As its name indicates, they are cryptocurrencies inspired by internet memes or jokes.
Dogecoin, the most popular memecoin, was started as a joke and criticism towards cryptocurrencies. Its creators, Billy Markus and Jackson Palmer, did not intend it to be of any use to anyone, and in fact they got rid of all their tokens as soon as they started to be worth a fraction of what they would be worth today. Billy Markus for example sold all his Dogecoins in 2015 for $10,000 with the intention of buying himself a Honda Civic.
As a curious fact, if we use CRIPTOMO’s calculator to calculate how much your investment in DOGE of $10,000 would have been worth on December 15, 2015, it would be almost 10 million USD with a profit of 98,000 %.
Memecoins generally exist for nothing more than to be used as a medium of exchange, and thus are subject to the volatility of supply and demand. This is true of all cryptocurrencies that are not stablecoins, but in the case of memecoins it is even greater. Some memecoins, such as FLOKI, are beginning to offer different use cases related to DeFi, NFTs, DEXes, etc. Often a single tweet from a celebrity can skyrocket the value of a memecoin dramatically.
Memecoins are often in endless supply and are popular because they are funny in pop culture. They are highly volatile and subject to drastic changes in value in a short time. Like any other cryptocurrency, they use a blockchain, often on top of smart contract platforms such as Ethereum or Solana.
Memecoins usually have a very low value per unit, so when they go viral it is easy for their value to multiply several thousand times, in the case of the most popular DOGE and SHIBA they have reached capitalizations of billions of dollars.
Today platforms like DxLaunch allow you to create your own memecoin very easily and without the need to know how to program.
Are memecoins a good investment?
They are definetely not a very stable or safe investment. Admittedly, incredible fortunes have been made in memecoins, but their high volatility makes them very difficult to navigate and often subject to unpredictable external factors.
When investing in memecoins it is important to take into account the following:
- Verify that the liquidity pools go to burned addresses.
- Only invest in memecoins with contracts audited by the community. All ERC20 (and other) smart contracts are public and can be audited by anyone in the know.
- Be wary of projects where a single person controls more than 5% of the supply.
Investing in memecoins is highly risky since their fundamentals are usually not very solid.