Memecoins are digital assets that originate from popular Internet memes and are characterized by high volatility. These cryptocurrencies are usually created as a satire or social experiment. Their price largely depends on their popularity and cultural value rather than the technology behind them.
The first memecoin, Dogecoin, was created in 2013 by Billy Marcus and Jackson Palmer. Elon Musk played a major role in the coin’s PR thanks to his love for memes with the Shiba Inu dog. As soon as he made a post on Twitter, the price of the memecoin soared. At the end of 2013, DOGE was trading at $0.0003-7, in 5 years the coin rate exceeded $0.01 for the first time, and in May 2021, it briefly reached $0.74. Currently, the rate is hovering around $0.06.
According to Elon Musk, Dogecoin is no different from other cryptocurrencies, but it has a meme. This absurd statement has some truth to it. Memecoin technology is no different from some other cryptocurrencies that are considered “real”. For example, Dogecoin was created as a derivative of Litecoin. After Dogecoin, the world saw several other memecoins with dogs at the top: Shiba Inu (SHIB), Dogelon Mars (ELON), etc.
The main mechanisms of memecoin functioning are similar to those of well-known altcoins, such as: Ethereum and Litecoin. Meme coins, like other cryptocurrencies, operate using blockchain technology, and some of them even operate on alternative blockchain networks. They also use common hashing algorithms. Although memecoins are associated with popular Internet memes, their technical characteristics are similar to regular cryptocurrencies.
What is the value of memecoins?
Funny coins have their own value. There are at least five main advantages:
- The first and foremost is speculative. Memcoins are highly volatile. With enough experience, traders can make a lot of money on price spikes. A recent example: PEPE and BlackRock. According to Lookonchain analysts, the company made a tenfold profit of $2.39 million on memcoin transactions.
- Creativity. Users can create their own memes and symbols associated with these coins. This way, they can express their affiliation with a certain group or community.
- Collection. The key feature of memecoins is their collectible value. Each coin and/or image on it is unique. Similar to collecting art or rare items, famous memecoins are also of interest to a certain group (fans, collectors). Therefore, both collectors and resellers are ready to pay for them.
- Charity. Some meme coins were created to raise funds for charitable organizations. For example, Dogecoin was used to raise funds to fight COVID-19. Such coins also draw public attention to social and environmental initiatives.
- Evolution. Meme cryptocurrencies can evolve into something more – into their own projects with their own ecosystem. For example, Shiba Inu and Shibarium. Shibarium is a 2nd tier blockchain solution for Shiba Inu aimed at eliminating the problem of slowness and high transaction costs of Ethereum. The goal of Shibarium is to lay the foundation for the creation of a Shiba Inu ecosystem, complete with a metaverse, DEX, and blockchain games. As you can see, Shiba Inu has become a “fundamental” coin over time. It is also worth noting that Tesla has released its own merchandise that can be purchased for the Dogecoin (DOGE) meme.
Disadvantages of memcoins
Memcoins have several disadvantages. They are worth mentioning:
- Manipulation and fraud. Due to their humorous nature, it is likely that memcoins will attract the attention of fraudsters who will perform skimming as soon as the token value reaches a certain point. However, not only memecoins are prone to such fraud. This is a problem for the entire crypto industry due to insufficient regulation. The latest example of PEPE is proof of this: unscrupulous developers withdrew 16 trillion PEPE, sold them on the market, and disappeared.
- Memecoins can be used to spread disinformation and propaganda. If the picture or name of the token has a certain reference.
- Volatility. For traders who trade on margin, this is, of course, an advantage, but for investors, it is a disadvantage. The value of memcryptocurrencies can fluctuate greatly, which promises a loss of capital to the latter.
- Security. Many memecoins are created as a joke or as a social experiment. Therefore, it is unlikely that they can provide the same level of security and reliability as, for example, Bitcoin.
Conclusion
Memecoins have pleasantly diversified the world of cryptocurrencies and blockchain. They combine collector value, social integration, financial experiments, and entertainment. It is important to remember that investing in memtokens can be associated with high risks, and their value can fluctuate greatly. Which is good for trading on a margin platform. Nevertheless, they continue to attract attention, luring more and more new users to the industry.
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