On 6th December 2013, Dogecoin was launched as a proof of work cryptocurrency, based upon the existing protocols of Litecoin and Luckycoin. Billy Markus and Jackson Palmer created Dogecoin as a joke, based around the popular internet Shiba Inu meme. Generally, it has stayed that way since its launch: a joke within the market as apart from being the coin of an internet meme, it has no fundamental values or useability. Despite this, its value has increased by 9763% from 9th November 2020 to 9th November 2021, peaking at a price per coin of 0.74 USD on 3rd May 2021. Since November however, Dogecoin is no longer the only prominent memecoin – a Dogecoin clone, named Shiba Inu, was built on ERC-20 recently temporarily surpassing it in value.
Despite Shiba and Doge being the major two, hundreds of dogecoins alone have littered the market, along with “Safecoins”, rip-off brand coins, rip-off crypto coins, and other speculative meme assets. Although this seems at first glance to be a harmless joke, the creation of these tokens has had negative consequences generally for the market, especially for new entrants.
The most recent and widespread example of these memecoins ending disastrously for investors is the Squid Game token. Based on the popular Netflix show, the token itself had no affiliation to the program, yet still attracted many buyers due to the name itself. Within a week, the price had increased from near 2 USD to over 600 USD. Too good to be true, the token was promptly exit scammed, leaving many investors with nothing and the only winners, like in the show itself, being those behind it. The token itself was arguably a blatant scam with an inability for investors to sell due to an “anti-dumping” mechanism and the Whitepaper riddled with spelling and grammatical errors – the signals were alarming.
Squid Game token is one of many examples of unsafe and harmful tokens. Sadly, a majority of the memecoins are scams, with even clones of the Squid Game token being created since. Many of these clones and fake tokens can be created easily due to the Binance Smart Chain (BSC). The BSC is built by Binance and is a blockchain that is compatible with the Ethereum Virtual Machine (EVM) and has very low transactions fees and transaction time. With these tools, anyone can create a memecoin with very little effort and advertise it on social media platforms like Twitter, Reddit, and YouTube. Moreover, those willing to buy also have little trouble in doing so, with BSC DEXs like PancakeSwap and through software wallets like Trust wallet. With all these conditions, it has become similar to a casino, with investors “gambling’ their money on these tokens, with huge gains and losses alike.
Although there are some winners in this “casino” a vast majority are losers and the house, in this case the creators of these tokens, generally win. Unfortunately, this only worsens the perception of Cryptocurrencies, with many already seeing the entire market as a speculative short-term bubble. Memecoins provides evidence that this is so, even with innovation being made elsewhere in the market.
Moreover memecoins, due to their small size, are easily swayed by online influencers and celebrities. The prime example is Elon Musk. Musk, through his use of Twitter, has been one of the main reasons for the recent boom in memecoins. His early support of Dogecoin and subsequent praise for it led to its sharp rise in value, with his appearance on SNL marking the local top previously mentioned. Moreover, this has led his Twitter account to be used constantly by meme coin creators and speculators, with examples like him tweeting that he would name his ‘Shiba Inu Floki’ leading to numerous coins with the same name being created moments after his tweet. Again, although this appears to be just fun and games, this could call into question market manipulation and possibly lead to stricter regulation. Particularly by the US, who using SEC have already opened cases on Crypto before, such as Ripple, which could prove to be a huge detriment to the market, if not the end of it.
Therefore, despite initially seeming light-hearted, memecoins have turned from an initial joke of Dogecoin into a malicious Ponzi scheme which has caused pain to many unsuspecting buyers. They have been, and still are, a main cause for concern for the future of Cryptocurrencies, especially given their reputation with governments and institutions.
By Sam Buchan
Edited by Sophia Li