Meme coins are great. They’re fun and they onboard a ton of new users into the space—and every once in a while, they break through the on-chain noise and become new pillars of community for people to rally around, like Shiba Inu (SHIB), BONK, or Dogecoin (DOGE).

They’re a great tool for onboarding and an even better tool for gambling. They also represent a problem that crypto has faced since the advent of Ethereum’s ERC-20 tokens, and arguably even before then.

As long as there are gamblers willing to gamble on-chain, there will be developers willing to supply vehicles to bet their life savings on. As time progresses, it gets easier and easier to launch a token; you don’t need to be technically adept anymore. The “meme coin trader” and “meme coin dev” relationship is a toxic one that won’t be ending anytime soon. 

While meme coins do bring light and joy to many, they bring losses and pain to more. There is limited on-chain liquidity, and meme coins are typically extractive. Meme coin devs aren’t launching meme coins and then reinvesting their profits into on-chain infrastructure—they’re cashing out.


What are meme coins?

Meme coins are crypto tokens that are inspired by a meme or some other cultural reference, such as a public figure. There is rarely any token utility, and if there is, it’s often an afterthought used to try and justify its continued existence in the spotlight—not the main focus of the token.

Some meme coins catch on because they're timely. A CZ coin taking off when Binance founder Changpeng “CZ” Zhao was in trouble with the U.S. government is a key example. Coins that launched following the respective deaths of controversial U.S. diplomat Henry Kissinger and noted Bitcoin hater Charlie Munger last November are also timely (albeit morbid) examples.

But some meme coins are just funny. Dogwifhat (WIF) is a Solana token that’s based on an image of a dog wearing a hat, and it has a market cap of more than $800 million. That’s absurd, right? Well, that’s crypto.

When a coin takes off solely because of how funny the meme is, it has something called "memetic value." The more people that can relate to, laugh at, or understand your meme, the more memetic value it has. Memetic value has driven engineering in crypto for years.


Ethereum creator Vitalik Buterin has even spoken about the power of meme-driven development on panels. While I have not done extensive due diligence into the success of WIF, I’d be willing to bet that you could attest most of its success to how simple and easy it is to meme the token.

“The hat stays on.” It’s simple, but effective. Creative directors should take notes. 

While we often hear stories of people hitting 1,000x returns on random meme coins, more often than not, they go to zero—and pretty quickly, too.

But the tales of 1,000x gains are enough to keep degen traders coming back and back again. There is an almost insatiable thirst for meme coins, and there are developers willing to support the cause by supplying (and sometimes rugging) a constant stream of new coins for people to gamble on.

Why they face a short shelf life

In any game, it’s important to know who you’re playing against. Trading of any kind is a player-vs-player (PvP) game, with a limited number of winners and a potentially unlimited number of losers. In meme coin trading, there are two types of opponents you must face: other traders, and the “boss battle”—or the developer launching the coin. 

Whether or not the meme coin has a strong community, is timely, or is just plain hilarious, they won’t get very far if the developer isn’t thinking in terms of longevity. Most shitcoin creators are here for a good time—not a long time. That’s why most meme coin charts look like this:

A typical meme coin price chart
A typical meme coin price chart. Image: Decrypt

The Solana meme coin market in particular has picked up a lot of steam lately due to low fees. Most of the current “flavor of the month” meme coins were born on Solana, including BONK and WIF. In fact, Decrypt reported that 72,000 new tokens had been minted on Solana last year between December 15-30 alone.


So who are these mysterious devs launching meme coins? Do they have gamblers' best interest at heart? Do they care about the long-term community that might form around their token?

No. Well, mostly no.

Even if you beat the other traders you're fighting with for liquidity, half the time you end up facing a “boss” who is pumping out multiple tokens a day and pulling liquidity every time they get enough money to call it a win. In the thread linked above, the mystery developer was pulling liquidity after making $100, sometimes less.

“Of these 7,000 tokens being launched daily, a lot of them are these 30-a-day style churn-type tokens to farm people watching the ‘recent’ tab on Birdeye,” Slorg, the pseudonymous developer of token burning app Sol Incinerator, previously told Decrypt.

For every trader that thinks they're smart for watching the “Recent” tab on blockchain data aggregators like Birdeye or Dexscreener, there’s a smarter developer who knows that they’re looking.

Liquidity and "rotatoooors"

There is limited on-chain liquidity. Every time a developer “rugs” a meme coin and sells the profits for rent money, liquidity is extracted from the ecosystem. Because liquidity is limited—and people have short attention spans—traders tend to rotate their money from meme coin to meme coin, trying to catch different pumps while avoiding the dumps.

“Rotatoooor” culture is strong in all forms of trading, but especially so in crypto where you can permissionlessly transition in and out of positions 24/7.


Unfortunately, for every reasonably savvy “rotatooor,” there are thousands of people who bought the top of the price pump and become permanent “community members,” or people who will stick around and hold until their bags are no longer underwater—which is likely never.

There are cases in which the community becomes so powerful—and when the dev doesn’t rugpull liquidity—that meme coins can reach critical mass and become familiar faces in the crypto pantheon. But it’s good to keep in mind how incredibly rare that is. 

Think of as many meme coins as you can, and then consider the fact that over 70,000 tokens were launched in the last two weeks of December—on Solana alone. The majority of meme coins don’t have staying power, or they don’t have teams working to make them a mainstay.

Even if some of these devs stopped launching tokens, then more would pop up to take their place. Once again: As long as there are gamblers on-chain, then there will be developers willing to satisfy that vice.

One oft-overlooked downside to how much liquidity flows into meme coins is the fact that the same liquidity isn’t going into serious organizations building real products. There are perverse incentives in this industry that we have to be careful about contributing to.

Every time a meme coin dev retires with their profits and leaves traders high and dry, there’s a builder out there watching and thinking, “Maybe I should give up on building my world-changing product and just launch a shitcoin.”

In today's market, developers are more incentivized to launch low-effort tokens than they are to build legitimate products. Try to remember that next time you’re yelling “WEN TOKEN” over Twitter replies at a hard-working developer facing countless such demands.


To be clear, I’m not saying “Don’t buy meme coins.” Just understand that you’re gambling. You have better odds at a craps table in Vegas than you do picking a winning meme coin right before it blasts off to the moon.

But craps tables can’t give you 1,000x returns.

Edited by Andrew Hayward

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