Meme coins started in 2013 when Dogecoin was born. They began as a joke, a parody of Bitcoin and crypto, with very little utility or value. But in recent years, cryptocurrencies like Dogecoin and Shiba Inu have leapt into the spotlight because of their colourful communities and incredible financial returns.
This article looks at what meme coins are and explores a few popular examples. It also explains how they differ from other cryptocurrencies and the potential risks of investing in them.
What are meme coins?
Meme coins are cryptocurrencies designed around internet memes: viral media usually in the forms of photos and videos. Dogecoin (DOGE), released in 2013, was the first meme coin. It was inspired by the popular Doge meme. In 2021, Dogecoin performed exceptionally well, outperforming most other digital assets. After this, other meme coins skyrocketed in popularity with numerous coins trying to replicate Dogecoin’s success. So far, Shiba Inu (SHIB) has been the frontrunner, with billions in market value and trading on many top exchanges.
Important To Remember
Many meme coins are created with the hope of gaining popularity and exist only to be traded. Without any utility behind the coin, the value of the coin is dependent on its internet and social media community as well as pop culture trends. For these reasons, meme coins tend to be extremely volatile.
Why are meme coins popular?
The popularity of meme coins can be attributed to multiple factors. Meme coins can have unprecedented return rates – the price of Dogecoin rose 12,000% between January and May 2021. These extreme returns cannot be found in major cryptocurrencies like Bitcoin and Ethereum, especially not in such a small timeframe.
Meme coins generally have a very low cost due to having a large and sometimes infinite supply, this allows users to own many tokens with a small investment. Owning millions of meme tokens feels much more significant than owning a fraction of a token. The low price also gives the illusion that the price has huge potential to increase. Although in some cases this is true, for most meme coins it is not.
Elon Musk, the CEO of Tesla and SpaceX, is a major influencer in the meme coin community, especially Dogecoin. The value of Dogecoin has consistently skyrocketed whenever Musk has tweeted about it. Several meme coins were also created in homage to Musk, such as Dogelon Mars, referencing Musk and his space exploration company SpaceX, and Floki Inu, the name of Musk’s Shiba Inu.
Interesting Fact
Elon Musk is currently being sued for $258 billion USD over alleged price manipulation of Dogecoin in 2021. The plaintiff claims that Musk used Twitter to conduct a deliberate “crypto pyramid scheme”.
The most popular meme coins
Dogecoin (DOGE)
Dogecoin (DOGE) is heavily inspired by the Doge meme, a viral image of a Japanese Shiba Inu dog. Similar to Bitcoin and Ethereum, Dogecoin operates on its own blockchain using the Proof of Work consensus mechanism. However, Dogecoin is an inflationary asset as it has an unlimited supply.
Dogecoin is the original meme coin and was launched in 2013 as a joke. Billy Markus, the creator of Dogecoin, took a playful approach to cryptocurrency in an attempt to reach a wider audience. In 2021, the value of Dogecoin took off, reaching an all-time high market cap of $88 billion USD, and has been consistently in the top 10 by market capitalization over the last few years.
Although DOGE began with very little utility, it has since been adopted as a payment coin by companies such as Tesla, Newegg, and Twitch because of its fast transaction speeds and low costs.
Shiba Inu (SHIB)
Recognised by many as the “Dogecoin Killer”, Shiba Inu (SHIB) is an ERC20 token developed on the Ethereum blockchain. Shiba Inu was created in 2020 by a developer known only as Ryoshi.
For a brief moment in late 2021, Shiba Inu broke into the top 10, surpassing DOGE in the process. Unlike Dogecoin, Shiba Inu is a deflationary asset with a total supply of just under six hundred trillion.
With the rise in popularity, SHIB evolved from having no utility to supporting a decentralized ecosystem with applications such as Shiba Swap. Shiba Swap is a decentralized exchange (DEX) that allows users to swap, stake, trade NFTs, and earn rewards by contributing to liquidity pools.
Did You Know?
Shiba Inu (SHIB) is partnered with AmazonSmile to collect and distribute a percentage of Amazon purchases as donations to the Shiba Inu Rescue Association.
Floki Inu (FLOKI)
Unlike most meme coins, Floki Inu (FLOKI) was developed around utility. Seeing themselves as a movement, Floki Inu aims to combine meme brand recognition with utility. Valhalla is a Play to Earn (P2E) game that will be powered by FLOKI tokens. The first major release is aiming to go live in Q4 2022. Other applications in the Floki Inu ecosystem include The FlokiPlaces, an NFT marketplace where FLOKI will be the main currency, and The Floki University, a crypto education platform.
Risks of investing in meme coins
Investing in meme coins is inherently risky due to a number of factors, including price instability and large token supply. Meme coin pricing is often backed by trends, which are constantly changing, causing investors to leapfrog towards the next successful meme coin. Every Radical swing in price can also be attributed to the fact that meme coins often have little to no utility, which means there is no strong foundation for the price. Because of this, a meme coin’s value is heavily reliant on market speculation.
The possibility for massive returns also makes meme coins a breeding ground for cryptocurrency scams. Squid Game is a popular TV series on Netflix that was trending in late 2021. To capitalise on this opportunity, scammers created a Squid Game meme token to lure investors. After the token was created, the nature of meme coins did the work for them. Hoping to ride the wave, unsuspecting investors falling victim to FOMO bought into the token. At the peak of its price, the Squid Game token was rug pulled, losing 99.99% of its value instantly.
How to buy meme coins
High market cap meme coins (such as DOGE and SHIB) can be purchased from most big cryptocurrency exchanges. Swyftx is a popular crypto exchange in Australia and New Zealand where people can buy Dogecoin and Shiba Inu, store it in their own crypto wallet, and perform all of their other crypto trades. Smaller cap meme coins (like FLOKI) can be bought or swapped using decentralized exchanges. Please ensure you do your own research before buying meme coins.
Summary
Starting out as a light-hearted joke, Dogecoin and Shiba Inu have established themselves in the crypto space. This has prompted a generation of meme coins striving to recreate their success. The extreme volatility in value carries high risk but can also have unprecedented returns. But picking the right meme coin before it goes viral is similar to winning the lottery.
We may see more utility-focused meme coins similar to Floki Inu entering the market; the entertaining nature of pop culture combined with real use cases could have a lot of potential.
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