Something fascinating is happening with meme coins. If you haven’t followed, a flurry of new meme coins have been created and traded the past few weeks.
As chatGPT puts it: “A meme coin is a type of cryptocurrency that is often inspired by jokes, memes, or whimsical themes rather than serious technological or financial innovation. The concept and appeal of meme coins are largely driven by internet culture, social media, community support, and sometimes viral trends. Despite their often light-hearted origins, some meme coins have achieved significant market capitalization and a wide user base.”
Yes, they’re highly speculative, but this new generation of assets (potentially the new NFTs?) share extremely interesting characteristics and new mental models. I’ve tried to summarize a few that I think are interesting and hopefully helpful for all of you to get a better understanding of what’s going on right now.
#1 - Not all meme coins are born the same
This super insightful tweet posted by Li Jin sums it up very well. There are a few very different categories of meme coins which represent different fundamentals:
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Meme-first meme coins: based on internet culture and memes such as $DOGE (worth $27bn) or $PEPE ($3bn). Those are the OG meme coins
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Community-first meme coins: natural default options for people in an online community to coordinate and align. For instance $DEGEN ($1.2bn) for the Farcaster community (more below) or $ENJOY ($52m) for Zora
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Event-based meme coins: derive their value based on real world event. For instance the Trump Token ($MAGA - $270m) or the Jeo Boden token ($BODEN- $532m) whose price follow the events of the US presidential race
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And many others…
#2 - Shelling point, yes. Utility, no.
While the past crypto cycle was very much defined around the idea of utility as a justifier of $ value, this prerequisite is not present in current meme coins as explained by the founder of Pudgy Penguins. This shift in what matters most is occurring for two reasons. 1) Counter-intuitively, it is safer, from a regulatory perspective, for meme coins to exist without the expectation of utility - or the expectation or promise of an increase in value. And 2) because holding the token to belong to an online community of holders far exceeds that of getting access to a group chat or other token-based access and benefits . Said otherwise the value of a meme coin lies in it being the Shelling point of the community it represents. To quote chatGPT once more:
A shelling point, a concept introduced by economist Thomas Schelling in his book "The Strategy of Conflict" (1960), is a solution that people tend to use in situations of strategic interaction when they cannot communicate with one another. It is a sort of natural focal point or default option that individuals gravitate towards under conditions of uncertainty, based on the presumption that others will similarly find it a naturally attractive choice.
Shelling points are fascinating because they reveal how, even in the absence of communication, people can coordinate their actions or decisions by relying on common knowledge or shared understandings of what seems natural, special, or relevant in a given context. This concept is broadly applicable across various fields, including economics, game theory, negotiation, and even everyday decision-making scenarios.
Key characteristics of a shelling point include:
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Commonality:* It must be something that all parties can easily recognize as a natural or prominent option.*
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Simplicity:* Often, the most straightforward or simplest option becomes the shelling point because it is the easiest for all parties to think of and agree upon.*
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Cultural or Contextual Relevance:* In many cases, the shelling point relies on specific cultural, historical, or contextual cues that all participants are likely to be aware of.*
Three key characteristics that are found in today’s most successful meme coins.
#3 - Meme coins and Apps
Farcaster - a decentralized equivalent of Twitter - opened to the public a few months ago. The Farcaster ecosystem has since built a meme coin linked to the app called $DEGEN ($1.2bn) which has been instrumental for the adoption of Farcaster. In short, active profiles on Farcaster are:
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Rewarded with a $DEGEN airdrop
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Fed access to a daily $DEGEN tipping allowance.
Point #2 is super interesting: this means that the most active Farcaster profiles can tip (or distribute) DEGEN tokens to other Farcaster profiles based on rules they choose. This has caused Farcaster to skyrocket in usage (x users, x WAU) and DEGEN to skyrocket in price.
This is an example of a token being used to supercharge the GTM of an app and interestingly we’ve seen the reverse happen with the $DEGEN community lately. In April, we’ve seen the DEGEN team allocate grants to multiple apps to increase the usage and distribution of tokens. Some examples:
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Drakula.app - an on-chain tiktok where users can buy shares of content creators with $DEGENs
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Bracket.Game - a sports betting apps on which users place bets with $DEGENs
By funding new apps, the DEGEN community makes sure there are more and more use cases for their token.
#4 - Meme coins for creative coordination
Last but not least, the $HIGHER ($60m) community has created what is perhaps the first / most successful example of a creative-led meme coin. Higher started as a Farcaster channel of crypto-optimists. To quote lght, the leader of the community:
“when price is higher: art looks better memes are funnier negativity bounces off easier ’higher’ can be a conscious mental model”
Higher is now a community of +15k members who all share the same ethos, one token ($HIGHER) and one unicode symbol ↑ to create content, memes and what is effectively is starting to look like a decentralized brand. Buying $HIGHER represents participating in this community and contributing to it by declining its symbol in any way you want (minting NFTs, creating memes, building websites…). Font choices, color ways, media profiles, tooling priorities, all the way down to motivations and tag lines, are unique to the individual members of ‘higher dao’.
This is a very interesting example of creative synchronization between members of one online decentralized community. As we speak, $HIGHER is worth $60m.
I hope this gives you a glimpse into what’s going on in web3 land. This is a very exciting, interesting and fun (!) moment and a lot of new patterns are emerging. And this is influencing a lot of what we do at P00LS: many creators and community leaders have created a token with us recently in order to build their own version of a meme coin.
Adding some interesting links below: