The Breakdown - Does Crypto Need Memecoins?

Episode Date: June 23, 2024

That's the argument in this essay: https://blockworks.co/news/vitalik-wrong-crypto-dumb-memecoins NLW explores and puts it in context in a week where the big story was a new Trump memecoin. 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, June 23rd, 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 of the show notes or go to bit.L.Y slash breakdown pod. Well, friends, in a week where arguably the dominant story was about a meme coin, a Donald Trump meme coin, of course, I thought it made perfect sense to read an essay from the Blockworks op-ed page

by David Canellis called Vitalik is wrong. Crypto really needs dumb meme coins. Let's read the piece and then we'll get into the discussion. And this week, it is in fact just regular all me, no AI to speak of. If you're a celebrity, Bored Ape Yat Club is out. and meme coins are in. BAYC was arguably the most successful project to find traction with the mainstream, but they're passe these days as shown by flatlining floor prices. Meanwhile, celebrity meme coins have found crossover appeal, something most cryptocurrencies don't really have. The idea that meme coins are devoid of utility is short-sighted. Memcoins are critical benchmarking software for blockchains, placeholders for quote-unquote real economic activity that might eventually come

once more of traditional finance ports over to blockchain rails. For that to happen, those rails must be able to handle more than a few hundred thousand people trading meme coins with silly names at the same time. And at this point, siding against the meme coin discourse risks misunderstanding some of the most engaged people in crypto today, even if they're more responsive to absurd and pointless projects. The celebs are just meeting crypto where it is right now, fast-dexes, cheap blockchains, gambling apps, Twitter, telegram, and discord. Without pearl clutching, it's hard to find much fault in that. So it really isn't cringe that Iggy Azalia or Caitlin Jenner have their own meme coins, at least not in the same way that Katie Perry's CryptoClaas were,

or Kim Kardashian's unfortunate Instagram ads for Safe Moon Clone Ethereum Max, or even Randy Zuckerberg's painful Wagmi music video. These stunts felt far more how do you do fellow kids than anything Jenner or Azalea's camp have done. Where countless meme coins have pumped, dumped, and flatlined, the classic rugpole trajectory, Caitlin Jenner's Ethereum meme coin is chugging along. It even flipped her original meme coin on Solana. Jenner launched the Ethereum version only a few days after the Solana one. Solana Jenner had just peaked at over 30 million market cap after a thousand plus percent rally. Supposedly, Jenner's camp had been swindled by an alleged serial meme coin fixer, and the Solana version of the coin should have never been endorsed. That made the

Solana token, which was now rapidly losing value, an unofficial dud. To help boost interest in the newer token, Jenner pledged to direct a 3% transaction tax on the new Ethereum-based Jenner to the Trump campaign, should it reach a $50 million market cap. Hello, friends. Before we get back to the rest of the show, I want you to join me at Permissionless. Permissionless is a conference for Cryptonatives by Cryptonatives. And the reason it's so important this year is that despite regulators' best attempts to push industry founders, devs, and executives out of the U.S., the U.S. remains the beating heart of crypto. Today, the tide is turning. Policymakers have pivoted from fighting crypto to embracing it, which will lead to the creation of new financial products,

new applications, and ultimately new adoption. Permissionless is a conference for those using and building on-chain products. It's home to the power users, the devs, and the builders. And what's more, I'm going to be there. The location is Salt Lake City. The dates are October 9th to the 11th, and right now, tickets are just $199. Towards the end of the month, they're going up to $499, and if you want 10% off, use code breakdown 10 when you check out.

If you go to the Blockworks website, blockworks.co, there will be lots of information about how to register, and again use code Breakdown 10 to get 10% off. Tens of thousands of addresses hold the current suite of celebrity meme coins. But to be clear, these are not big cryptocurrencies. Memcoins overall, including majors like Dogecoin and Flocky, have over a $52 billion market cap, but still make up less than 5% of the crypto market excluding Bitcoin.

Jenner's two tokens, alongside Iggy Azalia's mother and Andrew Tate endorsed daddy, make up less than 1% of the total meme coin market. meme coins are fodder for grumpy takes, even from Vitalik who has rules about what celebrity involvement in crypto should look like. Mostly, they should be long-term public goods in his estimation. Or meme coins make crypto look immature and are extractive in a way that detracts from investment in more legitimate technologically sound projects with venture capital backing. For true believers, crypto means everything and from the greatest value transfer in history to the solar punk revolution and an anarcho-capitalist coup. But crypto also means nothing. It's

agnostic, a free-for-all. It's what we do with the technology that gives it meaning. Without over-intellectualizing the warm, fuzzy community feeling attached to buying and selling meme coins alongside internet strangers, meme coins do have technological utility. They stress test blockchains in a way that few token classes have ever done. NFT game Cryptokitties taught us that Ethereum needs to scale with layer twos. Ordinals showed us that practically any EVM chain can be easily overwhelmed by sudden popularity. And MemcoinMania proved that Salinas transaction routing really needs work. So welcome to the new celebrity crypto meta. These celebs may not realize it, but how they're embracing the joys of memecoin launches might actually be giving

crypto the right kind of boost to improve the infrastructure in the long run. All right. So David's argument here, if we're trying to extract just one main thing, is that meme coins are useful in that they stress test infrastructure and give us a chance to build that infrastructure out in a relatively low-stakes environment. He also points out that for as much as they dominate conversation, they're fairly small in terms of market cap, And he also points out that as crypto is the freest market left on Earth, even if you don't like them, you don't really get a say. I think all of those are totally reasonable takes.

A couple more different ways to look at this. One certainly has to be the financial nihilism framework that's been shared by folks like Dimitri Kofinus from Hidden Forces and crypto investor Travis Kling. The argument there is roughly that in a world where people are relatively hopeless about their relationship to markets and their ability to actually make money in a traditional way, going all in on ridiculous things, hoping to hit it big, starts to make a certain kind of sense. I don't think it's unreasonable to view meme coins as a part of that phenomenon.

Mem coins in this case just being the crypto market version of meme stocks. A more sympathetic argument, perhaps, for meme coins in terms of how they relate to celebrities, is that one way to look at what NFTs were was a proxy for celebrity popularity. Celebrities either created or participated in the collection, and the value of the NFTs was in some way related to their participation. participation. Meme coins really cut out all of the fat in that equation. They are just a straight-up token that the main thing you do with it is buy it, sell it or hold it. We've seen over and over again in Crypto Land that the closer you get to the raw unfettered trading power of crypto,

the more popular the activity tends to be. We are very good at providing highfalutin explanations for things, but ultimately lots and lots of people in this market like to play the game that is trading. One question that an interested party might pay some attention to, is to what extent meme coins stay simply a crypto market phenomenon versus start to break into the mainstream in some way. In other words, part of what made NFTs unique during last cycle is that it wasn't just some subset of existing crypto holders that were playing with them. They, in fact, attracted an entirely new group of people to participate in the industry. There were NFT influencers who not only didn't care what was going on in the world of Bitcoin,

but who had never cared about what was going on in the world of things like Bitcoin. So far, we haven't seen any real proxy to that with meme coins. They are a distinctly internal insider kind of phenomenon. While they remain such, they're probably relatively safe. To the extent they start to go mainstream, that might be where one needs to raise an eyebrow. What's for sure is that right now, they are a big part of the fabric of the crypto discourse. At the time of recording, a huge amount of discussion is happening around whether a Donald Trump meme coin from earlier in this week actually had the involvement of his son Barron,

or whether that's just Martin Schrelli talking out of his butt, and so like it or not, these things have intersected with at least the crypto mainstream. Now let me give you, however, the final piece of good news. If you are someone who happens to find yourself not caring at all about these things, you basically can simply ignore them. I think David's right to point out that for all the chatter and bluster there is about these things on X, they are still a tiny portion of what's going on in crypto.

Crypto has always been a space where you get to choose your own adventure, and this is no different. For now, though, that is where we will leave our high-fork. undergraduate thesis-style exploration of meme coins, and get on with the rest of our weekend. Appreciate you listening as always, and until next time, peace.