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What Are Meme Coins and How Do They Work?

As their name implies, meme coins are a kind of cryptocurrency inspired by memes, interesting, or funny ideas captured by an image, video, or other forms of media. Dogecoin and Shiba Inu are two of the most popular and well-known examples with Meme Coins.

Key Takeaways

As many meme coins have an unlimited supply and their popularity is largely driven by pop culture, meme coins are highly volatile and subject to extreme changes in value over very short periods of time.
Meme coins work like any other cryptocurrency, taking full advantage of the blockchain and related technology. In particular, they’ve popped up on blockchains that use smart contracts like Ethereum and Solana.
Currently, Dogecoin and Shiba Inu are the leading meme coins, with USD 16 billion and USD 13 billion market caps, respectively, though there are hundreds of others available (as of March 2022).

Investing safely in meme coins requires verifying liquidity pools are tied to burn addresses, ensuring third-party audits have been completed on the project, and avoiding coins where any one entity owns more than 5% of the total supply.
While most meme coins in the past haven’t offered clear use cases, that’s beginning to change as some meme coins, like FLOKI, are also offering real benefits and uses. These coins are also known as utility meme coins.

What are Meme Coins?

Meme coins are cryptocurrency, like Bitcoin or Ethereum. But unlike those tokens, meme coins are normally designed as an homage to a meme, an interesting or funny idea captured in an image, video, or other forms of media. Like the memes they’re based on, meme coins are designed to go viral and be shared.

Dogecoin, one of the biggest meme coins on the market, was initially created as a joke to mock Bitcoin and other mainstream cryptocurrencies. Its developers, software engineers Billy Markus and Jackson Palmer, didn’t intend for it to have any real use. And that’s true of most meme coins. Unlike utility tokens, meme coins generally aren’t used for joining a DAO, staking, or making purchases within a particular ecosystem. They exist to be traded.

Volatility & Value

While cryptocurrencies, in general, suffer from more drastic swings in value than traditional currencies, meme coins take that volatility to an entirely different level.

One of the reasons that meme coins undergo such extreme changes in value is because of the way they’re designed. Unlike fiat currencies and most cryptocurrencies, meme coins often have an uncapped supply, meaning there’s no limit to how many of them can exist.

When Elon Musk and Mark Cuban promoted Dogecoin, its value skyrocketed. But once the hype died down, it fell just as quickly.
To summarise, here are the characteristics that differentiate meme coins from traditional cryptocurrencies:

Meme coins are highly volatile and subject to extreme changes in value over very short periods of time
Meme coins often have an uncapped supply (exceptions are e.g. Shiba Inu)

Meme coins normally have a very low value per token

And yet, crypto investors shouldn’t write meme coins off as if they’re a total waste.

Consider the fact that someone who invested USD $1 in Shiba Inu coins in March 2021 could have sold them for USD 8,000 seven months later. Very few investments can offer that kind of quick return. And that’s why investors shouldn’t ignore meme coins completely, even if they’re only a minor part of their investment strategy.

The key to making money off meme coins is to be aware of what’s going to go viral before it does. By staying abreast of current and future trends, meme coins can be an incredibly valuable investment. This is especially the case since their value is so low, allowing investors to purchase a sizeable number for a minimal amount of money.

Even if you choose never to invest in meme coins, they’re an important part of today’s crypto market and something to be aware of.

How do Meme Coins Work?

Meme coins work like any other cryptocurrency, taking full advantage of the blockchain and related technology. In particular, they’ve popped up on blockchains that use smart contracts like Ethereum and Solana. Today, there are over 200 meme coins floating around on these blockchains.

In the past, creating a meme coin took some technical know-how. Launch, for example, offers everything you need to create and launch your very own meme coin. While this is good for accessibility, it also makes it possible for scammers to take advantage of less savvy investors.

Simply visit a marketplace like Crypto.com, download the App, and make your purchase. Buying meme coins is no more difficult than purchasing Bitcoin or Ethereum.

What can you do with your meme coins once you’ve purchased them?

Unfortunately, most meme coins don’t offer clear use cases. Instead, you can look for opportunities to buy when the token is low and sell when it’s high. It is more of a pure investment rather than something you’re going to put to use.

Most Popular Meme Coins of 2022

While Bitcoin has been a topic of conversation among investors and the general public for years, meme coins have only entered the mainstream in the past year or two. The excitement around them surged in early 2021 when celebrities like Elon Musk, Mark Cuban, and Snoop Dogg backed Dogecoin, sending it soaring more than 800% in 24 hours.

Since then, Dogecoin has consistently leapt in value whenever Elon Musk has tweeted about it. And hundreds of other meme coins have entered the scene, including dozens based on the doge meme.

Currently, Dogecoin and Shiba Inu are the leading meme coins, with USD 16 billion and USD 13 billion market caps, respectively.

In the top ten meme coins with the highest market cap, you’ll also find:
DeLeon Mars, an offshoot of Dogecoin that specifically pays homage to Elon Musk and his SpaceX company
Banani, a meme coin that resulted from a hard fork of Nano coin in 2018 and which describes itself as ‘a feeless, instant, rich in potassium cryptocurrency’
Wow Nero, a meme coin that bills itself as a ‘privacy-centric meme coin’ with no premise, ICO, or Dev Tax

Are Meme Coins Safe?

If you’ve read everything written here about meme coins, then you probably already know that they are not the most stable investment. Their high supply and volatility make them an innately more risky investment. While Elon Musk (or some other celebrity) could tweet about Shiba Inu and send its value soaring tomorrow, it could just as easily fade away into obscurity.

Remember, meme coins are based on internet memes. And as such, they share many traits with them, including the potential for going viral and for becoming quickly outdated.

 

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