What Are Meme Coins?
It’s no secret that the cryptocurrency community is terminally online. And anyone that is addicted to the internet will know a thing or two about memes. Popular internet trends have always leaked their way into mainstream culture. And as crypto keeps on growing in popularity it was only a matter of time until meme culture made its way into it.
To put it simply, Meme Coins are the cryptocurrencies that have been inspired by internet memes or trends.
While many cryptocurrencies, such as Ethereum and Bitcoin, gained traction because of their technical features like decentralization and confidentiality, meme coins are different. The majority of these coins get their value from their association with a popular meme — yes, they’re that fragile.
Some meme coins were developed as a critique of other cryptocurrencies or other aspects of internet culture.
Dogecoin, one of the most popular meme coins on the market, was created as a parody of other mainstream cryptocurrencies like Bitcoin and Ethereum. Its creators, Billy Markus and Jackson Palmer had no intention for the coin to have an actual use.
In comparison to other mainstream cryptocurrencies, meme coins are often dismissed as jokes. However, their prices have risen dramatically in recent years.
While most meme coins haven't offered any clear uses in the past this is slowly starting to change as some meme coins, dubbed utility, are now providing real-life uses. For instance, FLOKI is one of the coins leading the charge in this new utility-based movement.
Let’s take a look at FLOKI and some of its fellow meme-based coinage.
Popular Meme Coins
Here are some of the meme coins to look out for.
DogeCoin (DOGE)
Dogecoin is the most popular meme coin. Its launch in 2013 sparked a mini-revolution in the cryptocurrency world.
It was inspired by a Shiba Inu dog meme and was created as a joke to gain mainstream attention.
DOGE is a branch of Litecoin (LTC) and uses the same Proof of Work (POW) framework as LTC and has an unlimited supply.
Shiba Inu (SHIB)
Shiba Inu (SHIB) is DOGE's main competitor and is sometimes referred to as the "Dogecoin killer." SHIB is also named after a type of Japanese dog.
The major difference between DOGE and SHIB is that the latter has a limited supply of one quadrillion tokens, half of which were burned and donated to charity.
Dogelon Mars (ELON)
In terms of popularity, Dogelon Mars (ELON) closely follows DOGE and SHIB.
ELON is named after Tesla CEO Elon Musk.
ELON is an extension of dogecoin with a circulating supply of 557 trillion tokens. Since its launch in April 2021, ELON has increased by over 3,780%.
Floki Inu (FLOKI)
Floki Inu is more of a "movement" rather than a meme coin. It's a cryptocurrency created by fans of the Shiba Inu (SHIB) coin.
The community is known as the "Floki Vikings" after Floki (Elon Musk's dog), who was named after a Viking character.
Floki Inu promises to take its community efforts seriously and has been listed in the top ten of LunarCrush's social engagement leaderboards several times.
Why Are They So Popular?
While it's difficult to pinpoint the exact reasons behind the increasing popularity of these coins, some people believe that it has everything to do with the boom in the crypto market during the COVID-19 pandemic as retail investors sought to hedge against inflation.
During the hype, along with traditional cryptocurrency, meme coins also saw a rise in market capitalization.
In late 2020 the "meme stock" debacle of GameStop (GME) and AMC Entertainment (AMC) also took place. It revolved around the Reddit online community, which rallied behind Gamestop and inflated the prices of their shares up to 100 times in a matter of months.
In January 2021, a subreddit joked about artificially inflating the price of DOGE in order to create a crypto equivalent of GME.
The trend caught on, and DOGE's stock price rose as a result of the influence of Tesla CEO Elon Musk's tweets. Due to this trend, Dogecoin reached an all-time high of $0.73 USD, representing a gain of more than 2,000% in five days.
However, in May 2021, after Musk made a public joke about DOGE on national TV, it led to a significant price drop.
Another reason why investors like meme coins is that they are usually very cheap, not selling for more than a few cents or even less.
Technically, the low price is meaningless because these coins are in abundant supply. Even so, holding millions of a particular coin feels different than holding just a small percentage of ETH or BTC.
With just a few dollars, traders can obtain thousands, if not millions, of meme coins like DOGE, SHIB, or Akita.
How Do They Work?
Creating a meme coin used to require some technical know-how. However, that is not the case anymore, as apps and websites have been developed to do all of the heavy lifting for you.
Platforms like DxLaunch provide everything you need to develop and release your own meme coin. While this is beneficial in terms of accessibility, it also allows scammers to prey on inexperienced investors.
Meme coins operate in the same way as any other cryptocurrency, taking full advantage of blockchain and other related technology.
Meme coins, like any other type of cryptocurrency, can be bought, sold, and traded. Simply go to a marketplace, download the App, and buy it. They've appeared in particular on blockchains that use smart contracts, such as Ethereum and Solana. There are over 200 meme coins floating around today on various blockchains.
The Risks of Investing in a Meme Coin
One thing to keep in mind about meme coins is how volatile they are. While some meme coins, such as DOGE, appear to have outlived their expected lifespan, most meme coins appear and disappear in a very short period of time — both intentionally and unintentionally.
Many meme coins are also "scam coins". These are cryptocurrencies that exist solely to benefit the creator.
Scam coins can adopt a variety of schemes, such as a "pump and dump" in which people are encouraged to buy a coin in large quantities. Once the coin's value has risen sufficiently, the coin's early owners will "dump" it in order to make a large profit.
Scam coins can also be a "rug-pull" in which developers take all of the money and abandon the project.
However, not all meme coins are illegitimate. Some meme coins, such as DOGE and SHIBA, have useful functionality and have primarily used the "meme" aspect to increase adoption. Members of the community also believe that meme coins are an important way to get people interested in cryptocurrency, with public figures such as Elon Musk frequently lending their support for meme coins.
Things To Know Before Investing
The economics of meme coins can be really troubling. As an example, consider Bitcoin. It has a blockchain, a well-written whitepaper, a mature ecosystem, and a deflationary nature. In recent years, we have also seen increased institutional adoption of Bitcoin.
Most meme coins, in comparison to BTC, are inflationary, with virtually unlimited supplies. Their ecosystems use — and their foundations are frequently defined by — the community's collective jokes.
Only a few meme coins were created using major cryptocurrency technology. DOGE is one of these, which is derived from Litecoin (LTC), as is SHIB which was built on the Ethereum blockchain.
Another potential risk is that meme coins are more speculative than larger cryptocurrencies. This volatility frequently results in unexpected pump and dump schemes.
Meme coins typically have a short life cycle. Their prices can skyrocket due to celebrity shilling or FOMO, or they can plummet unexpectedly when the community decides to move on to the next meme coin.
As the meme coin market expands, you should be aware that there may be projects taking advantage of the hype to defraud traders.
In just one week, Squid Game (SQUID), a meme coin based on the popular Netflix show of the same name, increased by over 86,000%. However, the development team abruptly did a ‘rug-pull’ causing the price to drop by 99%.
What's even worse is that shareholders were not allowed to sell their SQUID tokens. So before trading or investing in meme coins, you should always be cautious and do your own research
Invest in Meme Coins Wisely
While it is possible to profit from investing in meme coins, it is never guaranteed. These cryptocurrencies are even more volatile than their mainstream counterparts, and their value can fall significantly overnight.
Do your research before purchasing meme coins, just as you would any other financial investment.
Be wary if the coin has no history and information on it is difficult to come by. Even the most hyped currency may turn out to be a scam in the end. A lack of a whitepaper or an established ecosystem — or even a whitepaper riddled with typos and big claims — can often be a red flag.
Having said that, given how cheap they are, you can still get a good amount for a small investment. Just keep in mind that you can probably only expect a few dollars return on your investment in the long run.
Whatever you do, never invest more money than you can afford to lose.