1kx: A Brief History of Meme Coins and Understanding Future Trends

Original Title: “A Brief History of Memecoins: Their Past and Future”

Author: freezer, 1kx

Compiled by: BlockBeats

In this article, we will cover:

· The origins of meme coins: Proof-of-Work meme blockchains

· How meme coins have evolved over cycles: ICOs, tokens, DeFi summer, Solana

· How NFTs have influenced the meme coin landscape

· Latest developments and new trends

· Potential risks and opportunities

What is a Meme?

A meme is a unit that carries cultural ideas and symbols and spreads continuously in people's consciousness. Like genes, the ability of memes to spread varies; those that resonate tend to endure, while those with less impact are quickly forgotten.

The internet has brought about the concept of "internet memes," allowing memes and cultural ideas to spread at a faster pace, often in the form of images, videos, GIFs, and jokes. One study likened the spread of internet memes to disease: "Memes spread in a viral manner, infecting 'individuals' in a way reminiscent of the SIR model of disease transmission."

The way internet memes spread is similar to infectious diseases.

"Meme coins" are a type of cryptocurrency whose value derives solely from the associated meme, essentially bringing financial value to the concept of memes.

With the emergence of meme coins, cultural ideas and symbols can be traded and speculated upon. Their value is based on the relevance of the meme and its ability to capture mindshare, creating a new type of market where cultural resonance can be quantified and has financial value.

A Brief History of Meme Coins

The following table and illustrations provide a brief introduction to the crypto cycles and the meme coins that have emerged during these cycles:

POW Meme Coins

Proof-of-Work meme coins are primarily designed for miners to allocate their resources to mine and sell new tokens. Many of these meme coins first appeared in the "alternative cryptocurrency" subforum on the Bitcointalk cryptocurrency forum. Although a considerable number of meme coins failed to enter exchanges, those that succeeded made their way onto platforms like Cryptsy and BTC-E for traders, which have since shut down. Each meme coin is typically distinguished by factors such as name and branding, hashing algorithm, block time, and supply, all of which contribute to their overall narrative (or "meme").

The first wave of tokens after Bitcoin was "meme coins," which, in a sense, offered little value beyond a new idea.

All of these tokens, except for Litecoin, eventually died out (due to reasons such as low trading volume and market cap, lack of exchange support, and vulnerability to 51% attacks). This may be due to several reasons: the weak stickiness of memes (lack of cultural longevity) and the cost of participation (each meme coin is a complete blockchain).

Litecoin's longevity may be attributed to the meme value of Bitcoin ("digital gold"), as it appeared much earlier than other meme coins and received ongoing support from numerous exchanges.

Dogecoin: The First Meme Coin

In the summer of 2013, the original Doge meme ("Such wow") began to spread on 4chan and Reddit. On December 8, 2013, Jackson Palmer and Billy Markus capitalized on this cultural trend by launching Dogecoin on Bitcointalk. It was the first cryptocurrency based on an internet meme.

The success of Dogecoin led to a new "category" of cryptocurrencies that are humorous, satirical, use celebrities (like Kanye West, Max Keiser), animals (like PandaCoin), or attempt to capture specific communities. These were all launched as Proof-of-Work tokens in the "Alternative Cryptocurrency" subforum on Bitcointalk. The "technical details" became less important, with everything centered around the "meme." The following image showcases some examples:

The ICO Boom and the Rise of Ethereum

The rise of Ethereum sparked a wave of innovation, bringing new use cases, better user experiences, and new users.

Some specific improvements include:

· Easier token launches (ERC20 standard)

· A new user base (non-miners)

· Token creators could earn more money (unlike zero-pre-mined PoW tokens, ERC20s are sold directly through ICOs)

· Introduction of interoperability / a unified ecosystem / unified wallets (via ERC20)

The ICO era birthed a wave of more "serious" projects, such as theDAO, Filecoin, Tezos, EOS, Cardano, Tron, and Bancor, which aimed to possess some utility or purpose beyond meme value. During this period, there were a few meme coins that, while not particularly eye-catching, still garnered some attention.

One example is the Useless Ethereum Token, launched in June 2017, which mocked the concept of ICOs and raised 310 ETH during its ICO.

Dentacoin, although initially aimed at becoming "the cryptocurrency for dentists," is still regarded as a meme coin, reaching a market cap peak of $2 billion in January 2018.

HAYCOIN was the first ERC20 token listed on Uniswap and was one of the meme coins created during this era (2018). The token was created by Uniswap founder Hayden Adams for testing the Uniswap protocol. Initially, it did not gain much attention, and trading volume was low, but due to its historical significance, it was revived in 2023.

Collectible Memes and Early NFTs

Outside of cryptocurrency, a subset of the Pepe meme known as "Rare Pepes" exists, which are memes not publicly released and, if released, bear the watermark "RARE PEPE DO NOT SAVE."

Between 2016 and 2018, a group of developers from Counterparty (a smart contract protocol built on Bitcoin) and Pepe meme enthusiasts created the Rare Pepe wallet, Pepe Cash, and orchestrated the "Rare Pepe meme" for trading on the Counterparty protocol.

Rare Pepes are often considered the second NFT series in history and continue to hold value, with some selling for over $500,000.

With the launch of CryptoPunks, MoonCats, and CryptoKitties, NFTs began to enter the mainstream of the Ethereum era, representing non-fungible tokens that point to images and other media. EtherRocks was launched as a joke on Reddit in 2017, consisting of a collection of 100 multi-colored clipart rocks. The series received almost no response at the time (only 30 were minted), but later revived and sparked a buying frenzy, reaching a floor price of 305 ETH in August 2021 (valued at $1 million at the time).

Another example of collectible meme coins is Unisocks (SOCKS), launched by Hayden Adams on May 9, 2019. He listed 500 physical socks that could be redeemed with SOCK (ERC20). As of this writing, the price of each sock has reached $53,000, making them possibly the most expensive socks in the world.

DeFi Summer

In June 2020, Compound Finance pioneered a new method of token distribution: "liquidity mining," also known as "yield farming." Users lock their assets to provide liquidity and earn token rewards in return.

This new paradigm marked the beginning of the "DeFi Summer," peaking in "food coin" yield farms that offered annualized returns of 10,000% (in meme coins) in exchange for locking your tokens in Yam or Pickle contracts.

Meme Stocks and Dog Coins

Stimulus measures, interest rate cuts, cheap money, and COVID lockdowns led to a high-risk environment globally throughout 2021.

In early 2021, retail traders gathered on Reddit and began spreading the "Gamestock" meme, posting images/videos and driving rapid stock price increases. Thanks to Robinhood's user-friendly experience (like having a mobile app and no trading fees), a large number of ordinary users participated.

The "GME" frenzy led many to speculate on other assets, especially those that could be traded on Robinhood. DOGE was listed on Robinhood in 2018, with a price of $0.00008 in late January, which was very attractive to retail users. In early February 2021, Elon Musk began tweeting extensively about the Doge meme. DOGE peaked in May 2021, reaching a market cap of $90 billion.

The popularity of DOGE spawned more dog-themed meme coins, including Shiba Inu, Floki, and Safemoon, all of which reached valuation peaks within just a few months.

NFT Boom: "Meme Coins with Images"

With the introduction of the ERC721 standard and the emergence of universal marketplaces like OpenSea, NFTs created a new category of crypto assets, which are unique visual expressions of "culture" or "meme."

Some of the most well-known NFTs include: CryptoPunks, Bored Apes, Squiggles, and Pudgy Penguins. NFTs can be used as profile pictures on platforms like Twitter and Discord, spreading virally by serving as identity markers. These PFPs represent a form of prestige and "membership in a cultural club." Many collectibles have made their holders wealthy, but holders cannot sell their NFTs without "leaving the community." To reward loyal holders, some NFT projects have issued a "meme coin" (ERC20) to their communities, providing a form of liquidity, "utility," and cultural "currency" value for the NFTs.

Some examples of NFT projects from this era (and their potential meme coins) include:

Recent Developments (2023+)

As cryptocurrencies recover from the bear market, new memes, cultures, ideas, and ecosystems continue to emerge. Meme coins are one of the few asset classes that have sustained attention (in terms of trading volume, market cap growth, and social interest), and recently, interest in them has surged.

Some recent meme narratives include:

Common Models

Every cycle has some form of meme coin: Meme coins present themselves in different ways depending on the underlying technology, such as PoW coins, ERC20s, and NFTs, which are among the earliest "applications" of new technologies or form factors.

Despite the various types of media for meme coins, they accumulate value in the same way: They all rely on attention, narrative, and hype to survive and spread. While new media can always spark initial excitement, only sustained attention can maintain long-term value. Simply making it an NFT is not enough; merely creating an Ordinal is not sufficient. Attention has highly cyclical characteristics, and after the initial media's first wave of hype, it requires deeper attention-driven factors.

Meme first, coin second: For the most successful meme coins, such as Doge, Pepe, and Dogwifhat, internet memes come first, and meme coins merely leverage the existing meme recognition for propagation and promotion.

Crypto-originated memes are just beginning: Crypto natives have started creating memes that can successfully spread beyond the web3 circle. A typical example of this trend is the rise of crypto-native intellectual property, especially NFT projects like Pudgy Penguins.

Low price equals meme: Since the early days of altcoins, users have enjoyed speculating on tokens with low "prices" (due to high supply). There is a psychological allure that if a seemingly insignificant token reaches $1, it could make its holder a millionaire overnight. Thus, price itself is a meme.

Strong community + marketing: Meme coins need a strong community, founders, or "spokespeople" to create content, promote the brand, and spread the "meme."

From wild growth to professional operation: The first wave of meme coins was relatively primitive, often fairly launched without insider or team allocations. This method of release has many benefits but also brings risks, such as rug pulls and fund theft. An emerging solution is the development of ecosystems around meme coins driven by dedicated teams, such as PFP projects.

Spread memes using strong imagery, imagery derivatives, and slogans: Imagery is the primary way memes spread on social networks. Typically, it starts with a key symbol and is expressed in various ways.

Opportunities

With a total market cap exceeding $60 billion and daily trading volume over $13 billion, meme coins hold significant financial value.

Since the sole function of memes is to spread into the minds of others, capturing the next "meme" early could be a profitable opportunity. Creators and investors "work for the meme" by expanding its influence and are rewarded in the process as early believers.

Whether it’s a lottery ticket to wealth, a choice to follow a specific KOL, or speculation on social trends and ideas, meme coins have been experiencing explosive growth since the inception of cryptocurrencies.

Criticism and Risks

Despite the numerous opportunities, meme coins are not without risks. Many meme coins tend to attract users trying to obtain instant wealth effortlessly, viewing them as a form of lottery or gambling.

Another common trend is "rug pulls" and "pump and dump" schemes, which occur almost daily in the meme coin market. According to a recent report by blockchain analytics firm CipherTrace, in 2023, rug pulls accounted for 99% of all crypto scams, with total losses reaching $2.1 billion. Therefore, it is particularly important to check some key features of meme coins, such as the status of LP tokens (are they burned or held centrally?), team allocations, transfer taxes, and whether contract permissions have been renounced.

At the same time, meme coins also lack regulatory clarity. The most notable regulatory event concerning meme coins was the Thai Securities and Exchange Commission's ban in June 2021 on tokens that "lack a clear purpose or substance" and whose prices are influenced by social media trends and KOLs.

Another major issue is that, aside from any malicious behavior, memes may also fail to "survive" due to a lack of interest, attention, and mental resonance. Such investment losses could lead to a hostile or indifferent holder community.