Meme Coin vs Elite Coin: A Cultural Revolution in the Crypto World

Author: KERMAN KOHLI; Translator: TechFlow

I didn't expect to write this article. Last cycle (2021), I didn't know much about NFTs, didn't buy things without "utility", and loved my DeFi coins.

This cycle, my views have changed significantly. So what happened?

Broken promises and seeing through 8 years of cryptocurrency bullshit.

I entered the cryptocurrency circle in 2017, and in my opinion, it is still one of the most exciting cycles in crypto (2020 is a close second). Why? Because for the first time in history, you can raise funds from anywhere in the world in less than 10 minutes. Sure, there are scams everywhere, but the overall innovation cannot be ignored. Ethereum is an ICO coin, and there are Aave, Gnosis and countless other currencies. As someone from New Zealand/Australia who could never geographically get close to the big money, ICOs gave me hope that talent and the best of the best had a chance to shine no matter where they were (assuming they could build and market). The feeling of people huddling around a laptop, transferring $5 million and getting a deal done in crypto would have been crazy anywhere else.

Unfortunately, all good times must come to an end. In the years since 2018/2019, we have had to pick up the pieces, including a large number of injured retail investors and countless lawsuits that followed. Despite crypto being an extremely risky industry, founders and investors wanted something “safer”. So they’ve chosen a new model:

• Raise money privately for early rounds

• Raise money privately for later rounds

• Airdrops at high valuations

How to participate in these “deals”? Become one of the crypto elite who have access to these deals, and then wait for your assets to appreciate. I’ve been a net beneficiary of this model. I’ve been lucky enough to be an angel investor in certain tokens that have grown significantly in value when they’ve gone public. Most of my investment performance has come from the public markets. I do know a lot of friends and investors who have made incredible amounts in this new model. You just need to be big on Twitter now.

Now, I’m not saying that people with social capital shouldn’t be able to convert that into financial capital. That’s just the way the world works. The problem is the incentives of this system. I’ve written about this in various ways, but I’ll take a moment to review it.

The “New” Model

The problem with this new model is that it’s more corrupt than the existing financial system. It usually goes something like this:

• The first round of investors will get a $10-50 million valuation for any token/project. Given that most tokens have the potential to be worth $1 billion, you’re looking at a 20x-100x upside. This round is an easy sell, usually to insiders. That’s fine, because that’s how regular VC investing works, too.

• Now that there’s enough funding, the project can start building and shipping. Once you’ve released something, you’re putting the expectation of an “airdrop” in front of your users. The deal is simple, use our product and we’ll eventually reward you with our tokens. Oh, and if you use multiple wallets, you’ll get more because you’re boosting our metrics.

• With these new metrics, projects can sell bigger dreams. Growth-stage capital can come in and write bigger checks to these companies. If your dream is ambitious enough, you can raise $50 million at a $500 million valuation. This is where you start to wonder, if they are investing at a $500 million valuation, then investors need to see at least a $5 billion valuation. To achieve this, you need investors with the best marketing and social impact (or cash flow, which usually does not exist at this stage). Keep them on call, because in the next stage, you need to work together.

• As you get closer to launching your token, increase your marketing and social impact. More and more people discover the project and the token and will enthusiastically use it in the hope of getting an airdrop. This cycle is as powerful as a 20-year-old man going to the gym on steroids to gain muscle.

• Once the marketing campaign reaches its peak, launch the token and ensure liquidity for your investors and team members. You can also sell in the secondary market early if you want. What happens after this is not in your control as people will dump their tokens to get liquidity and move on to the next project.

Note: Some teams are not as good as they should be in terms of execution and will ensure proper 4 year token vesting for team members and investors, carefully execute airdrops, and work hard to get accurate data. These are the exceptions and I expect these projects to stand out.

The result of this cycle is basically a ton of products and stuff that people don’t really want but will continue to repeat: why? Because it’s the only way to make money in this market. Opportunities for early and growth rounds are limited. Your only chance is to throw money into untested smart contracts and hope for a bad product on multiple wallets and then get $1,000-$10,000 a few months later. So what is the utility of these tokens?

• Most tokens promise “governance”. Well, the majority of tokens are held by insiders, so your voice is irrelevant. How do you know? Well, you just have to invest a lot of time understanding the makeup of wallets and how governance votes have worked in the past.

• What about cash flow? Yes, some may have cash flow, but as a token holder, will you receive it? Of course not. This may change with the UNI fee switch, but until then we are at an impasse.

• What about innovation? Key team members have become multi-millionaires, and from this point on, they may only care about whatever product they produce. How do you know? Only when you have inside information through discussions with industry insiders.

• What about growth? Well, the airdrops and metrics are fake, so none of it is real. Most users and funds will flow to the next "hot" project, leaving you forgotten all about, a relic from the previous cycle. There will always be a new project with hotter investors and more users taking advantage of airdrops that will attract more attention.

• What about future price appreciation? Well, you need to understand the entire supply schedule and when more tokens will be unlocked so that insiders can’t dump on you and get exit liquidity.

The system works by perpetuating short-term, profit-driven behavior with false data. People are not stupid and frankly, they’ve had enough. Why choose other projects that will enrich a large number of insiders when there is a new option: Meme Coins?

A Revolution Within a Revolution

Crypto is supposed to be a place where the playing field is equalized for everyone and we can have a transparent, fair distribution.

Bitcoin is a perfect example of this:

• No pre-mine

• Fair distribution via proof of work

• No utility promised beyond what is advertised

I’m not saying every coin needs or needs to do this, but this does represent the qualities of a cryptocurrency that make it revolutionary compared to the current financial system:

• New dollars are printed to those closest to the printing press

• Information is opaque and difficult to verify

• Value accrues almost entirely to those who create it (citizens)

In many ways, the current crypto system is starting to look like the old way of doing things (tokens are distributed to insiders, data is hard to verify, and investors get most of the value). In contrast, memes have responded to the promise of the original crypto in a unique way. I want to start with a phrase that people often say, “When the hype dies down, memecoins will eventually go to zero.” I used to say that a lot. But let’s look at the data, shall we? Here’s a chart of Dogecoin’s market cap since 2014 (on a logarithmic scale because the price has risen so much to chart properly). This is a coin with no utility, other than the logo being a widely recognized dog called a Shiba Inu. You’ll make more money investing in Dogecoin than investing in NVIDIA.

So should this coin go to zero? In fact the opposite. It has continued to climb significantly, actually outperforming Bitcoin. Giving investors a return of about 8,000x is hard to ignore.

You might say "well, Dogecoin is special, it's an outlier". I think that's a weak answer and requires a deeper dig. Let's look at some of Dogecoin's features:

• There is no pre-mine

• It runs on a proof-of-work algorithm and there was no "pre-sale"

• It offers no utility other than being a cute internet joke

Dogecoin doesn't lie. It doesn't favor those with social capital. No insiders get special access. If you believe in internet culture and crypto, you can get some for yourself.

But I want to further illustrate my argument with this example, in a different but similar way.

$DEGEN

I’ve written about Farcaster here before, but there’s a new play on it emerging that we’re going to see become very popular in the coming months and years. To illustrate this, I want to use something different: Reddit. Recently, Reddit IPO’d at a $6 billion valuation. Much of this value was created by the platform’s users. However, the best Reddit could do is offer their users a chance to participate in an IPO at a multi-billion dollar valuation. They might get a nice return, but it’s not going to change the trajectory of their lives in any meaningful way.

When Farcaster launched and I was writing about it, there was a little experiment going on there called $degen. The idea was pretty simple, you get a certain amount of $degen, and then you can distribute it to people who have good posts on Farcaster by commenting “50 $degen”. The more you tip, the more you earn. In many ways, it's simple, but also brilliant at distributing value. As usual, I was skeptical and dismissed this as "another Ponzi scheme that will go to zero because it has no utility". However, $degen succeeded by capturing the minds of the Farcaster people. As Farcaster grew, so did the price of $degen.

$degen is still young (only 3 months old) and will face many challenges in its journey ahead. While it represents something new and novel, I think it will stand the test of time, even in the face of a bear market. However, looking at a chart like this, it's easy to think "what if I invested when it was $x".

What I want to illustrate with this post is what you can achieve by actually participating. One of the largest $degen holders I know of is Cooper Turley. He has been very involved with Farcaster and $degen. His public wallet holds close to $250k in $degen purely through participation.

These stories are what I came to crypto for, not to reenact the same corrupt system with new projects.

During the rise of $degen, it is now being used as a marketing strategy for startups. Alex Masmej is building the intersection of TikTok and crypto, and he is using $degen as the primary currency for their product, Dracula. This creates a symbiotic relationship between Dracula and $degen. The meme as a marketing channel is becoming a more prominent theme in the future. I will expand on this further in the next section.

Although $degen had a small pre-allocation, and tokens have been sold to “Farcaster” insiders, the amount is much smaller, which I personally think is reasonable. Despite seeing $degen's meteoric rise, I hold very little $degen due to my mid-curving strategy.

$WIF

Dogwifhat. The most hated meme on crypto twitter right now. When I first heard about it, I was disgusted. I remember thinking, "those filthy people are making shit again". However, after learning about the dog's story, I found it fascinating enough to change my mind. I hold a small portion of $wif, and I got involved fairly late (with a market cap of billions of dollars).

You see, the picture of dogwifhat started long before it was a token. It was a popular internet meme that had a lot of life. It's a picture that makes you look at it and say, "that's a pretty cute dog in a hat".

In late 2023, a Solana developer launched $wif. However, after the token surged in the first two days, he sold his share for $32,000, leaving a "clean" allocation. There is no remaining supply. If he hadn't sold, his share would now be worth more than $1 billion. Considering that the distribution of tokens is essentially first-come, first-served, wif has grown to unprecedented scale.

$wif is very easy to understand: it's just a cute puppy in a hat. No investors to worry about selling you, no promises, no cash flow. It just is.

It's simultaneously hilarious and deceptively simple. But most people might miss it.

Zooming in

“But author, are you really suggesting that we should all buy tokens that don’t actually do anything but have cute dogs or communities and no other value”?

First, your decision to invest or not is your own problem and not the scope of this article. My second point is, what is the alternative?

• When you look at the top 100 tokens on CoinGecko, you’ll see that there are a ton of tokens that:

  • have no real utility behind the scenes, and most of them are lies

  • are likely to face a massive sell-off from investors

  • don’t generate any cash flow

  So in relative terms, meme coins and “utility” tokens are the same. I prefer coins that are honest about where they are and don't require me to analyze 100 different variables while I'm working on other things.

  "But when the bear market comes, will they all go to zero"?

  Well, guess what, everything will plummet by 50% to 99% in a bear market. What you describe is no different than any other coin. At least for memecoins, there are no lies or false promises, like most coins will eventually reveal themselves. AI/L2/ZK coins are currently the biggest perpetrators of this trend. They falsely misrepresent their technology, have an oversupply of tokens, and are listed at ridiculously high valuations. I hate these coins.

  Crypto is plagued by lies and it is an industry full of corruption. Memecoins, in an unusual turn of events, are the answer to the fight. It's a revolution within a revolution.

  They are easy to buy now (Solana), easy to understand (adorable dogs), and honest (no complicated technical or financial jargon to confuse you).

  They are here to stay whether you like it or not.

  They will drop in value in 2-3 years like everything else on the market, but I bet the best memes will live on in our minds and make huge returns in the 2028 bull run, just like Dogecoin.

  The question is: are you a good meme connoisseur, or a fool who buys a scam altcoin where the developer is trying to make a quick buck and run away? That question is left to you.

  The Future of Cryptocurrency

  Meme coins may also represent a future of financial nihilism where people gamble their way out of poverty. There should be an alternative to being able to invest in technologies that make humanity happier or more productive at rock-bottom prices. Don’t just sell dreams like this.

  While I could choose to spend my time on Meme, I believe that through better identity, reputation, and data primitives we can create a better on-chain society. This is where I choose to spend my time and build accordingly. Based on my recent article on airdrops, I have learned a lot behind the scenes that I am excited to share with you.

  I hope that these new products can help solve the problems we currently have with cryptocurrencies.

  However, for now, Memecoin may be the best honest alternative.

  Disclosure, despite my bullishness on Meme, I still keep under 5% of my portfolio in Meme. I expect this percentage to grow significantly and increase in value significantly as Memecoin shows continued staying power and is ignored by the elite.