Meme Coins vs Elite Coins: A Cultural Revolution in the Crypto World

Original Title: Memecoins vs Elitecoins: A Cultural Revolution

Original Author: KERMAN KOHLI

Translation: Deep Tide TechFlow

I never expected to write this article. In the last cycle (2021), I had no understanding of NFTs, did not buy things without "utility," and loved my DeFi coins.

This cycle, my perspective has changed significantly. So what happened?

Broken promises and seeing through the nonsense of cryptocurrency over the past 8 years.

I entered the crypto space in 2017, and to me, that was still one of the most exciting cycles in crypto (2020 being a close second). Why? Because for the first time in history, you could raise funds from anywhere in the world in less than 10 minutes. Of course, there were plenty of scams, but the overall innovation was undeniable. Ethereum was an ICO coin, along with Aave, Gnosis, and countless other coins. As someone from New Zealand/Australia, I could never geographically access that big capital, and ICOs gave me hope that talent and the best people could stand out no matter where they were (assuming they could build and market). In the crypto space, people crowded around a laptop, transferring $5 million and completing transactions; that feeling was insane anywhere else.

Unfortunately, all good times come to an end. In the following 2018/2019, we had to clean up the mess, including a lot of injured retail investors and the countless lawsuits that followed. Despite crypto being an extremely risky industry, founders and investors wanted something "safer." So they chose a new model:

• Raising funds privately for early rounds

• Raising funds privately for later rounds

• Airdropping at high valuations

How to participate in these "deals"? Become part of the crypto elite who are entitled to participate in these deals and then wait for your assets to appreciate. I was a net beneficiary of this model. I was fortunate to be an angel investor in certain tokens, and their value significantly increased when they went public. Most of my investment performance came from the public market. I do know many friends and investors who made incredible amounts in this new model. Now you just need to shine on Twitter.

Now, I’m not saying that those with social capital shouldn’t be able to convert it into financial capital. That’s how the world works. The problem lies in the incentives of this system. I’ve written about this issue in various ways, but I’ll take a moment to review it.

The "New" Model

The problem with this new model is that it is more corrupt than the existing financial system. The usual situation is as follows:

• First-round investors will get a valuation of $10 million to $50 million for any token/project. Given that most tokens have the potential to be worth $1 billion, what you see is a 20x to 100x increase. This round is easy to sell and is usually handed to insiders. That’s fine because that’s also how regular venture capital investments work.

• Now that there is enough funding, the project can start building and shipping. Once you release something, you put the expectation of "airdrops" in front of users. The deal is simple: use our product, and we will eventually reward you with our tokens. Oh, if you use multiple wallets, you’ll get more because you improve our metrics.

• With these new metrics, the project can peddle bigger dreams. Growth-stage capital can come in, writing bigger checks for these companies. If your dream is ambitious enough, you can raise $50 million at a $500 million valuation. This is where you start to doubt; if they invest at a $500 million valuation, then investors need to see at least a $5 billion valuation. To achieve this, you need to have the best marketing and social impact investors (or cash flow, which usually doesn’t exist at this stage). Keep them on standby because in the next phase, you need to work together.

• As you approach the launch of your token, ramp up your marketing and social impact. More and more people discover the project and token and will eagerly use it, hoping to receive an airdrop. This cycle is as powerful as a 20-year-old man using steroids to bulk up.

• Once the marketing campaign peaks, launch the token and ensure liquidity for your investors and team members. If you want, you can also sell in the secondary market early. What happens after that is out of your control, as people will sell their tokens for liquidity and move on to the next project.

Note: Some teams do not execute like this; they ensure that team members and investors have appropriate 4-year token vesting, execute airdrops seriously, and strive to obtain accurate data. These are exceptions, and I hope these projects stand out.

The result of this cycle has essentially created a bunch of products and things that people don’t really want, but will continue to repeat: why? Because this is the only way to make money in this market. Opportunities in early and growth rounds are limited. Your only chance is to put money into untested smart contracts and hope to use bad products across multiple wallets, then months later receive $1,000 to $10,000. So how about the utility of these tokens?

• Most tokens promise "governance." Well, most tokens are held by insiders, so your voice is irrelevant. How do you know? Well, you just need to spend a lot of time understanding the composition of wallets and how past governance votes were conducted.

• What about cash flow? Yes, some may have cash flow, but as a token holder, will you receive it? Of course not. This may change with the UNI fee switch, but until then, we are at an impasse.

• What about innovation? Key team members have become millionaires, and from that point on, they may only care about whatever products they produce. How do you know? You can only know if you gain insider information through discussions with industry insiders.

• What about growth? Well, airdrops and metrics are fake, so nothing is real. Most users and funds will flow to the next "hot" project, forgetting you entirely, becoming a relic of the last cycle. There will always be a new project with hotter investors and more users looking to farm airdrops, attracting more attention.

• What about future price appreciation? Well, you need to understand the entire supply schedule and when more tokens will unlock so that insiders don’t dump on you and gain exit liquidity.

The way the system operates is through false data to perpetuate short-term, profit-driven behavior. People are not stupid; frankly, they are fed up. Now that there are new options: meme coins, why choose other projects that allow a lot of insiders to get rich?

A Revolution Within a Revolution

Cryptocurrency was supposed to be a place where the competitive environment became equal for everyone, and we could have transparent and fair distribution.

Bitcoin is a perfect example of this:

• No pre-mining

• Fair distribution through proof of work

• No promised utility other than advertising

I’m not saying every token needs to or should do this, but it does represent a characteristic of cryptocurrency that is revolutionary compared to the current financial system:

• New dollars printed for those closest to the money printer

• Information is opaque and hard to verify

• Value hardly belongs to those who create value (the citizens)

In many ways, the current crypto system is starting to resemble the old ways of doing things (tokens allocated to insiders, data hard to verify, investors receiving most of the value). In contrast, memes have responded to the original promises of crypto in a unique way.

I want to start with a phrase that people often say:

"When the hype disappears, memecoins will eventually go to zero."

I used to say this phrase often too. But let’s look at the data, shall we? Here’s the market cap chart of Dogecoin since 2014 (it’s plotted on a logarithmic scale due to the price increase being too large to plot correctly). This is a token with no utility, other than the logo being a widely recognized dog called Shiba Inu.

Investing in Dogecoin has been more profitable than investing in NVIDIA.

So should this token go to zero? In fact, the opposite is true. It has continued to rise significantly, actually surpassing Bitcoin. Bringing investors about 8,000 times returns is hard to ignore.

You might say, "Well, Dogecoin is special; it’s an outlier." I think that’s an untenable answer that requires deeper digging. Let’s look at some characteristics of Dogecoin:

• No pre-mining

• It runs on a proof-of-work algorithm with no "pre-sale"

• Aside from being a cute internet joke, it offers no utility

Dogecoin doesn’t lie. It doesn’t favor those with social capital. No insiders get special access. If you believe in internet culture and crypto, you can get some for yourself.

But I want to further illustrate my point with this example in a different but similar way.

$DEGEN

I’ve previously written about Farcaster here, but now there’s a new play emerging that we will see become very popular in the coming months or even years. To illustrate this, I want to use something different: Reddit. Recently, Reddit went public at a $60 billion valuation. Most of this value was created by the platform's users. However, the best thing Reddit could do was give their users a chance to participate in the IPO at a multi-billion dollar valuation. They might get a decent return, but it won’t meaningfully change the trajectory of their lives.

When Farcaster launched and I was writing about it, there was a small experiment going on called $degen. The idea is very simple: you get a certain amount of $degen and can distribute it to people with good posts on Farcaster by commenting "50 $degen." The more you tip, the more you earn. In many ways, it’s simple, but it’s also excellent in terms of value distribution. As usual, I was skeptical and ignored it, thinking it was "just another Ponzi scheme because it has no utility, so it will go to zero." However, the success of $degen lies in capturing the mindset of Farcaster users. As Farcaster grows, the price of $degen also rises.

$degen is still young (only 3 months old) and will face many challenges in its future journey. While it represents something new and novel, I believe it will withstand the test of time, even in a bear market. However, looking at such charts, it’s easy to think, "What if I had invested at x dollars?"

What I want to illustrate with this article is what you can achieve through actual participation. One of the largest holders of $degen I know is Cooper Turley. He has been very involved with Farcaster and $degen. His public wallet holds nearly $250,000 in $degen, purely through participation.

These stories are why I came to the crypto world, not to reenact the same corrupt system with new projects.

In the rise of $degen, it is now being used as a marketing strategy for startups. Alex Masmej is building the intersection of TikTok and crypto, using $degen as the primary currency for their product, Dracula. This creates a symbiotic relationship between Dracula and $degen. Meme as a marketing channel is becoming a more prominent theme for the future. I will elaborate further in the next section.

Although $degen has a small amount of pre-allocation and has sold tokens to "Farcaster" insiders, the number is much smaller, and I personally think it’s reasonable. Despite seeing the rapid rise of $degen, I hold very little $degen due to my mid-curving strategy.

$WIF

Dogwifhat. The most hated meme on crypto Twitter. The first time I heard about it, I felt disgusted. I remember thinking, "Those filthy people are making garbage again." However, after learning the story of this dog, I found it compelling enough to change my mind. I hold a small portion of $wif, and I joined fairly late (the market cap had already reached billions).

You see, the photo of dogwifhat started circulating long before it became a token. It’s a popular internet meme, full of life. This photo makes you say, "That’s a pretty cute dog wearing a hat."

At the end of 2023, a Solana developer launched $wif. However, after the token surged in the first two days, he sold his share for $32,000, leaving a "clean" distribution. No remaining supply. If he hadn’t sold, his share would now be worth over $1 billion. Considering the distribution of the token is basically first-come, first-served, wif has grown to unprecedented scales.

$wif is very easy to understand: it’s just a cute little dog wearing a hat. No need to worry about investors selling you on it, no promises, no cash flow. It simply is what it is.

It’s both lively and deceptively simple. But most people might miss it.

Broadening the Perspective

"But, author, are you really suggesting that we should all buy those tokens that actually do nothing, only have cute dogs or communities, and have no other value?"

First of all, whether you decide to invest or not is your own issue, not the scope of this article. My second point is, what other options are there? When you look at the top 100 tokens on CoinGecko, you’ll find a plethora of tokens:

• No real utility beneath the surface, most of which are lies

• Potentially facing massive sell-offs from investors

• Not generating any cash flow

So relatively speaking, meme coins and "utility" tokens are the same. I prefer tokens that are honest about their position and don’t require me to analyze 100 different variables while dealing with other things.

"But when the bear market comes, will they all go to zero?"

Well, guess what, everything crashes 50% to 99% in a bear market. What you describe is no different from any other token. At least for meme coins, there are no lies or false promises, which will ultimately be revealed like most tokens. AI / L2 / ZK tokens are currently the biggest perpetrators of this trend. They falsely report their technology, have an oversupply of tokens, and list at absurdly high valuations. I loathe these tokens.

Cryptocurrency is plagued by lies; it’s a corrupt industry. Meme coins, in an unusual turn of events, have become the answer to the struggle. You could say it’s a revolution within a revolution.

Now they are easy to buy (Solana), easy to understand (cute dogs), and very honest (no complex technology or financial jargon to confuse you).

Like it or not, they will continue to exist.

They will lose value like other products in the market in 2-3 years, but I bet the best memes will survive in our minds and yield huge returns in the bull market of 2028, just like Dogecoin.

The question is: are you a discerning meme connoisseur or a fool buying fraudulent tokens that developers are trying to cash in on and run away? That question is left for you to answer.

The Future of Cryptocurrency

Meme coins may also represent a future of financial nihilism, where people gamble their way out of poverty. There should be another option that allows investment in technologies that make humanity happier or more productive at the lowest cost. Not just selling such dreams.

While I could choose to spend time on memes, I believe we can create a better on-chain society through better identities, reputations, and data primitives. This is where I choose to spend my time and build accordingly. Based on my recent article about airdrops, I’ve learned a lot behind the scenes, and I’m excited to share it with you.

I hope these new products can help address the issues we currently face in cryptocurrency.

However, for now, meme coins may be the best honest alternative.

Disclosure: Although I am optimistic about memes, I still keep my meme holdings below 5% of my portfolio. I expect this percentage to grow significantly as meme coins show sustained resilience and are overlooked by the elites, and will appreciate greatly.