"The three key factors for the survival of memes: longevity, reproductive power, and fidelity of replication."

Authors: Lingyun, Miss Cat

Reviewed by: Ashley

Cover Source: Midjourney

Value investment is a waste, while memes rise to the palace overnight. Today, AU Research will interpret the economic principles behind the meme craze and how to select reliable targets for you.

01 What is a Meme

The term "meme" was first proposed by British scholar Dawkins in his work "The Selfish Gene." He believed that just like genes in biology, culture also has a basic unit that carries information for cultural transmission.

The term "meme" is also translated as "mimetic element" or "mimetic mother," which originally comes from the Greek word "mimema," meaning "imitated thing." Biologist Richard Dawkins first mentioned and simplified it to the word "meme" in his 1976 work "The Selfish Gene," similar to the rhythm of genes. He applied the theory of evolution to the study of "cultural change" and formally defined meme as a small cultural unit similar to a gene that is constantly replicated and imitated among people. Chinese scholars He Ziran and He Xuelin translated "memes" as "模因" in 2003.

Richard Dawkins used the rules of biological evolution to analogize the process of cultural inheritance. Memes encompass a wide range, including religion, rumors, news, knowledge, ideas, habits, customs, slogans, proverbs, language, and jokes.

The replication of memes is not as precise as the replication of genes in nature. It is not just a process of imitation, but also a process of autonomous recreation, following the principle of natural selection.

Just as genes jump from one person to another in the gene pool, memes jump from one person's mind to another's through imitation in the meme pool, completing their reproduction. When a meme occupies a person's mind, it is like a virus infecting a cell, turning the mind into a tool for carrying the meme. Just as not all genes can successfully reproduce, some memes have a wide impact, while others quickly disappear.

02 How are Memes Spread

Dawkins summarized three key factors that affect the survival of memes: longevity, reproductive power, and fidelity of replication.

Compared to the other two factors, longevity seems less important because the survival of memes largely depends on the longevity of the carrier. When the host carrying the meme dies, or when the "CD" carrying the information is destroyed, the meme also disappears.

Reproductive power is relatively more important. If a meme is a scientific discovery, its survival largely depends on how many people can understand this discovery. This can be roughly estimated by calculating the number of times it is cited in well-known academic journals and the sales volume of the journals. The stronger the reproductive power of a meme, the more widely it can be spread, and the greater its chances of survival.

Fidelity of replication refers to whether a meme can be fully preserved when replicated and spread. Differences may arise between the replicated and accepted memes due to differences in the educational background, interests, age, and gender of the replicator and receiver. In some cases, changes may be made consciously by the replicator when spreading the meme. A typical example is in academic papers, where to fit the author's intended point, only a certain aspect of a meme is selected for explanation, or it is analyzed from a new perspective, or combined with other memes to form a new meme. Memes with high replication fidelity can be fully preserved.

03 What Makes Memes Go Viral?

In simple terms, memes go viral by "complying with the laws of communication," which enables them to spread rapidly. Therefore, to study memes, one must first study the laws of communication, understand market sentiment, and grasp "how to arouse people's emotions." This inevitably leads to the mention of the SIR transmission model.

This was originally an epidemiological transmission model, but it is also applicable to information transmission. The red line represents people who are easily infected, the green line represents those who are infected, the blue represents those who have recovered, and the horizontal axis represents time.

The core of information transmission is to ensure that the rate of infection exceeds the rate of recovery, so that the number of infected people continues to grow. Combining psychology and communication studies, the more new people are exposed to this information, the more opportunities there are to infect more people.

Next, by combining psychology and communication studies to find the rules of meme distribution, we will analyze from these four core elements: MEME content, environmental atmosphere, KOL promotion, and wealth effect.

**Content: **The essence of a meme is to tell a story with images and convey emotions through images. For example, $Doge is appealing to dog lovers and has a strong long-tail effect, as many people are attracted to the cute and interesting little dog, and the more they see it, the more they like it. $PEPE, the sad little frog, was already a beloved emoji before becoming a meme. Sloths are also very popular in the movie "Zootopia."

In terms of emotional transmission, the more straightforward and simple to understand, the better. There is a saying about "The Three-Body Problem": for every additional formula, ten thousand viewers are lost. In this way, the more down-to-earth and easy to spread, the easier it is to go viral. Overly professional content only attracts peers.

In summary, what is cute, traditionally popular, and straightforward and simple is more likely to go viral.

**Environmental Factors: **This environment includes macro-environment and economic cycles. This bull market has brought a large number of outsiders into the industry, and they cannot understand complex technical terms, predictions, staking for security measures, smart contracts, etc. Memes are something they can understand, and the pricing is very cheap. For 10U, you can buy thousands of them, and if you add a zero, it becomes a tenfold coin. Many dog coins can add a zero in an hour, making it easy to get started.

The meme craze in this bull market is also influenced by the traditional economic downturn. In simple terms, it is a downgrade in the crypto market. Except for a few beautiful countries, most countries have experienced economic weakness in the past two years. In this situation, the public's desire to explore new technology will decrease, just like animals hibernating, living in a low-energy and easily absorbable way. In this scenario, the meme market will become even more popular.

**KOL Promotion: **The creation, distribution, pool building, and KOL promotion of a meme are essential. Regardless of the level of the KOL, you will find that what they write and say is very persuasive, making people very willing to believe. Many cryptocurrency prices come from bubbles, and bubbles come from consensus, so meme marketing will inevitably involve KOL promotion and community dissemination.

At this point, here are some risk warnings: you may see several group owners shouting to buy XX coin at the same time, and you will be brainwashed by overwhelming public accounts, thinking that a certain meme is particularly valuable. After rushing in, you may find that you have either been harvested by trading bots, bought at the peak, or lost everything in ten minutes.

Paying attention to KOLs in the English-speaking and different countries will help you judge the cultural value behind the meme, as cross-cultural consensus is the real consensus.

**Wealth Effect: **The reason why memes have become a mainstream track is their easy creation of wealth and the panic of missing out (FOMO). On one hand, they attract people with price increases, and on the other hand, they promote the myth of wealth creation, such as someone making $30 million in two hours. Community dissemination of FOMO fear is also a common marketing method for memes, which also complies with the laws of communication.

04 What is a Meme Coin

Meme culture's mapping in the crypto space undoubtedly includes various memecoins and meme NFTs. Memecoins, as a subclass of cryptocurrencies, focus on popular internet memes, pop culture references, and viral internet trends. Famous examples of such memes include different versions of the Japanese Shiba Inu Kabosu and the Pepe frog cartoon, and even extend to celebrities like Elon Musk.

According to a recent report from CoinGecko, the memecoin industry has become the most profitable sector so far this year.

The report shows that among the tokens with the highest market value, memecoins have the highest average return rate, at 1,312.6%. As of the end of this quarter, memecoins launched in March have entered the top 10 in the memecoin rankings, including Book of Meme (BOME), Brett, and Cat in a Dogs World (MEW), far surpassing the RWA and AI tracks.

The creators of memecoins use various themes to attract the attention and trading volume of speculative investors in the crypto market. In many cases, well-known KOLs and forums like Reddit have also joined the memecoin craze. Unlike other cryptocurrencies such as Bitcoin (BTC) or Ethereum (ETH) that primarily function as digital currencies, developers usually create memecoins as a lighthearted social experiment, with limited technical value.

Many people believe that memecoins are refreshingly different from traditional cryptocurrencies in terms of their seriousness. Memecoins invite a new generation of users to engage with blockchain technology in an approachable, non-traditional way. However, some people also consider memecoins to be highly risky assets that could undermine the legitimacy of ambitious blockchain projects. Whether or not you dare to invest in memes, it is still important to understand how memecoins operate, where they are most commonly used, and the risks you should be aware of before entering this field. Today, let's discuss the analysis of memes and cryptocurrencies.

05 History of Memecoins

The concept of memecoins can be traced back to the early stages of cryptocurrencies, but it did not attract much attention in the market until the appearance of the first representative memecoin, Dogecoin (DOGE), in 2013. Dogecoin was created as a joke by software engineer Billy Markus and Jackson Palmer. Its logo featured the popular Shiba Inu "Doge" at the time. Despite its humorous origins, Dogecoin's low unit price and fast block generation speed quickly made it popular in the crypto community.

Essentially, Bitcoin is the biggest memecoin. The value of Bitcoin comes from consensus among people, which is based on decentralized belief and relies on cryptographic technology to achieve it. Currently, we usually refer to cryptocurrencies that rely solely on consensus, jokes, and have rapid dissemination effects but lack technical innovation as memecoins.

From being commonly used for online tipping in European and American communities like Reddit.com to charitable donations to international non-profit organizations, Dogecoin has become a widely used medium of exchange, not just a joke. Following the success of Dogecoin, a series of memecoins inspired by internet trends and jokes emerged: tokens like Pepe (PEPE) (inspired by the sad frog) and Shiba Inu (SHIB) gained attention for their own advantages and became popular in the cryptocurrency community.

In the subsequent development, the rise of DeFi (decentralized finance) and the NFT (non-fungible token) craze provided fertile ground for more memecoin experiments.

06 Memecoin and NFT

Memecoins also leverage the NFT craze, transforming viral internet characters into unique digital assets that users can own and trade. For example, a memecoin project might create limited edition NFTs containing popular elements related to their tokens. Users can buy, sell, or trade these NFTs on various NFT markets. This allows meme enthusiasts to not only retain a piece of internet history but also support their favorite meme projects. Rare Pepes and the subsequent Fake Rares series are examples of some of the earliest NFT projects developed from viral internet memes.

Shiba Inu Coin (SHIB) is one of the most popular meme projects in the cryptocurrency space today and has also launched its "Shiboshis" NFT. This series includes 10,000 cartoon characters inspired by Shiba Inu, and holders can use them to battle in Shiba Eternity, a popular coin-earning game.

Like many other popular NFTs, meme NFT holders have established private communities for their collections, and some communities allow holders to participate in exclusive offline events and have the opportunity to receive related merchandise.

07 Memecoin and DeFi

DeFi refers to a series of blockchain-based financial applications that reconstruct traditional financial services in a decentralized manner.

Memecoins use DeFi protocols to create innovative ways for users to participate in the use of their tokens, not limited to simple speculative trading, but also to participate in staking, mining, and providing liquidity.

Staking: Memecoin holders can stake their tokens on DeFi platforms to earn rewards. These rewards can be in the form of additional memecoins or other tokens, providing users with the incentive to hold and actively participate in the memecoin ecosystem.

The Shiba Inu Coin project is a typical example of how meme projects thrive by incorporating DeFi elements into their protocols. SHIB token holders can use their ShibaSwap platform to exchange ERC-20 tokens and perform various tasks to earn SHIB and two other native tokens, BONE and LEASH. DoggyDAO, as a decentralized autonomous organization (DAO), provides additional income by granting token holders voting rights on key protocol decisions.

Mining: Mining is mainly done by lending your memecoins to others in exchange for interest through smart contracts. DeFi platforms for memecoins use these loans to facilitate various activities, including trading or providing liquidity, and users earn compensation for mining memecoins because of their contributions.

Providing Liquidity: Memecoins can also create liquidity pools, where users provide their own memecoins for others to trade on decentralized exchanges. This process allows users to earn a portion of the trading fees and contribute to the liquidity and efficiency of the memecoin market, also receiving corresponding compensation.

08 Risks of Memecoin Investment

Due to the viral nature of memecoins, many projects have experienced significant increases in the past, but some have also suffered sudden collapses.

1. Extreme Volatility: The value of a memecoin may skyrocket in one moment and plummet in the next, making investors vulnerable to significant financial losses. It has a strong speculative nature, making it particularly susceptible to sudden market changes influenced by a key figure (such as Musk), news, or internet trends.

2. Overreliance on Emotions: Many new memecoins often lack fundamental technology or practical use cases, which may cause their value to depend entirely on market sentiment. While some memecoins have found creative ways to integrate NFTs, DeFi, or community-driven initiatives, many projects primarily focus on the emotional value of humor and satire. This lack of fundamental technical value makes memecoins susceptible to being a house of cards.

3. Market Manipulation: The concept-driven nature of memecoins may attract bad actors looking to profit from speculation. Sometimes, they deliberately create false market news and divide the community to drive up the coin price, then sell off their holdings at the peak, often leading to significant losses for unsuspecting investors. These schemes exploit the speculative and emotional nature of memecoin trading, so investors need to carefully research when heavily investing in memecoins.

4. Many Scams: Many memecoin projects are launched by anonymous or pseudonymous developers, making it difficult to assess the credibility and intentions behind the tokens. Many memecoins are now being pre-sold, and after reaching a certain amount, the development team runs away. There are also many risks associated with changing the pre-sale payment address by using official accounts.

09 Conclusion

Overall, memecoins represent an interesting fusion of digital currency, internet culture, and humor. As memecoins continue to attract attention and evolve, how they will shape the broader cryptocurrency landscape, how they will find astonishing applications beyond their humorous origins, and how to discover early value? When is the best time to enter to balance risk and return? The AU Research team will continue to provide more detailed tools and technical explanations for everyone.

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