What are Meme Coins? 

Meme coins sprang to life 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 strong 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 ‘Doge’ meme paying homage to Kabosu, a Shiba Inu whose image gained popularity among online messaging boards.

In 2021, Dogecoin captured the spotlight after outperforming most other digital assets throughout the year. After this, other meme coins skyrocketed in popularity with several new projects trying to replicate Dogecoin’s success. Several new prominent meme coins has emerged, with the sub-sector of cryptocurrency cementing itself as a multi-billion dollar industry. So far, Shiba Inu (SHIB) has been the frontrunner, with billions in market value and trading on many top exchanges. 

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 are very rare in major, higher-cap 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 – or sometimes infinite – supply, this allows users to own many tokens with a small investment. Owning millions of meme tokens can feel more significant than owning a fraction of a token, as 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 shifted whenever Musk has tweeted about it – or even dropped when controversies around Musk have surfaced. 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. 

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. Despite its humble beginnings, the coin quickly took on a life of its own after the original developers stepped aside. The community-ran project continued to grow in popularity and has spent significant periods inside the top ten digital currencies by market cap.

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) 

Dubbed by some as the “Dogecoin Killer”, Shiba Inu (SHIB) is an ERC-20 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 cryptocurrencies by mkaret cap, 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.

Floki Inu (FLOKI) 

Unlike most meme coins, Floki Inu (FLOKI) was developed with a clear utility in mind. Seeing themselves as a movement, Floki Inu aims to combine meme brand recognition with a strong fundamental use case. Valhalla is a Play to Earn (P2E) game powered by FLOKI tokens. 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. 

Bonk (BONK) 

When meme coins emerged in popularity throughout the 2021 bull cycle, the majority of major projects were built using Ethereum. However, as the sector has evolved, Solana has cemented itself as a strong framework to support meme coins. Bonk, another dog-themed coin, is the top meme coin built atop Solana in terms of market cap, ballooning to over $1 billion USD. Bonk can be used as an in-game currency for blockchain-based games and was also airdropped to buyers of Solana’s flagship smartphone.

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.