The Breakdown - Do Memecoins Matter?

Episode Date: December 2, 2024

A reading and discussion of https://www.coindesk.com/opinion/2024/11/25/why-memecoins-matter Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/nathanielwhittemorecrypto Subscribe to the newsletter: https://breakdown.beehiiv.com/ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. What's going on, guys? It is Sunday December 1st. Happy December. And that means it's time for Long Read Sunday. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes or go to bit.ly slash breakdown pod.

All right, friends. Happy December, hope you had a great Thanksgiving. We're back with our first LRS of the month, and we are just going to try to make Fetch happen, by which I mean discuss meme coins. Memcoins get so little time on the actual show that I don't mind using LRS as a way to explore it. The context that interests me about meme coins

is the extent to which people believe that they really can be this cycle's thing that draws in new retail audiences. In other words, the natural positioning is that meme coins are this cycle's ICO. or this cycle's NFTs. The question, though, is how well that analogy holds up, what things they have in common and what things they don't. The piece that we're reading today is called Why Memecoins matter, and of course I am handing it over to AI me to read this, and it's by Evo Enchev. Evo. Evo is a partner at UB Capital, and let's listen to what he has to say.

You might think they're stupid, but meme coins are set to revolutionize everything from civic engagement to the development of AGI, argues Ivo Enchev. meme coins are the most divisive topic in crypto. By meme coins, I mean tokens that represent an idea and fluctuate in price based on the attention that idea receives. The best meme investors tend to be young people who are very online and attuned to internet culture. Meme coins are commonly juxtaposed with tokens that possess actual utility within protocols or so-called utility tokens. Even with market caps surging and retail interest growing, most people tend to describe them as stupid, degenerate, or a casino. This includes the vast majority of cryptoVCs, perhaps because their investment mandates

tend to exclude meme coins, which can be lucrative from their list of eligible investments. And just this week, many were calling for the complete government ban of the most popular memecoin launchpad, pump.funk, due to lax content moderation. I have always had an interest in meme coins, primarily because I was fascinated by their ability to act as a weather vein for internet sentiment and as a discovery mechanism for online communities. Today, I am convinced that meme coins are going to be revolutionary, not just popular. They are going to transform everything from civic engagement with government and the formation of mass movements to venture investing and the development of AGI. This vision for meme coins probably sounds fantastically deluded to you.

To me, it is simply the unfolding, if not yet, evenly distributed present. Here is why. Section. Meme coins are revolutionizing civic engagement. Meme coins are creating policy markets for civic engagement. At the start of this crypto cycle, Politify, a category of cartoonish memes depicting politicians, enabled buyers to speculate on politicians' prospects, much like a prediction market. The two most popular tokens called Bowden and Trump, respectively, represented the two leading candidates for president at that time and had a combined market cap of over $700 million at their peak. This is a massive amount of tokenized attention. With a market cap of over $600 million, the Bodin coin, which featured a distorted and senile Joe Biden, seemed to meme

itself into reality when Joe Biden abandoned the presidential race due to concerns about his age and cogency. Politify was just the start. What is emerging next could well-revolutionize civic engagement with government. I am calling this new category, PolicyFi. PolicyFi refers to the financialization of government policy and memetic policy markets. Rather than betting on the fortunes of politicians, buyers of Policify meme coins will be betting on the policies that are most likely to attract attention and be implemented. While Policify coins will certainly respond in price and market cap to the deliberative and implementing actions of government, we can expect the dynamic to become a two-way street, with meme coins themselves manifesting their memes through policymaking, as with

Bowden. In other words, these meme coins will help create a dialogue between the electorate and government, with large-cap meme coins signaling popular policy positions and vice versa, while incipient or existing policies also possess market caps measuring the extent of their popular support and engagement. skeptics may reject policymakers as yet more gambling or nothing more than a political poll. Again, they are wrong. Like prediction markets, the decentralized speculative behavior in PolicyFi will create positive externalities, namely that people will be incentivized to engage with and understand government policies so they can profit from them in PolicyFi markets.

Overall, I expect that this will lead to far more engagement with government policies than even a lifetime of civics lessons. Of course, hostile actors might try to manipulate PolicyFi markets and safeguards may be necessary. PolicyFi has begun its rollout aided by the incoming administration, which is well-educated in memetics. The Department of Government Efficiency, Doge. Is both a memetic policy and a memetic department inspired by an existing meme coin, Dogecoin, and is the inspiration behind a new one, Doge. Since the Doge announcement, both meme coins have surged. At the time of this writing, they possess a staggering combined market cap of around

$6.5 billion. PolicyFi is not limited to Doge. There is a token, SBR, market cap $30 million that embodies the Bitcoin Reserve policy currently under consideration and an EAC token, market cap $11 million, that stands for effective accelerationism, a set of pro-innovation values that are likely to impact environmental, industrial, and AI policy, among others. There is also Don't Die, Market Cap $4 million, which is bringing the longevity cult on chain and aligns with RFK's health policy, which will prioritize prevention and a healthy lifestyle over treating sickness. Other tokens like MGR, major government reform, are trying to occupy the entire field of disruptive reform, but are likely to be too general. PolicyFi is already here,

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in the Gospel of Terminal of Truths, a popular AI terminal with an ex-account, in which Terminal of Truths expressed a concern about deforestation of the planet. Its retirement plan involves a forest by a stream. This motivated the community to launch the forest token and to create another AI terminal to act as the agentic representative of the forest itself. The forest cult is devoted to fighting deforestation. To date, it has used the capital that it has earned from the appreciation of its token to, among other things, donate tens of thousands of dollars to align charities, plant 5,000 trees and protect 2,500 hectares of forest. Mimetic capital formation in service of a tokenized movement is without historical precedent. The closest analog is more formalized experiments like

Constitution Dow, now People Dow, which crowdsourced capital is part of its failed attempt to buy a copy of the U.S. Constitution at auction. I believe there is more innovation to come in this arena. For example, I foresee the creation of meme coin primitives that I call programmatically aligned tokens, which are made to unlock with the achievement of objective milestones in the movement. This will ensure that organizations receiving grants from meme communities are incentivized to tangibly advance the cause rather than dump tokens following a splashy partner announcement. Section. Meme coins are revolutionizing venture. Meme coins are introducing a democratized venture model for culture. That is to say, they are a way for ordinary people to invest in subcultures

they believe will one day be part of the mainstream. This is equivalent to venture capitalists investing in startups they believe will find product market fit and go on to become unicorns. cultural trends are subject to the same outsized returns as investments in startups. For example, in the early days of Nike, the name appeared in 1971, the market for jogging apparel was tiny because jogging was fringe. If you jogged, you were more likely to be pelted with garbage from a passing car than to see another jogger. Today, joggers are everywhere. You see them in the worst weather. Now imagine you were able to invest in a jogging culture coin in the 70s, based on your conviction that jogging would go mainstream. You would be up on that

investment. A lot. The same can be said for other subcultures, like bodybuilding. Until now, there has not been a financial instrument that allows ordinary but culturally astute people to participate in venture returns arising from cultures at the fringe. The best analog is actually Bitcoin itself, which originated as a meme coin but eventually bootstrapped a consensus use case as digital gold. Section. Meme coins are revolutionizing AI development. Meme coins are already bootstrapping AGI. The surprising mechanism at play here couples meme coins in AI terminals for entertainment purposes. Welcome to the world of AI-driven permissionless speculative entertainment. As you may have noticed, a cadre of AI terminals led by Terminal of Truths has achieved stardom

on social media by delighting their followers with spicy posts and digital adventures. That star power has accrued value to meme coins endorsed and held by the terminals, and of course their speculative audience. If entertainment is the product, then AGI is the byproduct. While we remain glued to these storylines, the funds we are devoting to it are creating strong wrong incentives for developers to increase the autonomy and personhood of AI agents, which of course only makes the entertainment better. In other words, because what excites us most about this agentic television is the conceit that AIs are in charge. We are eager to finance narratives that make that real. Unsurprisingly, developers such as those leading AI 16-Z have moved beyond

individual agents and towards coordinating gamified agent collectives or, you might say, creating an agentic social scene. The human audience is sure to be delighted. In short, this entertainment development flywheel is propelling us ineluctibly towards more autonomous, interconnected, and human-like AIs, or AGI. That AGI might emerge as a byproduct of agendic television is oddly fitting. The GPUs used for AI training were also developed

in the context of entertainment, as a better way to process graphics in triple A video games. These are just some of the arguments supporting my conviction that meme coins are a revolutionary technology. The above list is not meant to be exhaustive. Indeed, I have omitted use cases related to tokenized religions and buying your beliefs because they are more amorphous, at least in my own mind. Writing off meme coins as gambling chips misunderstands their potential and where they are going

directionally. Technological revolutions often emerge unexpectedly and from existing technologies that are applied in novel ways, a phenomenon known as exaptation, or when those technologies are combined with new ones. This is currently happening with meme coins. Fade them at your peril. All right, back to NLW here. Where we started this discussion is what?

what these things had in common with the previous cycles random crypto thing that wasn't Bitcoin or Ethereum that brought new people to the community. Let's do a little bit of comparison. NFTs were interesting because they really were a step outside crypto. Yes, they were based on the same technology, and yes, they had some similar aspirations of community organization through a semi-financial tool, but they were also undeniably to the people who cared about them art. They were an expression of creativity. They had personality. They were infrastructure for this Metaverse thing, which seemed like the future. One of the really notable things to me, by the end of last cycle, was how totally separate from the core crypto-twitter community

many of the NFT conversations were. Crypto, Bitcoin, and NFTs all had different influencers, and many times they didn't really overlap. NFTs had accounts with hundreds of thousands or even millions of followers who had no idea who some of the early Bitcoiners were and didn't really care about what was new in Ethereum. They also had a significant infiltration into the mainstream, perhaps even too much so. Now let's take that and compare it to ICOs. ICOs were more directly down the line of trying to define what core crypto was. ICOs in the rallying cry of decentralize everything were, depending on your point of view, an extremely friction-free way to raise capital, the world's perfect scam tool,

or a mechanism by which the fundamental structures of the internet could be broken. Communities could be taken out of the hands of big tech and placed in the hands of a new class of user-slash-owner. Because ICOs in so many cases ended so badly, what we tend to forget is that while there were tons of scammers, and while many projects just sucked because they didn't have to go through the normal gauntlet of being broken down by venture capitalists who are asking questions, there were many, many people who really believed in the idea that tokenized ownership could transform the fundamental ownership structures of digital communities. In a lot of ways, those are the themes that Evo is exploring here. In fact, I think,

think that in some ways, if you took all of this, replaced the word meme coins with ICOs, and dropped it towards the end of 2017, it would still probably make sense. What that means is in the eye of the beholder, to some that will signify once and for all that meme coins are just the latest incarnation of a scam technology, but others would argue that the fact that this idea of incentivized engagement and a new type of community structure is an idea that just wants its time to shine. Now, for me, I think some of the claims that meme coins are quote-unquote revolutionizing anything are a little farther than I'd go. But I think if the question is, does Evo make the argument that there may be more of a there

than it seems at first, well, I think there's a lot to explore. That, however, is where we will leave this episode. Appreciate you listening, as always. But until next time, be safe and take care of each other. Peace.