading, generating over $34b in trading volume and across +2M users.

One downside to Telegram Bots is that they don’t provide an easy and convenient way to view token prices, their historical charts, trades, etc. This has made websites like DEX Screener and DEXTools extremely popular as they display all relevant token/memecoin information across various DEXs and chains.

These websites have become so popular that memecoin/token deployers pay to advertise on the website and/or add additional information to their token’s trading page to create legitimacy in the hope of attracting more buyers & attention to their coin. Since April of this year, DEX Screener and DEXTools have made $23.6M in revenue.

DEX Screener Advertising Examples:

The memecoin tool economy has reshaped on-chain trading, with Telegram bots enabling quick, secure sniping and platforms like DEX Screener providing essential market insights. Together, they form a powerful ecosystem driving the growth and commercialization of memecoin trading, reflecting the ongoing innovation and speculation within the crypto space.

Looking Forward

As the memecoin economy has evolved, it has given rise to a thriving ecosystem of tools, bots, and platforms that cater to traders' desires for speed, security, and profit. This infrastructure has fueled the rapid growth and mainstreaming of memecoin trading, attracting billions in volume and millions in users and profit. However, beneath this vibrant and lucrative surface lies a darker reality—one rife with risks and manipulation.

In Part 2, we will explore the shadowy underbelly of the memecoin world, uncovering the scams, rug pulls, and pitfalls that have ensnared many unwary investors in their quest for meme-driven riches, and maybe just maybe, there might be a solution to all of these problems out there ;)