Memecoins’ position in digital culture and celebrity sponsorships have raised their notoriety. Many connect them with entertainment rather than usability. Recently, they attracted traders because of large returns.
Only a few of these coins have practical value. However, they have routinely outperformed real-world use case projects. Also, they have made the crypto industry more popular because of this nature.
Over the years, the memecoin market has consistently been reliant on a single essential component, which is the community. In comparison to traditional crypto, which prioritizes technological advancements and usefulness, these coins flourish on their emotional resonance, cultural relevance, and storytelling.
Memecoins can evade US securities law
In the second quarter of 2024, memecoins accounted for 14.3% of the market share on CoinGecko, making them the most significant crypto narrative.
The fact that memecoins are useless is one use case. They bypass the US securities regulations. These regulations have caused damage to the crypto industry for example, they stopped the ICO growth.
Furthermore, the Australian Securities and Investment Commission’s proposed expanded crypto powers do not specifically include memecoins.
A16z Crypto managing partner Chris Dixon said, “It’s actually safer to release a memecoin today with no use case than it is to launch a token that’s useful.”
Also, The Howey test is the primary focus of US securities law in determining what comprises an investment contract. The test does not capture memecoins, which are merely an idea.
Is it possible that they will dissipate now that Donald Trump is the incoming president and Paul Atkins is the presumptive new SEC supervisor? The SEC chairman may permit “real” projects to raise money again through a mechanism similar to Hester Peirce’s 2020 “safe harbor” proposal.
Memecoins let users capture the political zeitgeist
Memecoins enable holders to engage with and capture the political zeitgeist in a world where individuals use technology to establish social connections. These coins have been developed in support of and opposition to both candidates in the US presidential election.
For instance, Javier Milei, the libertarian president of Argentina, has a memecoin that is dedicated to his reforms. The social usefulness of enabling individuals to communicate their political opinions through monetary donations could be compared to the text-to-donate initiatives implemented by significant campaigns.
Trump’s new best friend and future Department of Government Efficiency (D.O.G.E.) boss, Elon Musk, is another prime example. He made Dogecoin become the gold standard in this uncertain realm of Web3.
Daniel Drescher, vice president of business development at Sal’Ad Labs, prefers to think of memecoins as “Brandcoins.” Often, they need a key opinion leader or a personality cult to power that coin.
The coins also thrive on silly things. For instance, Kamala Harris memes experienced an increase in popularity immediately following Joe Biden’s fall from a staircase, which resulted in his removal as the Democratic Party’s presidential nominee.
Memecoins do charitable things as well as funding projects escaping VCs
Memecoins have been used as Trojan horses to finance more significant initiatives. This includes the establishment of a casino akin to Iggy Azalea’s Motherland. Also, the establishment of an exchange akin to ShibaSwap or the fundraising for charitable causes.
Vitalik Buterin of Ethereum is well known for donating memecoins to charity. He wrote, “Among the more interesting of the coins that I’ve seen are coins where a large portion of the token supply is dedicated to some kind of charity.”
For instance, the Neiro Foundation is a global coalition that provides financial support and essential resources to dog shelters and charities that enhance the lives of Shiba Inus by funding Shiba Inu dog rescues and wellbeing initiatives.
In addition, these coins are contributing to the funding and launch of agents on the Virtuals Protocol, which enables AI agents to interact with tokenomics designs.
Consequently, autonomous DAOs may well result from AI agents. However, they are currently concentrated on the memecoin robo-trading end of the spectrum. Bots like Truth Terminal interact with users on platforms like X. This generates artificial excitement and shilling for community participation and the purchase of memecoins.
According to Calanthia Mei, co-founder of Masa, there is a significant gap between “intelligent AI agent memecoins” and “dumb memecoins.” Mei, who was previously a founding member of PayPal’s venture capital arm, discusses “memecoin sentience,” which refers to the intersection of AI and memecoins, in which AI agents execute duties, such as conducting transactions.
These trendy coins do more than just make money; they also make technology cool. They bring attention to technologies that not many people are interested in.
Zhen Yu Yong, CEO of Web3Auth, said that memecoins are useful for a new type of funding vehicle.
Still, according to Masa’s Mei, memecoins provide much-needed financial resources to develop their tech, escaping frosty VC markets and Web3 echo chambers.
In a viral Supercycle talk at Token2049, Murad Mahmudov contended that completely unlocked memecoins result in the tokenized meme being the actual product. There are no lock-up periods or VCs. Due to its lack of revenue, the asset’s inability to be valued becomes advantageous.
Clearly, the retail appeal is influenced by the absence of VC funding for the majority of memecoins. Degens who were unable to capitalize on Bitcoin in 2010, ETH, or any of the other major currencies can achieve immediate wealth without the interference of VCs in the pre-seed round.
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