What is a meme coin? The meme coin format has pretty much become a meme in itself. A comedy token gains traction on forums and social media and becomes a vehicle for financial speculation, making early adopters rich and leaving others to pay the real price. 

The latest in this chain of meme coins is PEPE which began trading on April 15. A reference to the Pepe the Frog meme, a cartoon used to illustrate reactions by social media users—which was co-opted temporarily in 2016 by the far right—the coin was marketed by its anonymous developer as “the most memeable memecoin in existence,” “fueled by pure mimetic power.” Three weeks later, it had increased in value by thousands of percent, reaching a peak market capitalization (the total paper value of all coins in circulation) of $1.63 billion. Investors like Ace rushed to catch the wave, and, smelling the revenue opportunity, crypto exchanges did the same: Binance, Gemini, OKX, and Huobi all listed the token. But anyone who bought in at the top, in the first week of May, has since lost more than half of their investment.

Its popularity has soared with me creators like Violetta Zironi even hosting daily spaces dedicated to the frog and weaving his name into iconic songs such as the ‘Barbie’ theme song.

An example of an earlier memecoin is CumRocket which takes us back to spring 2021. The token was developed by Lydia Lane, a software engineer from the UK who had grown tired of getting caught up in rug pulls, she says, and so decided to launch a coin of her own.

Making use of an existing TikTok following, built up during the pandemic with a series of stock-picking videos, Lane set about promoting the token. Her priority was to build trust in the legitimacy of the project and strengthen community engagement by making her identity clear and tending closely to the public Discord server. She also published details of any CumRocket sales she made with an accompanying justification, to reassure people that she wasn’t trying to “do anything shady” behind their backs.

But the name was the crucial ingredient, Lane says, because “controversy sells.” “With CumRocket, people either love it or hate it. They think it’s funny or find it disgusting.” In a similar spirit, she posted a video of herself pitching the new token to online image board 4chan, a notorious cesspit, in order to “anger the incels.” She elicited the desired response.

The eye-catching branding caught the attention of Musk, who published a tweet that drove a 400 percent increase in the price of CumRocket in the space of 10 minutes. The token has also since been featured on HBO in segments of Last Week Tonight With John Oliver and Real Time With Bill Maher.

The inconvenient truth that frames these projects, though, is that meme coin trading is a zero-sum game. For every winner, there must be a loser; the joke must come at somebody’s expense. In all, by the time regular people catch wind of a new meme token, the peak has already passed. This dynamic creates a moral quandary. 

Lane grappled with the same issue when the value of CumRocket soared. She cashed in enough of the profits on her own token holdings to allow her to quit her  job and cover the expenses of developing a use case, but she felt conflicted about the losses she might inflict on others in doing so. “I felt bad dumping. I didn’t want to be greedy,” she says. “When it’s your own chart, it’s your baby. I wanted everyone to win.”

While the underlying code is generally unsophisticated (and therefore easy to check for security flaws or hidden mechanisms for defrauding buyers), little verified information is available on the distribution of meme tokens at launch. This means developers could quietly award themselves a large batch of their own coin, which they could later sell in large volumes, tanking the price—a textbook pump-and-dump.

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