What Are Memecoins?
Memecoins are a category of cryptocurrencies inspired by humor. Developers usually link individual memecoins to internet trends and popular memes. Most often, the humor behind the memecoins and the promise of fun becomes the motivation for attracting a community of users to memecoins’ platforms.
Dogecoin (DOGE) and Shiba Inu (SHIB) are two of the most popular memecoins today. Both are dog-themed and boast of significantly high adoption levels. Although DOGE and SHIB remain classic memecoins, behind-the-scenes activities by their community members are expanding their use cases to serve purposes beyond fun and speculation.
The History of Memecoins
Software engineers Billy Markus and Jackson Palmer created Dogecoin in 2013 as the first-ever memecoin. They developed the digital asset as a joke to satirize the growing popularity of cryptocurrencies. Dogecoin adopted the Shiba Inu dog as its mascot, which became a popular product among cryptocurrency users.
It is worth noting that Dogecoin remained the lone memecoin in the crypto space for several years before Shiba Inu (SHIB) launched in 2020, followed by the proliferation of several crypto products in the memecoin category over the past few years.
What are memecoins used for?
You will commonly find internet users, particularly those in the crypto space, describing memecoins as a crypto asset class without an intrinsic use case. That is only a partial truth, considering the original intention behind most memecoins. By design, blockchain users would not describe memecoins as utility tokens because they do not serve specific purposes on their native blockchains, like being used to pay validators.
However, it is worth noting that many memecoins have market value, making them useful for settling real-world transactions. Hence, describing memecoins as a crypto category without a use case is inaccurate. We can only say they lack the typical utility characteristics of traditional crypto assets.
The Post-2020 Memecoins Frenzy
As of November 2024, CoinmarketCap’s data showed 3257 memecoins existed within the crypto space. That is a significantly high number, considering most of them are unknown to most crypto community members. Many analysts believe most of those memecoins are unserious creations by blockchain interns trying their hands at developing decentralized protocols or pump-and-dump projects by blockchain developers looking for quick cash.
As already mentioned, Dogecoin became the first memecoin to exist in 2013 and remained the lone crypto in that category until August 2020, when an anonymous developer going by the name Ryoshi created another memecoin around the same Shiba Inu dog theme. Ryoshi named his creation Shiba Inu, with SHIB as the crypto token’s symbol.
Shiba Inu’s creation triggered a memecoin frenzy that saw both SHIB and DOGE embark on a kind of cryptocurrency rally never seen in the technology’s history. Enabled by the crypto tokens’ low market cap, speculators explored the market opportunities to make life-changing profits from the DOGE and SHIB rallies. SHIB in particular rallied over 1,700,000% in 2021, expressing the kind of volatility that became accustomed to the memecoins ecosystem.
Top Memecoins in the Crypto Market
The 2021 Shiba Inu price rally caught the attention of the crypto community and led to the creation of several memecoins. Almost all the memecoins created after Shiba Inu focused on speculation, revolving around price rally opportunities to enable the community members to make money. That approach formed the basic characteristics of the memecoin sector, making it a highly volatile aspect of the crypto industry based on “high risk and high reward.”
Observing the memecoin sector reveals a consistent trend where Newly launched meme coins often experience rapid price surges followed by immediate declines. They may occasionally see renewed volatility driven by community activity or broader market trends. However, they generally remain highly volatile, exposing investors to significant risk.
The top memecoins currently existing in the crypto space based on adoption levels and market capitalization include Dogecoin (DOGE), Shiba Inu (SHIB), Pepe (PEPE), Dogwifhat (WIF), and Bonk (BONK). Others are, Floki (FLOKI), Brett (BRETT), Dogs (DOG), Popcat (POPCAT), and Book of Meme (BOME).
Despite their popularity, these memecoins still exhibit significant volatility. For instance, PEPE surged 233% in two weeks and then pulled back 27% a few days later. The frog-themed memecoin has gained an impressive 11,000% since its launch in May 2023. However, traders remain cautious due to the potential for significant losses during bear markets.
Conclusion
Memecoins appeal to many crypto users because of their potential to generate quick profits. The surrounding hype revolves around the internet culture, which could be captivating and swift. Therefore, getting involved with memecoins requires you as a crypto user to adapt quickly and understand the potential risks associated with the highly rewarding ecosystem. Hence, it is more appropriate to consider exchanging your money for memecoins as speculation, rather than an investment.
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