What makes Memecoin so valuable?

Source: Four Pillars; Compiled by Bai Shui, Golden Finance

1. Composition of Token Value

Source: DeFiLlama(Pump.fun)

Since the beginning of this year, the crypto industry has witnessed a frenzy of memecoins, marking what many are calling the "memecoin supercycle." The scale of this movement is evident in the success of Pump.fun, a memecoin launch platform that generates over $1 million in revenue daily and facilitates the issuance of 20,000 tokens. Solana has become the center of this memecoin revolution, with its DEX trading volume now surpassing that of Ethereum and other major chains. The surge in this activity is further reflected in the significant success of the Phantom wallet, which reached a peak of 700 million MAU.

The influence of Memecoins goes far beyond merely capturing the imagination of crypto enthusiasts — they have become the most powerful gateway for introducing newcomers to cryptocurrency. However, this success comes with skepticism. Critics argue that memecoins are purely speculative, pointing to their high volatility and apparent lack of intrinsic value. This raises an important question within the crypto community: how should we truly understand and assess the value of memecoins in today's market?

In the cryptocurrency ecosystem, the value of a token is composed of three main parts:

• Store of Value: Similar to gold or Bitcoin, tokens can serve as a hedge against inflation, maintaining purchasing power over time. This is the most basic yet challenging form of value, as it requires broad trust and consensus among users.
• Cash Flow and Transaction Demand: This value stems from utility—whether through transaction fees (as shown by ETH and SOL), revenue from fees (such as DeFi tokens), or value accumulation mechanisms like token burns. Similar to traditional stocks, these tokens can be evaluated based on their business models and their ability to generate sustainable cash flow.
• Meme, Narrative, and Attention Value: This component is driven by community interest and engagement. In the crypto market, the ability of projects to attract attention and build strong communities often becomes a key value driver. The narrative ranges from technological innovation to financial infrastructure, as well as an increasing number of cultural and social elements, as evidenced by meme coins.

It is worth noting that these elements are not mutually exclusive. Tokens often embody a unique combination of these three elements, and this balance may change as the project matures and develops. Here are some noteworthy examples that illustrate how these value elements are manifested in practice:

• Bitcoin: embodies all three components of value, but it is primarily recognized for its value storage properties. In addition, it has practical uses for payments and cross-border transfers, while having a loyal community of Bitcoin extremists who reinforce its cultural significance.
• Ethereum/Solana: The value of both primarily comes from the fact that they are the fundamental currencies for network transactions and operations. The increase in network activity directly drives the demand for tokens. Their established economic existence and network effects also help them develop into reliable stores of value.
• Dogecoin: Although it originated as a meme-driven token, its development has surpassed its initial appeal. Through its dedicated community and ongoing relevance, it has achieved a certain level of stability, allowing it to serve as a store of value for its loyal holder base.
• Bonk: Originally a meme token in the Solana ecosystem, it later expanded its utility through various applications such as BonkBot and Moonwalk. This evolution helped it develop sustainable value through real trading demand and value accumulation.

Among the thousands of existing tokens, only fewer than 20 protocols have truly gained recognition as a means of stable value storage or achieved the market fit necessary to generate sustained demand. The market value of the vast majority of circulating tokens primarily derives from a third factor—meme status, narrative strength, and the ability to attract market attention.

2. What is the Value of Memecoin

As we discussed above, the fundamental factors that determine the value of memecoins are fundamentally similar to those of other cryptocurrencies. Besides the practical utility, including the use of stablecoins for payments and transfers, the real potential of cryptocurrency lies in the concept of tokenization itself. Essentially, cryptocurrency excels at converting community engagement and cultural value into tangible economic value, creating new markets, and building incentive-driven networks and communities.

This is why other crypto infrastructures or platforms originally exist—from DeFi protocols like Uniswap and Jupiter to middleware solutions such as oracles and re-staking, and even basic infrastructures like rollups and DA layers. They all help facilitate token-based economic activities and the interactions surrounding them.

Source: Understanding the Rise of Memecoin

Most infrastructure and DeFi projects emphasize technological and financial innovation through their tokens, but their value primarily derives from narrative and attention economics, rather than from being a store of value or cash flow generator. What makes meme coins unique is their deliberate departure from these traditional cryptocurrency narrative games, instead embracing the fundamental values of community and entertainment. In doing so, they offer an ironic commentary on the limitations of venture capital and insider-driven markets and their often superficial utility claims.

"In the short term, the market is a voting machine, but in the long term, it is a weighing machine." —Benjamin Graham

Market events and investor sentiment drive short-term price fluctuations, but over time, assets typically return to their true fundamental value. This principle is not unique to stocks — it applies to all assets, including physical assets, tokens, and meme coins.

Source: memecoinrace.xyz

Yes, compared to other assets, meme coins exhibit greater volatility and respond more intensely to market events. However, their success or failure cannot be solely explained by short-term trading and speculation. Among thousands of meme coins, only a few have successfully built lasting communities and maintained their value. The rest typically disappear shortly after the initial hype fades.

What causes this disparity? The key is to understand that meme coins are not just speculative tools – they are tokenized expressions of community and cultural value. To better understand this, let's take a look at three key factors that influence the value of meme coins, or more broadly, the meme value of tokens:

1. Background and Narrative

The powerful origin story and engaging narrative are key elements driving the initial success of memecoins. Like genes, memes spread through replication and evolution — but among the countless memes that emerge, only those with a truly strong narrative can gain influence and resonance.

The most successful memecoins have an extraordinary ability to read the market and mine things that attract people's attention. PEPE was launched during the dark times of the cryptocurrency market at the beginning of 2023, bringing much-needed humor and lightness, helping to change market sentiment and spark a broader memecoin revival. After the FTX collapse, BONK became a beacon of hope within the Solana ecosystem, embodying resistance to centralized power and community resilience. Recently, GOAT has carved out its own unique position by building a narrative around an AI-driven memecoin supported by Marc Andreessen.

What sets these successful memecoins apart is not only their entertainment value but also their ability to craft stories that resonate with market sentiment and capture the public's imagination through engaging storytelling.

Influential figures often play a key role in shaping the story and success of memecoins. Take DOGE and Elon Musk as an example, WIF and Ansem, or SPX and Murad. These key figures are not just advocates; they become pillars of the community, supporting the growth of the token while shaping its fundamental vision and values.

However, even the most captivating stories and the strongest leadership cannot guarantee lasting success. Look at the memecoin supercycle at the beginning of 2024—despite the initial excitement, the vast majority of releases quickly became irrelevant. While the initial hype and FOMO may temporarily drive up prices, what happens next is often predictable: once the momentum stalls, it turns into a desperate race to exit, with holders scrambling to sell before others, usually ending with the token's value plummeting to zero. This cycle of rise and fall has become a very common pattern in the memecoin space.

2. Community and Brand

In "Sapiens: A Brief History of Humankind," Yuval Noah Harari points out a decisive characteristic of humanity: our ability to believe in fictional things. As more and more people believe in these fictional things, they become stronger and more real. Memes and communities operate in a similar way. They spread through the most viral forms of thought (fun and culture), and as more people engage with them, they form powerful network effects and real cultural value.

Source: Milady Maker

In order to transform the initial hype and capital of memecoins into real success—sustainable value—they must establish a strong community and brand foundation. Tokens like Bonk and WIF, as well as NFTs like Pudgy Penguins, CryptoPunk, and Milady, have evolved from simple memes into cultural symbols and recognized brands. Just as luxury and fashion brands represent certain lifestyles and values, these digital assets provide holders with a unique identity and sense of belonging. When people hold these tokens and engage with their communities, they are not merely speculating—they are participating in a new form of cultural consumption.

Compared to traditional brands or cultural organizations, the uniqueness of the crypto community lies in how they combine cultural values with economic incentives. Take Degen as an example— it directly rewards content creation and social participation within the early Farcaster community. Participants are not just consumers; they are active value creators. This creates a positive feedback loop where earlier and more active participation leads to greater rewards, encouraging early adoption and long-term community loyalty.

3. Organic Growth and Fairness

Source: Guided by principles of trustworthiness and neutrality

Decentralization is not only crucial for blockchain networks but also a fundamental requirement for memecoins to build organic communities. This aligns with what Vitalik Buterin said about "trustworthy neutrality." People are highly sensitive to discriminatory conditions or benefits that favor specific groups or individuals. Take Vitalik as an example: when social media platforms censor certain political ideologies or content, people feel outraged, but when food delivery apps filter out lower-rated restaurants, they do not complain.

As mentioned earlier, the true value of memecoin depends on how many people resonate with its meme culture and community and wish to participate. Therefore, organic growth and fairness are not just moral requirements but practical necessities. How the token is issued and distributed fairly and transparently becomes a key criterion for winning people's trust and encouraging their participation.

This is especially important for memecoins, which are crucial for community participation. The success of token issuance platforms like Pump.fun lies not only in lowering the barriers to token issuance but also in responding to the market's demand for fairness and transparency in early token investments.

Source: X(@MustStopMurad)

The demand for fairness and organic growth can be measured by quantitative indicators of the health of the token community. Murad emphasizes the community aspect of memecoins, highlighting metrics such as median holder rankings and HHI (Herfindahl-Hirschman Index) to assess the equitable distribution of tokens and the loyalty of holders. HHI was originally designed to measure the degree of market monopoly, used to determine the concentration among token holders.

Summary

Those who remain skeptical about Web3 and cryptocurrencies may view blockchain and tokens as vehicles for gambling and speculation. However, beneath this surface lies an ideology aimed at establishing a decentralized, better financial system and a new internet structure. Regardless of the goodwill behind it, speculative demand has undoubtedly become a powerful catalyst for the birth and development of the industry. After countless iterations, we have reached a stage where prediction markets can replace traditional media, stablecoins are gaining attention as the next generation payment network, and blockchain applications have become accessible to everyone.

Memecoins have a deeper meaning beneath their seemingly worthless and unsound gambling and speculative appearance—they represent a fusion of tokens, communities, and culture. Memecoins embody the most pure form of the decentralized and fair ideals of the crypto ecosystem. They indicate that sustainable value can be created solely through community involvement and transparent operations, without the need for complex technologies or financial products. This suggests that, beyond mere speculative frenzy, there are more possibilities for blockchain technology to realize new forms of social networks and services.

More memecoins will continue to emerge and fade away. Through these cycles of innovation and failure, we gradually discover the reasons behind the thriving digital community, as well as how token economics can better align with human behavior and social dynamics. Although this ongoing evolution is volatile, it is steadily guiding us towards more complex and sustainable community-driven value creation models in the digital age.