Source: Gryphsis Academy
MEMEs are spread through imitation. Any information that can be copied through imitation can be called a meme; the form of information that spreads is various memes, such as music, ideas, or styles. The spread of memes follows the theory of the life cycle and the transmission model of infectious diseases, but the criteria for dominant memes are still difficult to quantify.
MEMEs present themselves in different forms and characteristics throughout each cycle. They reflect the mentality of investors and market trends during different periods, including prospects for new technologies and narrative directions.
The current wave of MEMEs in the bull market is influenced by society, psychology, economy, and technology. At this stage, MEMEs can be roughly categorized into mechanism innovation, market narrative, market sentiment, meme culture, celebrity effect, and hot topic simulation. The gameplay mechanisms are diverse, and reasonable strategies are needed to profit.
The future of MEMEs is highly controversial, with different opinions from institutions, retail investors, and Key Opinion Leaders (KOLs). MEMEs should be interesting and meaningful, and not become speculative tools.
Introduction
From Ethereum to Solana, MEMEs have always been a blessing myth. According to a report by CoinGecko, MEMEs were the most profitable cryptocurrencies in the first quarter of 2024, with the highest average return rate of top tokens reaching 1312.6%.
PANews has analyzed the investment returns of MEMEs from the perspective of the Kelly formula. By calculating the daily issuance of coins on the Ethereum and Solana chains and their winning rates, it was found that their winning rates were extremely low, with Ethereum at 3.28% and Solana even lower at 1.6%. They eventually become slaughterhouses where players always lose.
MEMEs are a high-risk, high-return investment game. How do they attract the participation of the masses and how do they spread? Value coins vs. MEMEs, where does the future of MEMEs lie?
1. How do memes spread?
1.1 What are memes?
“When we leave this world, only two things remain, genes and MEMEs.”
– Richard Dawkins
MEME, also known as meme, mim, mimi, or meme, is an abbreviation of the word mimeme, derived from the ancient Greek word μíμημα, which means imitation or replication. The concept of memes originated from the book “The Selfish Gene” by the British evolutionary biologist Richard Dawkins. He described memes as “units of cultural inheritance that replicate themselves in the meme pool by means of imitation in a broader sense.”
The concept of memes has had a biological analogy since its birth. This analogy equates memes with genes (they can both replicate, inherit, mutate, and respond to selection pressures), giving rise to a new discipline called memetics.
Memes can be classified in various ways. From the perspective of pros and cons, they can be divided into beneficial memes and harmful memes. From the perspective of manifestation, they can be divided into complex memes and simple memes. From the perspective of evolution theory, they can be divided into symbiotic memes and parasitic memes. From the perspective of replication ability, they can be divided into dominant memes and weak memes.
Currently, there are diverse interpretations of the concept of memes, but the most widely accepted definition is based on the synthesis of Dawkins and Blackmore, which states that memes spread through imitation. Any information that can be copied through imitation can be called a meme. The various forms of information that spread are various memes, such as music, ideas, or styles.
The definition of MEMEs is even more diverse. MEMEs can differ greatly in the eyes of different people. In the eyes of Web2, BTC may be the biggest meme. In the eyes of mainstream coin players, even altcoins may be considered memes. But the common point of MEMEs can be found, which is that they have no practical use in the eyes of investors and exist solely for speculative trading, relying on market sentiment for pricing.
1.2 Mechanisms of meme transmission
The meaning of memes being “imitated and spread” implies their own iterativity. Without the act of transmission, memes cannot exist.
It can be seen that the successful replication of memes relies on transmission. So, how do memes spread?
A meme goes through four steps: expression (E), transmission (T), assimilation (A) by recipients, and preservation (R) in the memory system of the recipients’ brains. After completing these four steps, the meme finds a new host and completes one life cycle of meme transmission.
The transmission of memes is similar to viruses, and the transmission path can be well revealed by the transmission model of infectious diseases. The transmission of memes usually follows the SIR model, where the population is divided into susceptible individuals (S), exposed individuals (E), infectious individuals (I), and recovered individuals (R), which simulates the transmission mechanism. Due to the short incubation period of memes, the number of susceptible individuals decreases, the number of recovered individuals increases, and the number of infectious individuals first increases and then decreases, reaching a peak. This peak is the apex of memes. Opinion polarization, opinion leaders, and emotional contagion during the transmission process can all have different effects.
In addition, the mechanism of meme transmission on the internet is also related to social psychology and the theory of social identity. Research by Spears and Lea (1992) found that due to the anonymity of the internet, members of virtual communities cannot effectively display their personal traits and identities. They must rely on the definition of certain decisions and organizations by the society to help define themselves and their interactions with others. Therefore, in the process of meme transmission, it also shapes the sense of identity towards the community. The stronger the consensus and identity within the community, the stronger the transmission of memes.
An interesting phenomenon worth mentioning is the pump strategy in the Solana chain, where meme holders worry that serious projects cannot withstand the decline and may rug pull, so they encourage and support the developers in the community. This indirectly reflects that a good community atmosphere can promote both parties and strengthen community identity, increasing the chance of memes going viral.
1.3 Criteria for dominant memes
The criteria for dominant memes have strong guiding significance. They can help individual traders judge whether a meme can successfully spread and at what stage of its life cycle it is in. They can also help project teams create more viral memes.
From the perspective of biological evolution, Dawkins (1998) proposed three indicators for measuring successful memes:
– Copying fidelity: The more faithful the copy is to the original, the more likely it is to maintain its intrinsic characteristics after several rounds of replication.
– Fecundity: The faster the replication speed, the wider the spread of copies.
– Longevity: The longer the survival time of the entity that copies the template, the more copies derived from it.
Successful memes need to have all three indicators. The reason why dominant memes can spread widely is largely because they are easy to remember, not because they are important or useful. Therefore, effective memes should be those that can evoke highly authentic and long-lasting memories.
From the perspective of communication studies, Heylighen describes ten selection criteria including coherence, novelty, simplicity, etc. to design the fitness formula for memes.
F(m) = A(m) x R(m) x E(m) x T(m)
F(m) represents the ratio of the average number of memes in a certain time unit t to the average number of memes in the previous time unit t-1.
A(m) represents the ratio of assimilation rates between the previous and current moments.
R(m) represents the ratio of the maximum retention time of assimilated memes between the previous and current moments.
E(m) represents the ratio of the number of expressions of a meme retained by the host between the previous and current moments.
T(m) represents the ratio of the number of copies of expressions transmitted to the host between the previous and current moments.
For a certain moment, A ≤ 1, R ≤ 1, and E has no upper limit. It can express a meme 10, 20, or even hundreds of times. T also has no upper limit. If it is broadcasted, assuming there are ten thousand listeners, it is equivalent to copying the meme ten thousand times each time. In the above formula, if any factor is zero, the product will be zero. In order to make the fitness F > 1, one strategy is to make E > 1 or T > 1.
By observing the spread trends of most memes and conducting rough statistics, Heylighen found that if a meme meets certain criteria in the table above, it may successfully complete the life cycle of memes and achieve replication and spread as a dominant meme.
However, whether from the perspective of communication studies or biological evolution, it is difficult to accurately judge to what extent a meme meets these criteria. Looking at it from the perspective of finance and mathematics, the success rate of judging secondary trading indicators on memes is about 30%, with a certain margin of error. Liquidity, the proportion of top ten holdings, the number of times the project rug pulled, etc., will all have an impact on measuring memes, but it is difficult to accurately quantify the actual indicators. Combining AI modeling analysis may be helpful.
2. Current Status and Development of MEMEs
Since the birth of Bitcoin, MEMEs have existed and performed well in each cycle. From Litecoin to Dogecoin, and now NFTs and zoo memes, MEMEs are presented in various ways. By reviewing their development and current status, we can better discover the answer to the future.
2.1 Early development of MEMEs
Source: https://dogecoin.com
The concept of memes did not trigger a market frenzy when it was first conceived. It wasn’t until 2013, with the introduction of Dogecoin (DOGE), that memes entered the public eye.
Doge is a meme featuring a Japanese Shiba Inu dog, which originated from a picture of Kabosu, a Shiba Inu that appeared in 2010. After Billy and Jackson launched Dogecoin (DOGE), it gained widespread attention on websites like Reddit and was used as a currency for tipping. Within two weeks of its launch, the daily trading volume exceeded that of Bitcoin.
In 2014, Doge was selected as the “Best MEMEs of the Year” by Time magazine and appeared in mainstream culture. In 2021, with the repeated promotion by Elon Musk, the price of Dogecoin (DOGE) soared. The success of Dogecoin (DOGE) laid the foundation for the prosperity of MEMEs and ushered in new types of coins. These new coins were initially launched on the “Alternative Cryptocurrency” sub-forum of Bitcointalk through Proof of Work (PoW).
Subsequently, different MEMEs emerged in each period. Looking back at the ICO frenzy in 2017, most projects provided detailed whitepapers to attract investments with the potential of technological innovation. MEMEs during this period were mostly more serious, with visions hoping to go beyond memes and achieve practical innovations.
During the DeFi boom, projects focused more on explaining the economic and liquidity advantages to attract participants. At that time, MEMEs mostly revolved around animals, food, and so on. In addition, NFT projects were also considered as memes in the early stages. Some of the most representative NFTs include CryptoPunks, Bored Apes, Pudgy Penguins, etc.
Currently, the craze for MEMEs relies more on emotional drive. Projects no longer pursue technological innovation but focus more on narrative direction and market trends. This phenomenon may reflect a certain fatigue in the market, where investors, after experiencing a long period of technology-driven projects, gradually seek more IQ50 ways to participate in the market. In this mode, the pump strategy emerges, attracting a large number of players with low-cost participation.
Tracing the development of MEMEs, the characteristics of MEMEs can reflect the mentality of investors during different periods and current market trends. MEMEs include visions for new technologies and capturing hot topics.
2.2 Analysis of MEMEs on major public chains
Source: https://www.memesrace.xyz/
MEMEs can bring prosperity to public chains. From Doge to Bome, MEMEs have become a unique cultural symbol and means of communication in Web3. MEMEs have a place in major public chains.
Currently, high-market-cap MEMEs are mainly deployed on Ethereum, Solana, Base, Bitcoin (BRC20, etc.), and other chains.
Among the top 500 MEMEs in terms of market capitalizationRewritten Article:
The current bullish market has led to a flourishing MEME ecosystem, with many projects deployed on the Ethereum and Solana chains. Solana’s MEME ecosystem, in particular, has seen a diverse range of animal-themed MEMEs, in addition to the popular DOGE-related MEMEs. On the other hand, Ethereum’s MEMEs are predominantly early-stage MEMEs such as PEPE and SHIB, reflecting the early narrative logic behind the rise of these headlining MEMEs.
One of the innovative advantages of MEMEs is their gameplay mechanics. Notable examples include PEOPLE and SLERF. While Web3 focuses on consensus, MEMEs prioritize consensus. PEOPLE, for instance, conducted a deep experiment on DAO by gathering nearly 20,000 people from around the world through ConstitutionDAO. It aimed to auction a printed version of the U.S. Constitution from 1787, making it the first project to raise funds for the protection of world historical documents, resulting in significant returns. SLERF, on the other hand, became a sensation due to the project’s operational mistakes, which led to a fair distribution and sparked a craze.
MEMEs capture the direction of market narratives. There is often a time lag between the primary and secondary markets, and MEMEs reflect the pursuit of new technologies. For example, when the narrative in the secondary market focused on AI, AI-themed MEMEs like AIDOGE and AIBB quickly gained popularity. Additionally, holidays such as Women’s Day and Spring Festival can cause a surge in related tokens like LADYS, while events like Nvidia’s conference and CZ’s court hearing can trigger the issuance and volatility of tokens like NVEDUA and FREECZ. However, these types of MEMEs often quickly return to zero after the event ends.
The market sentiment surrounding MEMEs is difficult to predict, but most of them trigger a consensus among people and ignite market enthusiasm. For example, the actions of BOME founder Jia Puzi quickly ignited the market due to his large-scale operation.
Strong memetic cultures play a crucial role in the success of MEMEs. DOGE became popular even before its token sale, and PEPE’s memes went viral before the token’s release. These are examples of strong memetic presence preceding the emergence of tokens. Additionally, MEMEs with artistic features often have a stronger influence, possibly due to the inherent uniqueness of art during the assimilation phase.
The influence of celebrities also plays a significant role in MEMEs. Elon Musk’s endorsement of Dogecoin led to the “DOGE to the moon” phenomenon. Anatoly Yakovenko, the founder of Solana, launched SILLY during Halloween, which performed exceptionally well. Within two weeks of its launch, SILLY reached a market value of $70 million, with over 8,600 holders and a liquidity pool of $1.2 million. On-chain, the mention of Argentina by Musk in his tweet immediately prompted smart money to buy in and gain substantial profits.
MEMEs often ride on the coattails of popular trends, but it is challenging to identify genuine trends among them. However, there is still room for speculation in the short term.
To become a strong MEME, certain conditions must be met. Although MEMEs may seem like a game of luck, they still require a keen market sense.
MEMEs have gained significant attention in this phase for several reasons. The emergence and existence of MEMEs are influenced by factors such as social, psychological, economic, and technological aspects. The desire for mainstream narratives is one of the reasons why MEMEs have gained attention in this bullish market. While value coins have not performed as expected, MEMEs like BOME quickly gained popularity on Binance within three days. MEMEs can continue the enthusiasm of crypto players to a certain extent and become a potential melody.
The improvement of infrastructure, including the development of decentralized exchanges and the continued upgrade of public chain performance, has significantly reduced the cost of token issuance and player participation.
Public chains have also actively supported MEMEs, attracting a large number of active users and increasing their own visibility and ecosystem. However, this has also created a negative impression due to the unregulated growth. While the Solana chain witnessed a decline in MEMEs, the Base chain chose to support them, revealing the different development stages and strategies of the two public chains.
The rise of MEMEs is closely related to the concept of Fair Launch. This fair distribution method aligns with the values of Web3.
The FOMO sentiment in the market, fueled by social media hype and highly shareable images, attracts users to participate. This FOMO sentiment also serves as an outlet for retail investors’ dissatisfaction with institutions.
The wealth effect of overnight success is a legend that circulates within the MEME community, attracting numerous players. MEMEs are simple and easy to understand, eliminating the need to understand complex technical principles, making it more accessible to players.
This market is characterized by a lack of coordination, and MEMEs represent a mismatch in terms of timing. They are more in line with the narrative and psychology of retail investors.
MEMEs reflect the primitive essence of unregulated finance but also face many issues. However, as a cultural phenomenon and popular investment, MEMEs have become an integral part of the crypto market. In the face of a complex market environment, it is important to understand that profits are rewards for good risk management, and relying on luck will eventually be subject to the market’s judgment.
MEMEs have evolved to have various gameplay mechanics. While some have profited greatly, most players end up losing everything. MEMEs are not just a game of luck; having a good strategy is essential to profit in the harsh financial market.
When engaging in on-chain transactions, wallet and contract security are crucial. Various tools are available to support the detection of contract security, and basic monitoring applications integrate these functions. Additionally, one must be cautious of rug pulls by project teams, false burn mechanisms, and other scams.
In the early stages, the gameplay of MEMEs mainly revolves around discovering early Alphas. As the cost of token issuance and user participation remains high, players focus on increasing their win rate. Judgments can be made by observing factors such as pool size, market capitalization, liquidity, and the top 10 holders’ positions. A comprehensive analysis can be conducted by combining factors such as Twitter followers, community engagement, and website completeness.
With the rise of Solana’s MEMEs, the gameplay has become more diverse, and metrics like Twitter followers and community engagement are no longer sufficient as single evaluation indicators. MEMEs have a faster trading pace, and the frequency of token launches is high, leading to a resurgence in the trading bot market.
Pump, a platform focused on creating and trading MEMEs on Solana and Blast, has gained popularity due to its unique gameplay mechanics. Pump’s popularity reflects the project’s desire for quick token issuance and the players’ demand for social interaction.
Pump currently uses a bonding curve mechanism as a DEX. Unlike AMMs, it is more suitable for the issuance and trading of new tokens. It directly correlates token prices with supply through a mathematical function, without relying on the two assets in the liquidity pool.
Participating in token issuance or trading on Pump is straightforward. When the market value of a MEME reaches $69,000, the platform automatically adds $12,000 in liquidity to decentralized exchanges like Raydium and executes a burning mechanism to stabilize the token price and increase scarcity.
Pump’s low entry cost has attracted a large number of players, and the platform generates considerable daily revenue, exceeding $400,000. However, the platform lacks technological barriers and currently relies solely on scarcity for profitability.
The interface design of Pump is simple yet captivating, and the hotspots change rapidly. MEMEs such as Michi (michi), USA (American Coin), and SC (Shark Cat) have appeared on Pump. The wealth effect on the platform attracts many players to participate.
There are various strategies for trading MEMEs, but there is no golden indicator. Following a framework may increase the win rate, but it may also lead to missing out on golden opportunities.
Trading strategies driven by sentiment analysis involve assessing the level of FOMO at various stages of the propagation chain. This process requires high sensitivity, as well as access to high-quality communities and KOL lists.
Strategies centered around technology involve signal trading, on-chain data analysis, and the use of trading bots. These strategies include tracking smart money, which is suitable for trading in major market trends. By observing the trading style of smart money, individuals can develop their own investment strategies. Scientist sniping requires establishing screening criteria for targets and using bots for assistance. Strict execution of strategies by bots can significantly increase the win rate but may lead to missed golden opportunities.
Trading strategies based on financial mathematics primarily involve judging based on candlestick charts and chip distribution. Different gameplay strategies are applied based on factors such as pool size, fund volume, and gameplay. Common strategies include daily traders, who usually participate in medium-sized pools to ensure that project teams do not rug overnight, and long-term holders or swing traders. Super short-term traders mainly observe candlestick patterns and the quality of targets to participate. With the popularity of Pump, some players strategically position themselves in early-stage hotspots and engage in trading through the Pump mechanism.
Risk warning: Participating in MEMEs carries extremely high risks, and the possibility of losing the entire investment is significant.
The future of MEMEs is a subject of debate among major institutions. Various institutions hold different opinions on MEMEs vs. value coins, making it a hot topic of discussion in this market. A16Z CTO has been critical of MEMEs, stating that they disrupt the long-term vision that keeps many people in the crypto space and are not technologically appealing. However, the institution’s position on MEMEs can be interpreted differently. According to Scopechat and Rootdata’s analysis of on-chain address data, A16Z’s largest publicly disclosed holdings are Uni, followed by COMP and ETH.
Many other institutions and KOLs have a positive attitude towards MEMEs. Pantera partners believe that MEMEs, as fun social activities, can attract more people to join Web3 with low entry barriers and become the simplest way to introduce the next generation to the latest DeFi applications and incorporate them into Web3. Additionally, MEMEs can contribute to the development of NFT projects, social protocols, and more.
Vitalik Buterin, the creator of Ethereum, also has aspirations for the future of MEMEs. He believes that MEMEs should be fun but meaningful and should not be reduced to mere speculative tools. He believes that MEMEs can further develop in charity and Robin Hood games. In fact, as the biggest MEME, Dogecoin has always embraced charity, supporting the Jamaican bobsled team in the Sochi Winter Olympics, building clean water wells in Kenya, and planning to clean up 30 million pounds of garbage from the ocean.
MEMEs have received both praise and criticism in this bullish phase due to the discrepancy between their true value and current market capitalization. However, it remains challenging to define what constitutes a high-quality MEME and what projects qualify as high-quality MEMEs. Whether MEMEs born out of the untamed wilderness of unregulated finance will eventually lead to capital consensus or track the meme coins of equal freedom and equality is yet to be seen.
In conclusion, it is important not to mistake deconstructed elements as the ultimate answer to the problem before learning how to construct them.
