Memecoins Mania
Memes are like containers of knowledge, and three things differentiate a good container from a less good one.
- How much knowledge does the container hold?
- How fast and far is the knowledge transmitted?
- How resistant is the container to change over time?
Now, let's look at two examples of good memes.
| Dogecoin | Gamestop | |
|---|---|---|
| Knowledge it contains | Anyone with an internet connection can access to a Tulip-like bubble - something tradable is not anymore only reserved for the elite or establishment | Retail can rekt institutions (short squeeze) |
| Dogs are funny | F*** Wall Street | |
| Don't take life too seriously | Retail can coordinate effectively, using internet, to achieve a common goal | |
| Speed of spread and outreach | Relayed by top media and traditional media outlets | < Same |
| People traded billions of USD volume on a daily/weekly basis | < Same | |
| Elon tweeted about it | Netflix released the Gamestop Saga | |
| Hard to vary over time | Does Dogecoin still resonate as intended? | When hearing about the name, do you first think about the company and/or the Gaming industry, or about the Gamestop Mania story? |
| When hearing about the coin, do you first think about the meme or Elon? | Will it (Gamestop) be more remembered as a business or as a meme constructor? |
Frederic Hayes once said:
The market is the most efficient mechanism for aggregating information.
Memes have definitely found in internet money, tokens, or coins, an appealing feature. Where trading volume, liquidity, and price reflect, in realtime, how 'good' the underlying knowledge is perceived (price), how often this perception varies (volatility), and how universal the message it carries may be (volume and market accessibility across the globe). However, with capitalism built-in functionality also comes the drawbacks or side effects. Like everything that is priced in, greed can hide the fundamentals or blur one's vision to make rational decisions. The rise might be virtiginous. The fall might be scary. And in fact, most meme containers will be lost 'like tears in rain'.
The recent and ongoing memecoins mania lacks substance to survive in the long term. New memecoins (e.g. Boden, Whoren) fail at point one and three of our good vs bad meme criteria, respectively the amount of knowledge they contain and the likelihood to resist change over time. Simply because they surf on local concepts (e.g. election, conference) rather than universal ones. Their underlying values depend too much on temporality and specific event-like outcomes. Whereas good memes are good enough to become their own events.
The fact that most recent memecoins use AMM-like infrastructure as catalyst also indicates that people prefer instant gratification over fair price discovery. AMM-based memecoins reward the few, allegedly the first to buy.
Finally, because capital is like water, it always finds a way through what's open. Memecoins are ready to be wet by the invisible hand of the crowd, and their supply is infinite - easy to create. This phenomenon is particularly evident now, because the Crypto industry went dark for a couple of years - many innovative projects died and new ones lacked of funding. Time may be different now. Until new innovative and useful applications emerge, capital may keep rotating straight to memecoins. Many of these lesser-quality memecoins distract from the fact that their blockchains are still catching up with real-world problems.