Why Memecoins, Despite Being Unserious By Nature, Seriously Exemplify Web3’s Core Value Proposition – The Defiant

If you’ve even marginally kept up with the madness that is the world of digital assets and web3, you’ve most likely stumbled upon a highly publicized rags-to-riches story.

They more or less take the same format: an individual making a life-changing amount of money by investing in a token built around a viral internet cartoon sensation or more eloquently named, meme. If you haven’t come across one of these stories yet, rest assured that you read the previous sentence correctly. There are numerous accounts of people buying these assets, often referred to as ‘memecoins’, and experiencing 2x, 5x, or even 50-100x returns in a matter of days.

Most famously, Elon Musk’s favorite cryptocurrency, Dogecoin, an ancient memecoin by crypto’s standards, rose from the ashes to prominence in late 2021. This happened when Musk, who was at the time the world’s richest person, publicly endorsed the asset in a series of tweets. Lo and behold, Dogecoin and its associated meme broke the internet.

While the vast majority of people who fall into this type of wealth do so unintentionally or through careful investing, there’s something to be said about the power of the individual and the communities they belong to. That’s something that has been showcased to the highest degree again and again in this industry.

Sophisticated finance ‘experts’ and ‘gurus’ are, rightfully so, quick to question the underlying intrinsic value of these tokens. Typically, this skepticism questions their value from a technological perspective, which is normally a good place to start. Low barriers to entry, undefined regulatory frameworks, and easy-to-use infrastructure make creating one of these tokens pretty easy. Investors have been burned in the past, so they are wary of scams and rug pulls. However, on the contrary, I assert that to fully understand the value proposition of the memecoin asset class, one must truly understand the principles of money and how society assigns value to anything.

“But they’re just cartoons! They have no value nor do they serve a purpose”

Before I go any further, it’s important for me to reiterate that anyone thinking about investing in digital assets should do so only after they’ve conducted an adequate amount of due diligence and research. Most people think that this starts and ends with the actual investment in question but I’d go as far as to say that in today’s day and age, it’s imperative that all investors sufficiently understand money and the modern financial system.

I say this for two key reasons. Firstly, to fully understand Bitcoin (or any crypto’s value proposition), an individual must understand the core benefits of decentralization. To do that, one must understand the pitfalls of our current monetary system. In the U.S., we’re dealing with hyperinflation and a currency that’s continuously being printed into irrelevance to keep up with America’s hefty promises. Ultimately, this makes the dollar valueless which is a huge issue, as it’s something that’s pervasively used as a store of value.

The second reason people need to understand the current system is that an overwhelming amount of the criticism memecoins and crypto face is also applicable to many of the fiat monetary systems that exist today. Since the debasement from the gold standard in 1971, the US dollar has been backed solely by the republic’s belief in the government saying the dollar is worth what they claim it to be. Sure the U.S. has the world’s most powerful armed forces and American pride has helped the country ascend to the global superpower it is today, but hyperinflation and growing political tensions have started to weigh on the long-term sustainability of America’s growth.

It only takes a couple more cracks in the U.S.’ seemingly impenetrable armor before we as people start to beg the same question of what truly gives the dollar its value. If anything, one could argue that the U.S. dollar is the world’s largest memecoin, built on the back of the imagery of the nation’s founding fathers and their foundational principles.

Power to the people!

Following the SEC’s approval of the highly-anticipated Bitcoin Spot ETF, we’ve seen unprecedented inflows into digital assets. Demand has continued to outpace the natural supply of the network. On the back of higher valuations, we’ve seen various ecosystems benefit as investors rotate profits into thriving utility-led ecosystems and ultimately, memecoin projects.

Most notably, we’ve seen a proliferation of memecoins in both the Ethereum and Solana ecosystems. Shiba Inu and Pepe are highly respected, mature memecoins in the more battle-tested Ethereum ecosystem, while numerous Solana memecoins have risen to prominence over the past few weeks.

Two reasons for this are Solana’s vibrant retail community and the network’s low transaction costs. Bonk got the party started but we’ve seen numerous others like Dogwifhat, Myro, and many others. Dogwifhat’s community surprisingly came together and raised over $600,000 for ad space on the Las Vegas Sphere — proof that what may have started as an inside joke is now going commercial in 2024!

Why Memecoins Are Integral to Web3 Adoption

Memecoins, if nothing else, are easy for crypto newbies to understand. This is potentially the most important aspect of them. The narrative behind several memecoin projects lies in the power of the community behind said meme.

Memecoins are a prime example of how any collective group of individuals can create the economic infrastructure to facilitate commerce, trade, and collaboration without the need for an intermediary. Before blockchain, this was virtually impossible.

To create the world we inhabit today, it was necessary for nation-states to establish a formal government whose sole purpose was to uphold the integrity of such a regime. As we’ve seen over time, this system requires infallible trust, given people’s financial livelihoods are at the mercy of said government.

Moreover, given that many governments around the world operate with limited transparency, growing tensions around the globe have started to impact people’s trust which undeniably stresses any financial regime.

Memecoins are completely at odds with this antiquated set-up.. Rather, memecoins and web3 technologies in general, enable users to interact with both people and money without having to trust any person or entity.

Failing to understand the value in that, is failing to understand crypto and decentralization altogether.